Hello from the Northeast Sustainable Energy Association’s 2011 Building Energy Conference in Boston, MA!
We hit killer traffic on the way in this Am, so only caught a bit of the end of the Keynote.
As usual, EVERYTHING is paraphrased because I can’t type as quickly as humans can speak. Any misspellings, typos, and errors are mine!
Keynote Speaker David Orr
At the moment, I’m using someone else’s laptop and can’t type for beans, so I’m just going to grab a couple of quotes of interest.
Referring to the changes needed in college curricula (which is now in progress @ Oberlin):
We should no longer be preparing our students for careers on the titanic.
What they’re shooting for with the Oberlin project is “full spectrum sustainability – parts reinforce the resilience of the whole.”
We’re already in a world the likes of which we’ve never seen.
How do we build in resilience? First we need to know what we mean. Favorite definition:
Resilience is capacity to take gut punch and come back swinging.
Another great definition is in the book “Brittle Power” in Chapter 13 (presentation displayed a long list of elements of resilience).
What do we do?
We’re in gridlock, it’s all rear guard in DC, protecting the existing interests and old technologies instead of supporting the new.
1) Change the narrative about security at the national/global level:
Security is about children going to bed well fed, safe, and sheltered.
2) Create a network of sustainable national security sites around the country – one in each congressional district.
3) Create our version of the Tea Party movement, but not based on bullshit.
Our security is too important to leave to generals alone. We face gridlock, black swans, terrorism, tech changes, etc. and we need to be prepared to adapt and move forward as the world changes.
Our sustainable future will look a bit like this:
local food /farms
powered by sunlighte,
people will walk and bike more
they’ll support and shop at local businesses
people will learn and use regionally appropriate skills
front porches
the word “neighbor” will be a verb
and more
The Great Work of our generation must be to stabilize & reduce Green House Gases – We MUST get to 350.
I don’t believe in the growth economy – stuff
An excellent book on an approach to meeting the challenge: “A Prosperous way down: Principles and Policies.” We have to learn to live w/less, but we can do it well.
It is in every way negotiable, it’s all on the table.
Updated w/much more below the fold. More to come…
The below is all “rough” text. I’ll b eback to clean up later… It’s a fantastic event! I’m suffering from “drinking from a firehose syndrome” re: the volume of great info flowing.)
MA Clean energy and Climate Plan for 2020
Integrated approach to Greenhouse Gas reduction and clan energy since 2007 w/Gov. Patrick.
Vulnerable to high energy costs: export $22 bil/yr for fossil fuel energy costs. $22 bil coal, oil natural gas.
$5200/household, the rest from business
—
Millions saved in 2020:
Electrical efficiency, 2500
nat gas 800
fuel oil efficiency 200
fed and ca vehicle efficiency 1700
clean car incentives 200
pay by mile auto ?
Create jobs:
Cutting energy itself crates jobs:
Reducing imports of fossil fuels keeps that money from leaving the state, which means it’s spent on business w/in the state.
General household spending: creates 9.1 jobs/million dollars spent
Nat gas spending: .7 jobs
Electricity 1.1
Fuel oil: 1
Gasoline: .7
Every million dollars you shift from fossil energy incr. jobs in state by 8.
In MA, there’s been an increase in solar industry: 20-fold in last few years, 10-fold increase in wind (megawatts).
Increases in 2020, direct and indirect (shifting the money from export into local economy)
$6k efficiency
$1k reduced emissions
$3k pay as you drive
$2k clean car incentives
$1k Smart growth policy
$13k transportation subtotal
(similar data re: electrical)
—-
Global Warming solutions act:
Reduce emissions 80% by 2050.
Choose level for 2020 (10 – 25% below 1990 levels)
Bus as usual: emissions would be approaching 94 million tons/yr
Estimates of reductions per sector for 2020 plan: (PLAN IS ONLINE)
9.8% red in building sector
7.7 in elect supply (renewables)
7.6 transportation
non-energy 2.0%
This gives 25% below 1990, we could reduce emissions by 27%, but 25% is max allowed by law. So, target’s been set at 25%. It’s a legally mandated target.
MA Will be spending 3x CA spending/capita, $2 billion -> $6 bil savings.
Will save 20% elect use in state
Ramp up from 2008 -> 2012: tripling expected elect savings. Tough to ask of the utilities. Utilities have committed to these plans.
