Money TalkA New Way to Pay for Your Sustainable Home Upgrades
By Donna Pols Trump, Past Writer
How can you afford to make sustainable energy upgrades to your home? An energy efficiency upgrade or a renewable energy project to make your home more sustainable is a significant investment. One of the bigger challenges can be finding the financing for that investment. Property Assessed Clean Energy (PACE) programs to the rescue!
PACE programs are a type of government-backed clean energy improvement loan offered by your state, province, town, city, county, or municipal district. Most of the PACE programs in North America are municipal.
They basically work like this. You borrow funds from your municipality to make your sustainable energy upgrades. You then pay back the loan over time, typically 10 years, at a competitive interest rate. The payment can sometimes be added directly to your property tax bill. In the best case, you can use the savings on your energy bill to make your loan payments.
What kinds of improvements can you finance through a PACE program? That varies from one program to another, but often it’s things like major insulation and energy efficiency upgrades to your building, efficient equipment like heat pumps, and solar or other renewable energy systems.
How can PACE be better than getting a loan from your bank or credit union? Those are great options too, but there is one key advantage to a PACE loan.
If you move within a few years, no problem; the debt stays put!
PACE programs are unique among financing options for sustainability and efficiency projects because they link the cost of borrowing to the property itself. If you sell the house and move, the improvement (solar panels, insulation, etc.) goes with the house, but so does the obligation to finish paying off the loan. This is an advantage if you might not own that house long enough to get the full payback from your sustainable upgrades.
If a PACE loan is tied to your property, who provides the financing?
PACE programs are most often offered at the municipal level because municipalities collect and administer property taxes. The municipalities finance renewable energy or energy efficiency upgrades, which are carried out by a contractor of your choice.
Sometimes, a separate organization will administer the program on behalf of a municipality, such as the Clean Foundation’s Clean Energy Financing program, which administers PACE programs for four separate municipalities in Nova Scotia, Canada - Lunenburg, Shelburne, Digby, and Bridgewater.
How do you participate in a PACE program?
First, find out if a PACE program is offered in your area. You can search online for PACE programs by state or province and ask your local municipal councilor or city staff. You may need to dig deeper to find out because PACE-style programs come with different names that might not include the word ‘PACE.’ Here are a few examples: “Clean Energy Financing (Nova Scotia)” and “Lean & Green Michigan.”
To participate, the process usually goes something like this:
- Fill out an application form, usually online.
- Get a Home Energy Assessment or a Home Energy Audit (or a Solar Energy Assessment for solar PACE programs like Halifax Solar City).
- Make a Funding Request and sign a Property Owner Agreement for approved projects.
- Select a contractor and have the work completed.
- Book a Post-Retrofit Energy Assessment to check that the work has been done properly.
- Submit a Project Completion Form and get reimbursed by the municipality (or sometimes the municipality will pay the contractor directly).
- Repay your loan over time via your property tax bill (typical repayment periods are from 5 to 15 years).
How does a project qualify for a PACE program?
Projects will often qualify based on their “debt-to-savings” ratio, where the upgrade cost (including program fees and the cost of borrowing) must be less than or equal to the energy savings over the financing period. Interest rates can vary from 2% to 5% depending on the municipality, and the maximum loan amount often ranges from $10,000 to $30,000.
What types of projects can you do under PACE financing?
Some programs, like Toronto’s Home Energy Loan (HELP), will finance a wide variety of energy improvements. Others will be more targeted, like Halifax Solar City, which is just for solar technologies like photovoltaic panels, and solar water and air heating.
Here is a list of common energy efficiency and renewable energy upgrades included in PACE programs:
