If you haven't yet heard about PACE financing, you probably will very soon. PACE (Property-Assessed Clean Energy financing) is sweeping the nation, providing eco-friendly homeowners with a way to finance solar panels, insulation, new windows, or (in San Francisco) even water conserving plumbing fixtures with zero down. More than 100 cities are currently developing PACE programs as a means to quickly reduce their carbon footprints by making residences more energy-efficient.

San Francisco just launched the nation's largest PACE program in partnership with Renewable Funding, an investment firm which specializes in PACE programs, and will be putting up $150 million in capital to fund retrofits for about 8,000 homes in San Francisco.

The loan is technically not made to the individual homeowner but to the property itself (hence property-assessed) so the homeowner, in addition to not being required to put up capital, isn't on the hook for repaying the loan when the home sells. Instead the loan is paid back to the city through a voluntary tax incorporated into the home's property tax payment. Depending on what retrofits are done, this additional tax is more than paid for in reduced energy savings.

Homeowners love it because they get dramatically reduced utility bills without paying for anything. The city loves it because they get to be green without having to finance, and the banks love it because they get nearly zero-default loan products. This triple-win play may have you wondering why it has taken this long to get such a program in place. 

During this week's Carbon War Room this very subject was discussed. San Francisco had to pass eight different bills in order to remove the financing obstacles that would allow such an unconventional program to happen, indicating the complexities involved.

What would help? A federal loan guarantee program for starters. If only we could divert the $36 billion Obama handed (risk-free) to the nuclear industry we could theoretically stimulate (assuming a modest 1:20 leverage) $720 billion in residential energy retrofits — enough to retrofit or solarize about 35 million homes!

According to my back of envelope calculations, assuming a 25 percent reduction in CO2 per home x 35 million homes, we could reduce residential CO2 by about 8 percent, equalling about 960 million tonnes of CO2 per year (based on 2008 EIA data). That's a whole lot of power plants that don't need to be built.

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