Exec office of Energy and Environmental Affairs, 2012 statewide elect efficiency programs chart
Gas savings also on a quick rampup. More than tripling from 2008 -> 2012. Not simple to accomplish in residential sector.
Elect supply: renewable protfolio standard was expanded in 2008, EPA will have more stringent EPA rules on power plants
Clan energy imports
Transportation: GHG standards 2.6%
Fed effi. standatrds for trucks: .3%
Fed renewable
Clan car incentives .5%
Pay as you drive auto ins. 1.1% (closest to win-win: not simply raising the bill, letting consumer decide how much to drive so they can adjust their own insurance rate)
Sustrain dev principles” .1%
Green DOT: 1.2%
Smart growth policy pkg: .4%
—-
Green DOT: bike, ped, transit investments
operations efficiency, development project mitigation, emplouyer based commuter choice programs….
Non energy emissions poliicy:
refrivgeration
vehicle aAC
Reducing DF6 emissions from gas
…
Policy directions for 2050:
Building rating and labeling
Adv. building codes
Deep energy improvements
tree retention and planting
smart growth
?
—
decarbonizing elect supply
convert motor vehicles from petroleum to other fuels.
—
Cut en costs for househods and businesses
reduc vulbn to volatile fossil fuel prices
imprive energy independence create jobs
greatest mandatory ghgreduction of any state
————–
New York planning for Climate Action
John willioans director energy analysis
NYSERDA
In process by exc ordre by Gov Patterson in 2009, formed 13 gency commissioner panel.
Interim report in 2010. Wiating to see where Cuomo admin puts climate action planning.
Levels of emissions 1990 – 248 million metric tons; 254 in 2008; benchmark in 2050 is 80% reduction. Need to be down to 148 metric by the halfway point. (40 by 2030)
Seeing some efficiencies and emissionless tech coming in line.
emissions profile:
15% other sources: 38 million mtric tons
89% from fuel combustion
CO2 is THE gas to go for, even after accounting for the multipliers on other gases.
Electricity CO2 emissions
4% imports of electricity
21% electric generation,
40% trasnportation
35% onsite combustion
—
Climate Action Council identified Emissions producing sectors, created working groups to prioritize policies:
Power supply and delivery;
Residential, commercial/institutional and industrial;
Ag, forestry and waste;
Transportation and land use;
Adaptation
Mitigation policy summary:
– no single solution: a portfolio is needed
– comprehensive/multi-sctor planning
– regional and national coordination is essential (our own policy won’t be effective on its own).
Residential commercial industrial/building sector:
– Funding policies (1: efficiency and clean energy find, tax structire and provate financing)
Enabling policies (eductaion, outreach and behavior change, workforce training and dev. rsearch dev and demo. Rate restructuring and flex metering.)
voluntary mechanisms (efficiency incentives, Customr sited reneables, )
statutory mechanisms
Building codes, appliance standards and enforcement of those cods and standards will have most substantial impact.
– more aggressive codes re:” energy use
– statewide stretch code to encourage municipalits to achieve additional savings and inform the building sector of planned future changes.
0- continue to establish and update energy efficicnecy performance standards for products that are notfederally preempted and advocate to increase performance standars.
– building labeling and upgrades. Measure then require audtis and efficiency measures.
Energy efficiency incentives, provide incentives and resources for greater energy efficiency in new buildings and better nergy performance in existing buildings. Employ whole building integrated analysis and design to di high efficincy.
Customer sited renewables:” provide incentives and resources for greatr penetran of solar pb, themal and low-carbon bioenergy solutions
Industrial process incentives: assess and freduc eindustrial process energy use, porvid funding
Workforce training and ev, assess and develop worforce apcabilities in NY to meet the needs of low carbon.
Ed. outreach and behavior change
– changve nergy use patterns by affecting retail purchase pagtterns,e d in schools. Incr. ny state gove elead-by example. provide info and resources to communities and individuals.
Rate restructuring and flex metering
– elec rates vary by time of use for elec usres and xpand installation of smart meters.
R&D and dmopnstration”
invest in next gen tech that will produce low cost low CO2 tech.
Efficiency and Clean nergy Fund
– fund efficiency and clean energy programs, build in existing sources and explore exapansion to all fuels.
Tax structure and private financing
Free up capital, make it easier to make energy efficiency investments.
