TribBlog: PACE Slows

A national program to encourage energy-efficiency and solar in homes is generating interest in Texas, even as it has encountered setbacks in Washington.

The program, known as PACE (short for Property-Assessed Clean Energy), essentially allows homeowners to pay for energy improvements through increased property taxes — thus avoiding the high up-front costs often associated with adding insulation or solar panels. Energy-efficiency advocates swoon over the program, which has backing from the Obama administration. Businesses also can participate.

Within Texas, San Antonio, Austin, Houston and El Paso have been the "most aggressive" in pursuing PACE programs, according to Chris Winland of Good Company Associates, an Austin-based clean energy consulting firm whose clients include a California company that is promoting PACE. None has implemented it yet, however.

In last year's legislative session, when a raft of bills promoting solar power and energy efficiency got introduced but did not pass, virtually the only survivor was House Bill 1937, which approved the adoption of PACE. Texas is one of 22 states to approve the program. But PACE does not take effect automatically: Cities must implement it, normally by issuing bonds or finding other means to support the up-front program costs.

The program has encountered stiff resistance from Fannie Mae and Freddie Mac, the federal mortgage-finance giants. They fear that if somebody defaults on their home, repaying the PACE loan gets priority over the mortgage. Earlier this month, the agency that regulates the mortgage twins issued guidelines that will effectively cripple residential PACE programs. Winland said in an e-mail that additional guidance from the federal Office of the Comptroller of the Currency earlier this month "may affect commercial programs as well."

Environmental advocates are pushing back. Last week Jerry Brown, California's attorney general and 2010 Democratic gubernatorial candidate, filed a lawsuit against Fanny and Freddie, challenging their stance. Also last week, 30 members of Congress introduced a bill to aid PACE and fight the mortgage giants' objections.

Laura Spanjian, who recently left San Francisco to become Houston's new sustainability director, said in an e-mail that her city was "not going to wait" for the PACE problems to get solved. "We have set aside funds to help commercial property owners with the upfront costs of energy efficiency improvements," she said in an e-mail. "We're going to find another model in the short-term while the issues with PACE are being worked out."

Said Winland: "Prospects are dim for the launch of a PACE program in Texas in 2010 without resolution of the national issues."