A Property Assessed Clean Energy (PACE) bond is a bond where the proceeds are provided to commercial and residential property owners to finance energy retrofits (efficiency measures and small renewable energy systems) and who then repay the financing over 20 years via an annual assessment on their property tax bill.
PACE bonds can be issued by municipal financing districts or finance companies and the proceeds can be typically used to retrofit both commercial and residential properties.
Unlike the garbage mortgage securities so happily sold by Wall Street recently, these bonds actually make sense. They have a guaranteed income stream to pay them off and property owners might find the cost negligible as energy savings pays for much of it.
The innovative clean energy funding mechanism, Property Assessed Clean Energy or “PACE”, has been recently named one of Harvard Business Review’s ten breakthrough ideas of 2010 and Scientific American’s top 20 ideas that can ‘change the world’. PACE is a new funding model that allows local governments to partner with property owners to achieve savings on energy costs through energy efficiency and renewable energy improvements.
Multiple states and counties have already passed PACE legislation. Let’s hope many more follow.