The Community Energy Initiative (CEI) specified the goal of using efficiency to create all of the energy needed to support the growth in the residential, commercial, and institutional sectors. One possible mechanism to accomplish this has appeared in the United States through the Property-Assessed Clean Energy (PACE) program.
Traditional financing is ineffective
Traditionally, when a property owner is considering an energy efficiency and/or renewable generation project, the best financing option available is a home equity line of credit. However, such projects have a long payback period, often longer than the current owner intends to own the property. Further, the repayment terms for the financing are such that, at first, the property owner will pay more to service the financing than the project saves them on utility bills. Homeowners are reluctant to add to their personal debt burden under these conditions.
The PACE concept
PACE addresses these issues by attaching the financing to the property, rather than the property owner. Principal and interest is repaid via the property tax roll rather than directly to a financial institution. PACE allows for a longer repayment period than other financing methods, allowing payments to match up with utility savings. If the property is sold, the obligation automatically passes to the new owner in the same way that the property tax obligation does (assuming the PACE financing is not retired as a condition of sale).
PACE progress in the United States
Beginning in 2008 with the passage of Bill AB811 in the State of California, PACE legislation is now in place in states representing a total of 80% of the US population. Over 2500 municipalities across 19 states have active residential PACE programs, with a total of US$4.3 billion invested to date in 175,000 home upgrades. Most of the investment dollars (58%) went to energy efficiency, with the rest going to renewable energy (37%) and water (4%). Commercial properties are participating as well, with US$583 million invested in 1,230 projects. (Pace Market Data, PACENation, 2017.)
PACE comes to Canada
Encouraged by the US example, proponents advocated for a made-in-Canada version of PACE through the Collaboration on Home Energy Efficiency Retrofits in Ontario (CHEERIO). Local Improvement Charges (LICs), which allow a mandatory user-pay model to finance municipal infrastructure, were identified as an appropriate tool for the purpose. In 2012, Ontario LIC legislation was amended to allow their use on a voluntary basis for energy efficiency and renewable generation projects on private property.
In 2014 the City developed the Guelph Energy Efficiency Retrofit Strategy (GEERS), a business plan aiming to upgrade 80% of the existing building stock (38,400 homes) by 2031. Staff presented this plan to Council on September 28, 2015, and Council gave direction to continue detailed program design and to draft by-laws to enable LIC usage for energy projects. In May 2016 staff reported on progress and Council gave further direction to continue developing the program including identifying participants, analyzing administrative and transaction costs, and reporting on the applicability of the program for home electric vehicle charging infrastructure. This report included a community survey.
In March 2017 staff noted that next steps for the GEERS program would be addressed through the CEI Update process. The CEI Update, presented to Council in May 2018, placed top priority on implementing a program for energy efficiency retrofits on homes constructed prior to 1980.
For more information
Alex Chapman, Manager, Climate Change Office
City of Guelph
519-822-1260 extension 3324