Will PACE Financing Rise From the Ashes?
Pike Research issued a report earlier this week highlighting consumer attitudes toward Property Assessed Clean Energy (PACE) financing, a financing method for making energy efficient home improvements that has been largely squashed by Fannie Mae and Freddie Mac, but which, the report shows, may be in a position to rise from the ashes.
The success of programs aimed at enabling energy efficiency are largely dependant upon customer enthusiasm, or the willingness of homeowners to take advantage of a program based on a perceived self-interest. Many fall short, because homeowners don’t trust that energy savings will offset upfront cost, even with tax credits and other incentives available. Many succeed — think “Cash for Clunkers” — because there is a high perceived value. People like a good deal.
Pike’s survey of 669 single-family homeowners shines a nice bright LED light on where the concept of PACE financing falls into this spectrum. 75% of respondents said they would be at least “somewhat interested” in taking advantage of PACE financing. 42% of respondents would be “very” or “extremely” interested, while only 11% would be “not at all interested.” This is significant, and it’s good news. Policymakers looking at low-cost, high-chance-of-success strategies for improving building energy efficiency would do well to heed these numbers.
The full report contains a number of valuable insights–including the correlation between demographic, economic and behavioral information and interest in PACE programs–but there are two that, in the big picture, are worth mentioning:
1) The report confirms what we’ve long known, that people remain enthralled with solar. Among the improvements eligible for financing under a PACE program, the most popular were solar panels and tankless water heaters, with 63% of respondents expressing interest. However, insulation wasn’t far behind, at 58%, and air sealing and duct sealing following at 47%. An improvement for us efficiency first types to be sure, but indicative of the market.
2) The report confirms something else that we’ve long known, that misunderstanding is the biggest hurdle to implementation, for PACE programs as for so many programs aimed at increasing building efficiency. Far and away the biggest reason cited by those who responded that they would not be interested in PACE was that they would “not want to take on the additional financial liability” (56%), a response closely related to the second most-cited reason (30%), that they did not understand how the program would work. I call this a close relationship because the first reason seems to represent a misunderstanding about how the program would work: the characteristic of PACE that makes it so appealing (and the characteristic cited by Fannie Mae and Freddie Mac in their cabashing of the concept) is that the program ties the value of the energy improvements to the property, rather than to the homeowner. In the event that a homeowner who has taken advantage of PACE financing sells her home, the remainder of payments will be made by the new homeowner. This means that there is, in fact, less financial liability tied to PACE programs than virtually an other financing mechanism for energy efficient home improvements.
All in all, however, the report demonstrates that there is still a high level of interest in the PACE financing model, and that we would do well to figure out how to navigate the roadblocks and make the concept a reality.
What do you think? Could PACE come back from the dead?