(Look for NYSERDA to find presentations…)
Once the climate plan is done, it needs to get folded into our energy plan. We need to integrate w/systms reliability, price volatility, env. impacts, and maximizing cost effectiveness.
Plan: Next draft Energy plan 2012, final energy plan 2013
——-
Blair Hamilton from VT
A VT Road Map to A Zero Carbon Building Sector
(NOT an official VT State Plan)
Working backwards from 2050
Big picture: wee’r trying to bend down the energy use curve through efficiency and conservation while increasing availability of sustrainable nergy resources until the two meet.
In VT, we’ve had 20 yrs of aiming low and achieving lower.
We had a 25% reduction by 2012 goal. We didn’t achieve it.
In VT leg, for the first time, adopted efficiency goals:” 40% of all res. buildings should use 25% less by 2020. All building stock using less each year. It would produce 6% overall reduction by 2020. However, we’re only on track for 3%
How do we get back on track toward th goal which is an imperative from a climate perspective.
One poss: focus on achieving climate results. One of the most striking differences between US and EUrope: in Europe’s case they make climate goals
Did not hear the words “cost-effective” – you can’t do it if you only do things that are only cost effective using current cost estimation and planning.
But what if “cost effective” is not enough?
Evrything is easier if we agree that climate imperative trumps everything, then we can look at what’s the last cost path from here to there? This is the direction uropean planning is using, instead of what we’re doing, which is focusing on cost-effectiveness.
Lt’s pick th goal then find the least-cost path to get there and figure out how to get on that path. This is the kind of thinking happening elsewhere, while we’re stuck here.
Sktching this out using VT as example.
Building sector:
Assumtions: building sector will need to be near zero carbon by 2050; efficiency is the least-cost option to provide the bulk of building sector carbon reductions.
AA reasonable mix of strategies:
20% On-site zero carbon energy supply, 20% supply from a de-carbonized electric grid; 60% reduction in consumption through efficiency.
Components of VT building sector roadmap:
– Many of the tech, if not most, are not as yet known.
– Our energy forecasts and plans should not be constrained by our limited ability to account for new tech.
– We tend to assume new tech will cost more and save less, but what is our experience?
All of our forecasts are constrained by our inability to account for new tech. It’s not likely to be that difficult to achieve 60% reduction in consumption as we think.
Typically look at a curve w/low hanging fruit = cheap and easy and quick, then you end up running upwards on a cost curve (more buck, less bang). But real worl experience: look at refrierators and lighting. As we introduce unanticipated new tech, price drops and savings improve even faster.
New delivery strategies for efficiency measures.
Infrastructure:
– Expanded sustrainable Energy utility (Eff. VT is changing format to be a real utility: appointed for 12 yrs, appointment revocable; adding climate to the measures)
– New VT green energy bank (agregate funds for providing capital from private sources)
– New VT sustainable energy loan guarantee fund (to support PACE, etc.)
– More and better skilled contractors and more who can do the whole job.
Policies
Incremntal and voluntary strategies are far too slow
When it comes to climate, Time Matters.
Need to transition to massive investment.
Regulatory Guidance:
Transition to a focus on achieving carbon goals from current gov and reg poliucy focused on reducing energy use and cost.
The least-cost planning paradign that has served VT well in utility sector will ow need to be applied….
Nw Construction:
codse requrie net zero by 2020.
Existing buildings:
Voluntary won’t get us there.
Phase in time of sale building efficiency requirements as condition of property xfer.
– rating and labeling buildings
delivery infrastructure dvelopment
innoavative financing and loan guarangteeds.
Putting it all together:
-Assume nt zro buildins by 2020
– focus in ach. 50% rreduction through retrofits
Retrofit all the buildings by 2050.
“Go Deep or Go Home”
_ When you look at the goal for 2050, sometimes it doesn’t make sense to even consider a half-measure.
——
Questions:
Why not mandate deep retrofits from the start?
A: Regulation doesn’t make it easy, also low fossil fuel prices and funding support are most limiting. Regulatory inhibitors = public service commissions and utlitiy economics. Try to get the marketplace to look at innovative ways to sell certain activities to their client base using factors other than the resource cost test factors as incentives. Politics will also play a part.
Q: We haven’t achieved sort term goals – what is the root cause of that failure. By looking long-term, are we just kicking the can down the road?
