California Launches Ambitious Energy-efficiency Program

Under the auspices of the California Statewide Communities Development Authority, the state’s joint powers authority, 14 California counties and 126 cities have launched the nation’s largest PACE program, an innovative financing tool to help commercial property owners reduce their buildings’ energy and water use.

The CaliforniaFIRST program allows commercial property owners to use municipal bonds to finance energy and water efficiency, as well as renewable-energy upgrades, which the owners repay through a special assessment on their annual property-tax bill. Through a public-private partnership, private capital will be used to supply the upfront funding for the work, so local government budgets will not be burdened.

There is huge potential for energy and cost savings in the commercial building market. According to Washington, D.C.-based U.S. Department of Energy researchers, if all U.S. businesses and institutions conducted cost-effective upgrades, they could reduce their average energy use by 25 percent. The total cost of this work would be more than $100 billion, which would be offset as a result of lower energy bills.

The financing mechanism, called Property Assessed Clean Energy (PACE), was first pioneered by the city of Berkeley, Calif., for its residential owners in 2008. The promising residential energy-upgrade platform ran into regulatory headwinds in 2010. However, commercial PACE programs have since been launched in San Francisco; Los Angeles County; and Washington, D.C. The CaliforniaFIRST program is the first multi-jurisdictional program of its kind to be essentially statewide in scale. With the CaliforniaFIRST program, many people view California as the state with the greatest potential to unlock the promising energy-efficiency market.