By Ruth Winecoff
This is the first in a series of blogs regarding an ongoing clean energy research project generously supported by the New Jersey State Policy Lab. This project focuses on Property Assessed Clean Energy (PACE) programs, a form of financing for energy efficient upgrades recently authorized in New Jersey. The Garden State Commercial Property Assessed Clean Energy Program has yet to launch. We will document the experience of governments and property owners in California, where the PACE program was developed and launched in 2009, in order to provide policy recommendations to New Jersey stakeholders as the program launches.
PACE is a novel financing mechanism for energy efficiency upgrades and renewable energy installations. With enabling legislation, states authorize their local governments to adopt and administer PACE programs, often coordinating with private-sector PACE service and financing providers. Thirty-six states and D.C. have authorized PACE in some form. Property owners in areas with PACE programs apply with details about their proposed project and property; participation is voluntary. If approved, the local government uses its legal authority to borrow from private sector investors by issuing a municipal bond, the proceeds of which pay upfront project costs. The borrowed money is repaid by special assessment on the property’s tax bill. In other words, were I to borrow through PACE to install solar panels, no money would come out of my pocket to pay for the installation. However, my property tax bill would be higher by the amount needed to pay off the loan over a pre-determined period (e.g., 20 years).
We aim to use detailed information about PACE borrowing in California, which is accessible in legal documents that accompany each bond issue. We have collected documents for the approximately 6,000 bond issues for residential PACE borrowing and for the approximately 300 bond issues for commercial PACE borrowing, comprising the totality of PACE bonds issued in California from 2009 to 2021. Although the exact information in the documents varies considerably, in most cases we can identify the location of the property for which the loan was made; often the assessor’s parcel number or street address is available.
With these novel, micro-level data on PACE borrowing by thousands of Americans, we will study the diffusion of program adoption by local governments, take-up by residential and commercial borrowers, and the socioeconomic and demographic characteristics of the neighborhoods where PACE is used. Since energy efficiency technologies tend to be limited to affluent, White-majority neighborhoods due to lack of awareness and high upfront costs, we are particularly interested in researching whether the PACE program expands access to energy efficient and renewable energy technologies to lower-income, non-White majority neighborhoods.
Because eligibility for PACE loans is determined differently than a bank loan and because the program covers upfront costs rather than offering rebates or subsidies after-the-fact, proponents claim that the program provides an option to people who would otherwise be unable to access capital for efficiency upgrades. We will test this claim by pairing the parcel-level data we collect from the bond statements with publicly available data on neighborhood- and census-tract-level characteristics.