A: (Panel) Recognizing that retrofit of existing building stock is where we can meet most of these agressive goals, we have a set of institutions and practices that are not supportive of making rational social decisions about investment and the level of investment into that building infrastructure. There are fundamental psychological barriers as long as we rely on voluntary programs. Whn you present: “look, this will provide more benefit than what you pay in, why won’t you do it?” ans is often “I already have 4 payments and can’t afford a 5th.” Also “I may not be here until it pays itself off.” If you could have all 5 of the people who would own your home in the next 100 yrs and sit down to decide how to split up the cost, and they’d all jump on it.
Q: PACE funding will help with this issue.
Utilitis funding this will not do it all. Will need private financing. What’s MA plan for spurring on private financing?
A: Tom Darling at DOER is devoted to that very aspect. In the process of rolling out loan products. Signif. expansion of HEAT loan process.
Q: Efficient materials: why no mention of energy star as a showcase of efficient products; and why no mention of LEED?
A: There’s a presumption that these types of activities need to be maintained and augmented over time. Need to be in partnership. not a discount, but a presumption that they would be maintained and advanced. Q-2: Use their info as a stepping stone to help move into the future.
Q: Why can’t we do deep retrofits today? Should emphasize deep retrofit program that already exists. Some aspects can be cost effective under today’s cost-effectivenss analysis.
A: For roof insulation: better than 1, wall insulation near 1, windows way below 1. We did expand deep retrofits program. 10% of normal house maintenance in MA include deep retrofits. For example: foam insulation in attic when replacing the roof in 20 yrs. Insulate walls when you’re replacing siding. Subsidy up to $40k for deep retrofit.
Q: MA doesn’t let you test the vermiculite insulation you find in house to see if there’s asbestos, so those houses can’t be retrofitted.
—————
Clean and Healthy Retrofits
Liz Eisenberg, Steven Winter Assoc.
Importance of benchmarking buildings in your portfolio
Audit process
Scenario: bathroom damage from leaking toilet above ceiling has peeling paint and partially collapsed.
Benchmarking:
descriptive building info, inc;. total energy and water use in that building. Allows cross-building comparison. Determine (BTU/sf)/heating degree days. This number allows you to compare how efficiently the building uses energy.
Targets:
space heating: <10 BTU/ft^2/HDD (target for high performance), less = target for low hanging fruit.
Benchmarking tools:
Building performance compass
epa portfolio manager
W1egowise
Bright power nergy Scorecard
… others
WQhy measure?
– know usage
– understand carbon footprint
– compare between buildings
– target improvemnts
– inform capital needs and renovations
– identify high nergy and water wasting buildings.
– Can then assess problems.
– Common area lighting, lower hot water set-points, etc. While you’re working on one building, can do some measures in others in the portfolio at the same time. (for example, while changing bulbs in one building on campus, changing in the other buildings while there can save more vs waiting and having another visit with its own costs.
Process:
Benchmark using utility bills.
Visit apartments
Do Air leakage testing & Combustion efficiency testing
Interview staff and tenants
– Find the person who has worked there, determine building psychology (for example, in some complexes, the tenants may not be capable of managing certain implementations (such as heating controls).
How to implement
Owner involvement from the start to finish.
Correct and complete billing data
Aid communication w/tenants (unit access, emphasis on tenant benefits)
Building history and planned improvements
Implementation oversight
Training (trained staff will know how to run new heating system, for example. Video or how to use systems, burned to DVDm handed to building staff brings excellent results.)
—
Green & Healthy Property Management
Ellen Tohn
Tohn Environmental strategies
Indoor air quality and health.
Now looking at Energy efficiency and health. Impact on health of occupants, it may be possible to get funding to make buildings both healthier and more efficient.
Damp musty envi = 30 – 50% incr. risk of having a breathing problem. You don’t need mold, just dampness is enough. Most buildings do not suffer from extreme dryness. You see more wetness than dryness.
Smoke free housing is the #1 way to have a healthier occupant.
Water use: 69 gals/day/person!
Top 4: Toilets, clothes washers, showers, leaking faucets
One apartment in a portfolio was costing $1500/yr for water (average was $700 elsewhere). It turns out that there was a hose faucet outside dripping too little to pool, but enough to use TONS of water.
50% f water loss = leaking toilet
Water benchmarking and usage training will be available on line. (Search Enterprise Green Communities late in March 2011)
Best strategies:
1.3 gal/min toilet.
1.75 gal/min shower heads, (Niagra and Moen) EFI.org is a great source.
