“These investments in energy efficiency and renewable energy will also be a net new source of job opportunities. More specifically, we find that new investments in energy efficiency and renewable energy will generate more jobs for a given amount of spending than maintaining or expanding each country’s existing fossil fuel sectors.” U.N. 2015 Special Report, Global Green Growth
It’s not surprising that a new report from the United Nations revealed the new job opportunities that occur alongside the pursuit of energy efficiency and renewable energy. In my experience the job creation component is one significant element of the overall economic development that results when businesses and communities embrace energy efficiency.
I speak from the experience of using the unique energy efficiency financing vehicle known as Property Assessed Clean Energy (PACE). PACE drives the launch of countless energy efficiency renovations throughout the United States, and is rapidly expanding into other countries due to its unqualified success.
As a driver of economic development, PACE is a funding tool specifically aimed at energy efficiency projects. It is repaid through a voluntary special assessment on the building’s property taxes. This is the same mechanism used for sewers, sidewalks, paved roads and other amenities. PACE projects pay for the services of architects, engineers, and countless numbers of contractors including HVAC, electrical, lighting, plumbing, solar, insulation, geothermal and compressed air.
What makes PACE unique as an economic development program is that it requires zero taxpayer funding! While the program has strict guidelines at the state and county level, the money that drives the program is typically sourced from private funds. These finance companies are eager to invest in PACE funded projects because the tax assessment makes the projects very low risk. Private retirement and insurance funds literally line up looking to fund green projects that fit the strict guidelines that PACE requires. The fact that the projects must be paid for out of the energy savings further lowers investor risk.
A key advantage of PACE is the long-term financing option – generally 15 to 20 years – at a fixed interest rate (currently 5.5% to 6.5%). This compares to most commercial bank loans which usually have a five year term at which point they must either be paid off or renewed at a new (typically higher) interest rate. Five years is often an insufficient amount of time to generate enough energy savings to offset the cost of larger projects. By comparison, 15 to 20 years is sufficient for even long-term payback such as solar and geothermal technologies.
Property owners receive 100% pre-funding for energy saving upgrades on their facilities and pay the loan back through their property tax bill. To take advantage of PACE a property owner signs an agreement with a private lender and the local government and the loan repayment is added to the property taxes.
When a community can help launch energy efficiency projects by becoming a PACE approved district an opportunity for economic development becomes possible. PACE projects put people to work, fund the sale of energy saving technologies, increase the property value of the improved building and, as most energy efficiency projects achieve, an increased comfort of those working within the building.
“What makes PACE unique as an economic development program is that it requires zero taxpayer funding!”
PACE is truly an economic development program that does not require government or taxpayer funds to work. It puts people to work while it reduces wasted energy. It’s no wonder that the majority of counties, upon voting to become a PACE approved district, pass the initiative unanimously! Why would anyone oppose economic development?
The Energy Alliance Group of Michigan is a leader in clean energy PACE project development and financing.