Unlocking Energy Efficiency: A Data-Driven Exploration of PACE Bond Issuance in California
By Ruth Winecoff
This is the second in a series describing ongoing research on Property Assessed Clean Energy (PACE). PACE, which uses local governments’ ability to borrow to pay the upfront costs of energy efficiency upgrades to residential and commercial properties, was recently authorized for commercial properties in New Jersey, though the program has yet to launch. We focus on California, where the novel financing mechanism originated. In this post, I discuss the project’s scale and scope and present some descriptive statistics based on data collected so far.
The California State Treasurer’s Office provides information on all municipal bonds issued in the state through the California Debt and Investment Advisory Commission’s (CDIAC) Debt Watch platform. Each time a California government issues public debt, they report certain information and submit legal documents to CDIAC, allowing us to identify roughly 9,000 PACE bond issues. Debt Watch provides information in spreadsheet form, detailing the date of issuance, the government issuing the debt, a measure of the overall borrowing costs, and other details of interest to researchers and practitioners working in the municipal debt space. The unit of observation is the bond issue, which in rare cases may be for a single PACE loan, but typically aggregates multiple borrowers for reasons of efficiency, as issuing municipal debt is nontrivial in administrative costs.
Commercial PACE borrowing started in 2014 and totaled 176 issues and $767 million borrowed through the end of our study period in 2021. The total dollar amount borrowed increased each year and at an increasing rate, reaching a peak of $337 million in 2021. Individual bond issues were highly variable in size, with a minimum of $15,878 and a maximum of $42.5 million; the average amount borrowed per issue was about $4.4 million. Residential PACE bonds were first issued in 2009 and, at an average 550 issues per year, total about 7,200 issues through 2021. Residential property owners borrowed a total of $5.4 billion over the period, averaging $416 million a year.
The documents accompanying each issue permit us to learn the borrowing patterns of these programs in far greater detail. Extracting information from the documents is our current focus and requires automated processes using the Python programming language, statistical software, and PDF engineering, as well as many hours of painstaking work by Bloustein master’s students working as research assistants supported by the NJSPL. Our work so far has yielded the dollar amount for 15,750 individual loans and the parcel number or street address of the property for which the loan financed energy efficiency upgrades. Loans ranged from as little as $254 to a maximum of $482,400, averaging $34,500.
The 15,750 loans for which we have extracted data come from only 180 of the roughly 7,200 issues we are able to see in the aggregate level data from CDIAC. Upon completion, our data collection efforts should yield a large geospatial dataset of PACE borrowing, enabling us to conduct exciting micro-level research on the diffusion of the policy and the demographic characteristics of borrowers.