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Greater Miami To Launch $550 Million Energy Retrofit Fund; Billions In Unfunded Projects Wait Nationwide

This article is more than 10 years old.

When I last dedicated a post to property assessed clean energy (PACE) programs, in January, I described how, with the residential PACE market stalled, project developers and financiers had collaborated to establish a commercial market.

On April 12, a vote by the Miami City Commission authorizing the city to join the South Florida Green Corridor District brought one of the commercial PACE collaborations much closer to fruition.

The PACE Commercial Consortium, spearheaded by the Carbon War Room and backed by Lockheed Martin, Barclays Capital, and Ygrene Energy Fund, announced, in September 2011, its intent to fund $550 million worth of energy retrofits in Miami-Dade County, Florida, and $100 million more in Sacramento, California.

PACE financing enables property owners to take out a loan, usually via city- or state-organized bonds, to pay for energy efficiency upgrades or onsite renewable energy. Loans are repaid, typically over 20 years, through an annual supplemental property tax assessment.

In a recent interview, I spoke with Ygrene Energy Fund Chairman Dennis Hunter and President Dan Schaefer about the Green Corridor District launch, and the state of the industry.

The Green Corridor District will be the “largest district in the state of Florida to provide energy efficiency financing,” Schaefer told me. Miami was the sixth city to join the district. Owing to a recent change to Florida law, the district won’t be able to fund projects until after July 1. Schaefer said the delay will be worth the wait. “Part of that law change,” he said, “makes it much more advantageous for cities to form districts such as the Green Corridor District in the state of Florida.”

Member cities are now waiting for the go-ahead by the seventh and final member, the City of Coral Gables. “All of the [Green Corridor] cities have to be on board before they can start the district,” explained Schaefer. “The seventh city – the district model is seven cities under the law – will be Coral Gables.”

Schaefer said the vote in Coral Gables is scheduled for early May. “If the vote is affirmative, the district will form, and then Ygrene and its partners can fund projects.” At the launch, Miami will authorize only commercial PACE projects; the other Green Corridor cities are likely to support residential as well as commercial PACE retrofits.

Building the project pipeline

Schaefer said Ygrene’s Florida subsidiary, Ygrene Energy Fund Florida, administrator of the Green Corridor program, is making preparations now to ensure a successful launch in July. “We’re in the final phase of our launch campaign. We are going to go into the cities to train, bring on board, the certified contractors, in order to start building the pipeline.”

“We have pretty active engagement going with the Latin Builders Association,” he went on. “We already have over 100 contractors signed up. Our initial marketing outreach was to the construction community, so we have quite a large pool of contractors onboard. They’re going to go through the training programs so they can learn to use our systems, and learn how to position the financing as part of their sales program.”

“We’re really excited about how quickly this will launch,” Schaefer said. Based on conversations with Green Corridor energy service company (ESCO) partners Lockheed Martin and Trane, he said, it’s clear that caulk-gun ready projects are waiting to be funded. “Lockheed Martin, the first project they are looking at is actually quite large; it’s about $10 million. Trane has something like $20 to $30 million of projects that are not currently fundable, but will be fundable under the Ygrene program.”

Billions of dollars of unfunded projects waiting

Dennis Hunter said Ygrene Energy Fund is working with cities and states across the country to authorize PACE programs, or to re-write existing law to establish more advantageous conditions for PACE programs. Atlanta, Georgia, will vote on a PACE program in May, Hunter said, and lawmakers in Louisiana, Connecticut, Massachusetts, Minnesota, Wisconsin, and Michigan are working on PACE enabling legislation.

Hunter was especially optimistic about the potential for projects in Michigan, where Ygrene has met with representatives from the major automakers. “Car companies there are paying over $1 billion a year in energy costs. They feel they can save half of that energy cost, but the return on investment isn’t high enough to merit their capital expenditure. They want a higher return. PACE programs work really well for them because it’s off-balance sheet,” he said.

“Because of our affiliation with the Carbon War Room and PACE Commercial Consortium, we’ve had quite a bit of access to and high-level conversations with a number of the large ESCOs,” said Dan Schaefer. “They’ve indicated to us there’s an aggregate pipeline – between companies like Lockheed Martin, Chevron Energy Solutions, Johnson Controls, Trane, Honeywell, and Siemens – of billions of dollars of unfunded projects.”

“The demand is so out there,” agreed Dennis Hunter. “The cities and counties are having such a difficult time making the political decision to go ahead. We don’t really know what is holding them back. It’s just an enormous pipeline of demand for money out there in the market. It’s so hard to get for these middle size and small companies.”

Hunter cited an ECONorthwest study (PDF), commissioned by the advocacy group PACENow, which assessed the economic impact of PACE programs. “This money operates at a two-and-a-half times multiplier. For every billion dollars extended, it creates about 15,000 jobs. It would be a very big contributor to the jobs market in the U.S.,” he said. Ygrene projects 8,250 jobs will be generated by energy retrofits in the Green Corridor District over the next five years.