According to Stacey Lawson, CEO of Ygrene Energy, the property assessed clean energy (PACE) financing program is poised for takeoff, and Ygrene is positioned to serve a large part of that market.
The YgreneWorks PACE program allows residents to finance energy efficiency upgrades, solar systems and other renewable energy installations, and water conservation measures through their property tax bill.
The unique feature of this approach compared to a traditional credit-based loan is that the financing may transfer with the home at time of sale or refinance. This means that when a homeowner with PACE sells, the new owner pays the remainder of the obligation while benefiting from the improvements. In addition, PACE financing can be much simpler and faster than a traditional bank loan, taking as little as 15 minutes to get an application approved, Lawson said.
Currently Ygrene is one of several private companies in California providing PACE financing. It serves 254 cities and counties statewide. Ygrene is the only company that is a multistate provider for both residential and commercial markets. Lawson said that the residential sector is growing fastest,and comprises 85 percent of their business.
While Ygrene provides financing and administers the program, the company works closely with the independent contractors who do the solar installations and energy efficiency retrofits. Contractors are trained and certified by Ygrene to accurately represent the program to property owners. Ygrene sees consumer protection as a big part of the service they provide, including contractor confidence in installing PACE-eligible measures, protecting customers’ sensitive information and informing them of their rights and how to resolve grievances.
The PACE industry experienced early challenges when Fannie Mae and Freddie Mac refused to handle PACE properties due to the priority PACE loans have over other liens against the property such as mortgages. Although this resistance originally created some serious drag on the PACE industry, the market continues to grow.
Many wonder if PACE affects home values. PACE is a positive contributor to home value, according to a study done by Laurie Goodman and Jun Zhu, published in the Journal of Structured Finance this winter. The study concluded that on resale PACE homes recovered on average 100 percent of their investment compared with other home improvement investments that recovered an average of 60 percent of their cost.
Headquartered in Santa Rosa, Ygrene was approved last month by the Sonoma County Board of Supervisors to serve this county’s market. Other Sonoma County PACE providers are Figtree Financing, Home Energy Renovation Opportunity, CaliforniaFIRST, and Sonoma County Energy Independence, the county’s public program.
In addition to working in California, Ygrene currently has programs in Florida with plans to expand into Georgia, Arkansas, Missouri and additional states in the coming year. Lawson believes that PACE has bipartisan appeal. Even in red states where clean energy may be less of a driver, the economic stimulus created by investing private capital into property retrofits and upgrades is viewed as a benefit of the program.
Ygrene hired 150 new employees in the last year, more than doubling their size. They have experienced an 800 percent increase in applications during the same period. Sixteen states offer PACE, and an additional sixteen now have enabling PACE legislation. Lawson estimates that PACE is a $200 billion annual market with less than one percent penetration.
She says Ygrene is ready for more growth, having recently received a credit facility for $250 million from a number of large banks. All of these funds will be used for direct investment in property upgrades.
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