Faucet in kitchen 1.5 or less gal/min; Bath faucets, <1.5 gpm
Water Case Study
One retrofit replacing toilets, aerators, shower heads, under 2 mo. payback. ($1800 for the retrofit, 1400/mo payback)
Pest costs per unit per year,
Use IPM, GreenPro and GreenShield are certified.
Monitor, keep out, reduce food availability, Knock down population with traps.
Healthier residents, and workers, fewer complaints, fewer pests. This approach works far more effectively.
Smoke Free Housing
Improved resident health, reduced complaints, reduces unit transfer requests, tenants want smoke free.
Reduces turnover cost: priming, repainting, carpet replacement, appliance cleaning or replacement. 6-fold reduction in cost to prep for next resident. Some insurers give a break up to 10%. Fewer tenant complaints.
It’s very hard to prevent air migration from one unit to another. Better to go with source control.
It’s a tenants rights issue. Yup. And 55% – 75% of tenants say they want to live in a smoke-free environment.
Greening:
GreenSeal or EcoLogo products for cleaning, supply microfiber wipes and mops, HEPA filtration vacuums.
GreenLabel plus carpet, FloorScore resilient flooring products, smooth and cleanable surfaces, entryway mats and grates to reduce tracking contaminants into building. Ask vendor to recycle. Diff in cost of recycling vs throwing away can be equal or very, very close.
Painting use GreenSeal certified paints or meet LEED for Homes VOC standards.
Q: Tenant Engagement in building w/one master meter – how do you get them to change usage?
– Had students w/in a community tech others in the community, sort of worked, but not so well.
——
PACE Funding
Funding for improvements to private property by a community. Paid off via proprty tax bill.
Used in MA for septic replacement, in CA for earthquake resistance retrofits.
Th importance of finance in taking energy efficiency to scale is
Couple of features make PACE important: attaches to the efficient property. When it’s transferred, the new owner acquires the repayment obligation, so you can undertake a project w/longer payback, and know that you’ll only be paying for that project while you own the property. Allows longer amortization than typical bank financing.
It’s local, and helps people in ways that utilities don’t.
FANNIE MAE and FREDDIE MAC said proprties w/PACE financing can’t sell mortgages on secondary market. As a result, only 2 active PACE programs in CA, 1 CO, 1 NY operational PACE programs, instead of the hundreds that had been in the pipeline.
There’s a sense that PACE is dead for the mean time, but it’s more nuanced than that.
Dorian Dale, Babylon, NY (founder of PACE in NY State).
PACE for energy, 26 states authorized PACE finance programs for alt energy.
Evident FANNIE AND FREDDIE will go to any length to prevent the truth from getting out. (Jokes about the
Passed energy star standards for new home construction and req. LEED for new commercial construction over 4000 sq ft.
Retrofitting via ESCO municipal buildings, w/guarantee.
Boss asked if this could be scaled down to homeowners. ESCO said “no.” So boss looked at me…
We had a waste to energy facility that provides signif $$. Expanded solid waste definition to include Carbon (since it started as a solid).
Tried to get some financing lined up, didn’t work. So… added a line to dispense monthly obligations from the power plant, already had waste collection on the property tax, just defined the carbon as some of that waste, Thus was born BASE (benefit assessed sustainable energy) funding.
Others came to visit, and were excited. Suggested that senior lien status would be a deal-maker for $30 – $50 mil of funding.
– Loading order (most cost effective at top)
– comparable pricing
– 2.0 SIR (savings to investment ratio)
– $15k cap
– 10 yr max payback
– $1k savings/yr.
State of NY now has “Green Jobs/Green NY” for same basic purpose – it is now offering 3.5% loans. The distinction between “Green Jobs/Green NY” and city of Babylon: Babylon are one-stop shop: we provide financing, if contractor doesn’t do satisfactory work, we handle the issues.
We oblige participants to pay for audit fee (gets rid of tire-kickers), then we pay upfront. 70% closing rate from audit to complete retrofit. We’ve done combustion safety test. They’re living in a healthy house. And there’s “that room” that used to be too uncomfortable to use.
We’re gtting it done:
Impact hierarchy of being efficient
We’r gtting it done
(slide pyramid, from top down)
Better world, better sense of community, better self-worth, better off financially, family feels better.
We’re now going to offer $250 to each person you bring into the program, You can collect these “greenbacks” to then use on the next level of efficiency projects.
