PACE 2.0

Restructuring PACE programsTeam Crown Joules

PACE’s primary goal is funding

1. Provide low-interest financing for economical demand-reduction home improvements.

2. Do not burden property owners with personal lien.

PACE interacts directly with owners

Obstacles facing PACE

1. Property lien

2. Scale of energy demand reduction

3. Administrative burden

Proposed PACE 2.0

Proposed PACE 2.0, continued 2

Financing

Program approval

Auditing

Proposed PACE 2.0, continued 3

Identify efficiency opportunities

Submit project proposals

Implement approved proposals

Proposed PACE 2.0, continued 4

Accept improvements

Proposed PACE 2.0, continued 5

Major advantages of new PACE program:

1. Economy of scale

2. Allocative efficiency

3. Streamlined administration and publicity

4. Credit-worthiness

5. No interference with mortgage liens

Proposed PACE 2.0, continued 6

Major advantages for utilities:

1. Increased return opportunity

2. Access to attractive financing

3. Decreased demand-side risk

Proposed PACE 2.0, continued 7

Major advantages for property owners:

1. Free or low-cost property upgrade

2. Increased rental value

3. Immediate energy cost savings

4. No interference with mortgage liens

Incentives are balanced

Low administrative burden to state

Return bonuses to utilities

Low liability and default risk to utilities

Low/zero up-front cost to property owners

Key levers for optimizing PACE 2.0

Financing

Implementation

Program qualifications

Outreach

Case example

Approved program:

Building: 200,000 sq. ft. office building (cold climate)

Total cost of retrofit: $400,000

Energy demand reduction: 35%

PACE loan to utility: $320,000

Interest rate: 5%

Annual payment: $55,302 (7 payment periods)

Case example, continued 2

Energy demand reduction:

Annual energy cost, before: $410,000 ($2.05 per ft^2)

Annual energy cost, after: $266,500 ($1.33 per ft^2)

Annual savings: $143,500

Annual bonus payment to utility: $71,750 (50% of savings) for 7 periods

Net profit to utility: $16,448 annually

Rate of return to utility: 10%

Case example, continued 3

Distribution of return:

Rate of return to utility: 10%

Rate of savings to property owner: 18% (and greater after payback period)

Rate of return to PACE: 5%

PACE 2.0 will target specific markets

Tailored for regulated electricity markets

Targets large property owners

Aligns interests of utilities with all demand-side

reductions (efficiency, distributed generation)

Considerations for PACE 2.0

Minimum standards for PACE proposals?

How to distribute risk?

Minimum incentive to engage owners?

Recap: PACE 2.0