Advanced Energy Economy
Jun 24, 2015
In 2010, the Federal Housing Finance Authority almost killed Property Assessed Clean Energy Programs (PACE) for residential properties. A lot can happen in five years, and what was once a program on the verge of foreclosure is now a booming market. Also, what a new financing model could mean for current solar consumers and producers.
Residential PACE Growing Rapidly, Now Larger than Commercial PACE
After years of frustration resulting from roadblocks from federal loan underwriters, the market for Property Assessed Clean Energy (PACE) financing for residential energy improvements is booming, and is now larger than the national commercial PACE market. Spurred by an innovative approach to using credit enhancements, residential PACE is now firmly established in California, with emerging markets in Florida, Georgia, Missouri, and New York. According to data from PACE Now, there have been more than 30,000 PACE-financed residential projects, totaling $626 million, compared to 330 commercial PACE projects, representing $112 million in investment.
One reason for the rapid growth in residential PACE is the ability to package individual loans into securitized financial products. Because there is less variability in residential loans in comparison to the more individualized loans in the commercial space, these residential loans are easier to bundle. California-based Renovate America, which oversees the Home Energy Renovation Opportunity (HERO) program, recently completed its third securitization of PACE bonds. The $240 million securitization, focused on advanced energy and water efficiency projects, follows Renovate America’s two previous deals, which funded more than $600 million in residential projects in California and helped residential PACE to overtake commercial PACE both in terms of number of projects and total deal flow.
Similarly, Ygrene Energy Fund recently partnered with the Golden State Finance Authority (formerly known as the California Home Finance Authority or CRHMFA Homebuyers Fund) to launch a statewide PACE financing program that allows any California city or county to immediately opt in to the PACE financing program, opening up PACE for all California residents interested in energy efficiency and water conservation upgrades.