Alliance Webinar Maps a Tough Road Ahead for Efficiency Financing

Across the country, states have devoted almost one billion dollars from the Recovery Act to energy efficiency financing, a long-term strategy to ensure efficiency investments last longer than the two-year stimulus injection. But when Fannie Mae and Freddie Mac put a freeze on one promising tool this summer, states scrambled to find another solution.  An Alliance webinar on September 8th discussed the options.

"Energy Efficiency Financing: The Current Landscape and Where We Need to Go"

The webinar, co-hosted with the Business Council for Sustainable Energy (BCSE), brought together a slate of state and national experts to share perspectives and plot a course forward.

Recovery Act Financing Thwarted

The Recovery Act awarded an unprecedented amount of money to state and local energy efficiency programs, said Jeff Genzer of the National Association of State Energy Officials (NASEO). Of the $6.3 billion in two main programs, said Genzer, between $900 million and $1.1 billion has been slotted to efficiency financing, including $150 million for property assessed clean energy financing, or PACE.  

But when the FHFA halted the promising PACE tools on July 6, states had to put their efforts on hold. Now states must either reallocate or resolve the PACE issues before a Department of Energy (DOE) deadline to obligate Recovery Act funding by September 30.  

Director of the Maryland Energy Administration Malcolm Woolf relayed Maryland's struggle with the end its PACE program, which was to receive $4 million in Recovery Act funding. After over a year of work to put the systems in place, he said, the state was weeks away from issuing the first loans when the FHFA ban on PACE blocked all efforts.

States Search for an Alternative to PACE

Woolf stressed the urgency of finding another solution until the PACE issue can be resolved. “The DOE wants all of this money encumbered by yesterday and all of it spent as soon as possible,” he said, so Maryland had to come up with a new plan. The new strategy consists of a unsecured consumer loan program, backed by a loan loss reserve fund – to be financed with as much as $2 million of the $4 million intended for PACE.  Where PACE provided a “clear path forward,” he said, the new plan would be limited by higher interest rates and tight credit and is “at best a dirt road.”

Washington Joins the Fight

The Department of Energy is working on a number of other efficiency financing programs to replace PACE in the short term. According to Bret Kadison, a financial Market Development Team Lead at DOE, these tools include bonds, revolving loans and loan loss reserves, each with their unique strengths and challenges.

Solutions are also coming in the form of national legislation, said Alliance Director of Government Relations Brad Penney and Tricia Russell from the Office of Congressman Steve Israel (D-N.Y.).  Among the solutions, they said, are a stop-gap measure to allow the $150 million in stimulus funding to support PACE financing, or a more permanent legislative solution to override lender objections to PACE.

The Search Continues

Participants agreed that PACE is the best option for Recovery Act financing, but that, with the Sept. 30 deadline fast-approaching and a lengthy legislative and legal process ahead, states must find another option in the meantime.