PACE Clean Energy Financing Gets New Lease on Life in California

Although the long-term fate of Property Assessed Clean Energy (PACE) financing is far from certain, another California court victory may help revive interest in the model.

A federal district court judge ruled that the Federal Housing Federal Agency (FHFA) violated federal law when it abruptly decided not to underwrite mortgages on homes that used PACE loans without any sort of public comment period.

One year ago, the same court required the FHFA to accept public comments related to its policy. The latest ruling negates the FHFA's old policy until it can consider those comments (the deadline for submissions is September 13).

"With this decision, the FHFA PACE policy is officially toast until the agency can develop a final rule pending the outcome of an ongoing rulemaking process," writes the Legal Planet blog.

The PACE structure, authorized in 27 states through legislation, makes it much easier for?property owners to finance?energy efficiency and renewable energy projects in homes and businesses. PACE?funds energy improvements with government bonds that are repaid via special tax assessments on the properties where improvements are made.?

But in July 2010, the FHFA issued a position statement calling the loans risky and inadvisable, which all but killed PACE programs. The issue for the federal government was that PACE loans might be paid back before banks or Fannie Mae or Freddie Mac if a property went into foreclosure.

?"To be sure, this decision does not clear up the long-term uncertainty around PACE, but it limits the FHFA?s ability to issue a sweeping policy undercutting the program. The final rule (whatever form it takes) will be subject to [Administrative Procedure Act] requirements and likely judicial scrutiny. The question now is whether FHFA appeals the decision and whether a higher court needs to resolve the split with?contrary PACE decisions?by New York courts on the issue of standing. Ultimately, local governments may be hesitant to restart their PACE programs until these questions are answered, and they?ve already missed a crucial window to use now-spent stimulus funds to launch them," writes Legal Planet.

The uncertainty over PACE has acted as a stimulus to solar leasing programs, which are helping many homeowners and businesses add renewable energy resources without hefty upfront capital investments.

A 2011 survey showed strong interest in PACE programs.

For more on the recent California court ruling:

Source: http://www.sustainablebusiness.com/index.cfm/go/news.display/id/24012

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