“A coup.”  That’s how one participant described the Sierra Club’s recent forum focusing on “Property Assessed Clean Energy” (PACE) measure.  Over 150 people from around the State gathered to hear from Cisco DeVries, pioneer of the PACE concept, and others discuss what Harvard Business Review has described as “one of the breakthrough ideas of 2010.”  

So what was the hullabaloo about?  Let’s start with a simple question:  why don’t more people install renewable energy systems like photovoltaic (PV) panels or solar water heaters?  While most people want to go green and save money on their electric bill, a significant number simply don’t have the upfront capitol to pay for these systems.

As Cisco DeVries described in a recent article, he thought -- as an environmentalist -- he should walk the walk and install a PV system.  But when the bids came in, he says “I couldn't pull the trigger for all the same reasons that people everywhere aren't pulling the trigger.”  “Which is, ‘Oh my lord, that's a big check.’”  (See Miller-McCune: Francisco DeVries invents a financing mechanism that makes rooftop solar affordable in Berkeley and other cities, 6/23/09).

While in theory people could use lines of credit and home financing, this process can be difficult and (in this economy) unavailable.  Further the average person moves homes every seven years, which makes it awkward to tie up personal credit over a long-term period.

In thinking about this problem, DeVries was struck by the sheer amount people currently pay on their monthly electric bill.  Could this money be channeled into retrofitting their homes with solar?  “The money was there,” he says.  "At its root, there is a financing market failure for renewables and energy efficiency in people's homes.”  Id.

The Breakthrough Idea.  While working as chief of staff at City of Berkeley, DeVries came upon a means to solve the financing dilemma.  DeVries was assisting a neighborhood that had collectively decided to put its utility poles and power lines underground. To pay for the project, the city created an underground utility district, a type of land-secured financing district that is a standard element of municipal bond finance. 

Put simply, the utility district would sell bonds to cover the upfront costs of the putting the power lines underground. Homeowners in the project would then pay back the money through a tax assessment levied on their property — essentially an installment plan that would spread the repayment over 20 years, much like a recurring utility bill.  The bonds would be made secure through a tax lien put on each participating property.

So how would this work in the clean energy context?  Let’s say a homeowner wanted to do a couple of energy efficiency projects -- like installing roof insulation and putting on window tinting -- and install a photovoltaic system.  The homeowner would find his or her own contractors and apply for the PACE program.  If the homeowner qualified for PACE (meeting eligibility criteria such as demonstrating the utility bill savings would meet or exceed the cost of the project over time), then the city or state government would float a bond to pay for the homeowner’s cost.  The homeowner would repay the costs through an assessment on the property’s tax bill over a specified period of time. The financing would be secured with a lien on the property. 

In other words, as a homeowner or business owner you can get a loan for the retrofit, and pay it back as an addition to your property tax. If you sell your property, the assessment (i.e. the loan payments) transfers over to the new owner. Not a bad deal.

Want to find out more about this concept?  Check out the Sierra Club website (www.sierraclubhawaii.com) and the PaceNow website (www.pacenow.org).  We’ll keep you up to date with efforts to bring this idea to Hawai‘i.

Special thanks to Sierra Club volunteers Brian Bell, Randy Ching, Jeff Mikulina, and Gary Gill for helping pull this event together.  And mahalo to the Blue Planet Foundation and the Ulupono Initiative for their co-sponsorship of this forum.