By Pierce Jones
Energy Finance District (EFD) and Property Assessed Clean Energy (PACE) programs facilitate low interest loans for residential energy efficiency retrofits and renewable energy systems that decrease a homeowner’s utility bills. But the loan has to be repaid. Paul D’Arelli made an excellent point in his posting last week. He said that to ensure the long-term success of their EFD (or PACE) programs, local governments should develop those programs such that property owners are likely to realize energy savings sufficient to offset the cost of their new assessments. I think it’s critically important that homeowners not find themselves upside down in their EFD loans.
Like many utility-operated demand side management (DSM) programs, a basic residential energy efficiency retrofit loan program could cover a range of upgrades including: weather-stripping, caulking, duct leakage repair, attic insulation, hot water system upgrade, some windows and some HVAC upgrades. Using Energy Gauge® software, we calculate that for a somewhat energy inefficient house, the energy savings from these type upgrades should be from 30-40%. For a somewhat energy inefficient 2,000 ft2 Florida home that uses ~25,000 kWh/yr the total annual electric bill would be ~$3,000/yr (@ $.12/kWh). So, a 30-40% savings would range from about $900 to $1,200 per year. For a given home, a suite of upgrades could cost anywhere from $5,000 to $10,000. So, what’s the payback?
If you get a 40% savings and only spend $5,000, an EFD loan could be paid off in as few as five years (even at interest rates as high as 8%). However, if you only get 30% savings and the retrofits cost $10,000 then it could take more than 15 years to pay off the loan even at very low interest rates (5%). An efficiently run EFD loan program that is focused on high impact energy conservation retrofits can pay dividends to homeowners very quickly as long as we keep our eye on the ball. As long as the programs stay focused on measurably decreasing household energy use, I’m confident that residential energy efficient retrofit loans can provide tremendous benefits to Florida communities - including job creation.
Showing posts with label Energy Finance District. Show all posts
Showing posts with label Energy Finance District. Show all posts
Monday, March 1, 2010
Monday, February 22, 2010
Florida: The Opportunity for a New Paradigm in Energy Finance Districts
By Paul D'Arelli
It has been very exciting to see the concept of an energy finance district (EFD) start to get traction here in Florida. These EFD financing arrangements are referred to in different circles by a variety of names, including, “Property Assessed Clean Energy” (PACE) programs; “Voluntary Environmental Improvement Bonds” (VEIBS), and “Energy Loan Tax Assessment Programs” (ELTAPs). Under these EFD financing arrangements, the local government raises capital from public and/or private financing sources that is loaned to property owners who voluntarily enter into loan/contractual assessment agreements to finance a renewable energy system (e.g., solar) and/or energy efficiency improvements to the property (e.g., insulation, HVAC, windows, etc.). The loan is repaid by the property owner over a long term (e.g., 10-20 years) as an item on the property owner's ad valorem tax bill.
After working hands-on on these financing initiatives in California, I had the pleasure of presenting the concept around Florida in several venues, including the Florida Green Cities Conference in Orlando and then at the Florida Association of Counties meeting recently in St. Pete. As I understand it, there were 2 bills that were put into formal bill drafting by Legislators for potential consideration in the 2010 Session, including the one we presented with our white paper to the Florida Association of Counties. If Florida adopts implementing legislation for EFDs in one form or another, then I believe local governments will need to focus their efforts on quality control as they set up their local finance programs. Prescribing appropriate eligible improvements for finance, effective deployment processes (education and training of property owners, auditors, contractors and vendors), collection and disbursement mechanisms, and other program criteria will be key. The end game for a local government should be to develop a program that best ensures that property owners are likely to realize energy savings sufficient to off set the cost of the assessments in order to set the predicate for long term success of the local program. Let's not just imitate what is being done in other states in this area, but let's develop a paradigm here in Florida for best practices that result in measurable and verifiable success.
It has been very exciting to see the concept of an energy finance district (EFD) start to get traction here in Florida. These EFD financing arrangements are referred to in different circles by a variety of names, including, “Property Assessed Clean Energy” (PACE) programs; “Voluntary Environmental Improvement Bonds” (VEIBS), and “Energy Loan Tax Assessment Programs” (ELTAPs). Under these EFD financing arrangements, the local government raises capital from public and/or private financing sources that is loaned to property owners who voluntarily enter into loan/contractual assessment agreements to finance a renewable energy system (e.g., solar) and/or energy efficiency improvements to the property (e.g., insulation, HVAC, windows, etc.). The loan is repaid by the property owner over a long term (e.g., 10-20 years) as an item on the property owner's ad valorem tax bill.
After working hands-on on these financing initiatives in California, I had the pleasure of presenting the concept around Florida in several venues, including the Florida Green Cities Conference in Orlando and then at the Florida Association of Counties meeting recently in St. Pete. As I understand it, there were 2 bills that were put into formal bill drafting by Legislators for potential consideration in the 2010 Session, including the one we presented with our white paper to the Florida Association of Counties. If Florida adopts implementing legislation for EFDs in one form or another, then I believe local governments will need to focus their efforts on quality control as they set up their local finance programs. Prescribing appropriate eligible improvements for finance, effective deployment processes (education and training of property owners, auditors, contractors and vendors), collection and disbursement mechanisms, and other program criteria will be key. The end game for a local government should be to develop a program that best ensures that property owners are likely to realize energy savings sufficient to off set the cost of the assessments in order to set the predicate for long term success of the local program. Let's not just imitate what is being done in other states in this area, but let's develop a paradigm here in Florida for best practices that result in measurable and verifiable success.
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