There are 80 million dtached houses nationwide. At $9k per house, you are creating 9 million job years. The houses are here, now, ready to go.
Don’t stop asking why FHFA is being allowed to kill all these jobs and all the attendant savings for homeowners.
We are suing the FHFA, as are 6 other groups. Our suit includes 10th Amendment claims. FHFA is telling municipality what can be determined to be a public purpose. They could do to municipal sewer systems what they’ve done to PACE funding.
If 5% were retrofitted nationwide @$9k/pop, that would be 6/10 of 1% of Fannie and Freddie’s total exposure. It’s a tiny, tiny percentage.
FHFA is readying to push back even further.
We’re not slowing down and are working on a commercial financing project as well.
Q: Level of funding allowed, and payback required? Why don’t you allow financing for longer-payback measures?
A: Typical job is $9k, largest portion of a typical retrofit is furnace or boiler replacement. Most are opportunistic consumers seeking to replace broken down or very inefficient
Ave payment is $93/mo for the retrofit, Ave. savings is over $100/mo. Obligation on bill should be roughly equivalent to what you would have been paying if you hadn’t made the change.
2.0 SIR is our average; 1.3 is required. US Govt. recommendation is 1.0: you will get equivalency over the life of the retrofit.
We want more than 1.0 so that money can come in and be used for other projects sooner. Gives much better bang for the buck, puts very little additional cost over the mortgage, providing little ammo to fannie/freddie to claim it’s risky. Having a rapid payback has the same effect.
(They use Homecheck software for determining efficiency.)
Q: If you broadened the coalition, including more communities and other betterment projects, you might have more luck.
A: Sent letter to 300 other municipalities around the country w/opinion letter from our atty stating that each community needs to evaluate the implications of this FHFA edict. This is a slippery-slope precedent.
Attendees of this conference should talk to their own municipalities.
Babylon has $42 million in sewer and other senior obligations (but a total of $1 mil would be at risk from PACE). Sewer and others are OK w/Fannie and Freddie; but FANNIE and FREDDIE are trying to stop PACE because it’s “different.” If they’re allowed to do this, does it threaten the capacity of municipalities to bond for every kind of infrastructure they’ve bonded for in the past?
Q: Who is doing the auditing to verify the benefits/savings?
A: Collect billing data from homeowner a year after, compared w/the two
Peter Adamczyk
Energy Finance and Development Manager, Vermont Energy Investment Corporation. 802-488-7631 padamczyk@veic.org
Conference in CA, where they’ve led country in development of PACE both in terms of devel. prog. and in terms of rolling out.
Important:
There’s a difference between a loan and an assessment.
Common Q: “Why is government doing lending?”
A: “It’s not.”
A bank makes a loan with you. Municipalities have a tax relationship to the property. An assessment transfers (27k special tax districts in the country) smoothly with the property – 100 yrs of history.
Since it only has to be brought current at time of transfer, the amount owed is only a very small amount (for example 1/2 of 1% of the property), which is a far smaller an obligation than the full amount owed on the assessment. It’s like the diff between being behind a honda vs being behind a Winnebago.
24 states plus DC in 2 yrs enacted PACE provisions. It speaks to the power of the concept. States that have enabled it represent 65% of the electoral votes in the US. This is a constitutional issue in the sense that a federal entity is telling localities what they can deem as a public good.
1st special assessment in the country, an opt-in, was for fire protection by Ben Franklin. Freddie and Fannie claim that opt-in is “different” because it’s an opt-in.
FL has 40% of houses underwater. Even w/all the foreclosures, tax collection rate is 99.98%. Taxes get paid. Mortgages are a different beast.
10th amendment case could take 6 yrs or more even to reach supreme court. FHFA set up a regulator after PACE was implemented. Lawsuits: 2 kinds:
– 10th amendment (inapprop setting policy).
– There’s a process for fed agencies to change policy (warning, public comment period, etc.) and FHFA didn’t follow it.
FHFA tried to combine all suits into one case, but that was set aside, so the states are separate.
May be, fairly soon, a ruling to require FHFA to withdraw the letter and start the official process.
PACEnow.org to help ensure sufficient public comment….
Sonoma County: cost of funds 3%, lending at 7%, th 4% spread funds their programs and litigation. $44.2 mil, 66 of the projects were pre-paid (paid off early), most likely due to sale.
Palm Desert: wealthy republican community, enormous AC loads ($1000/mo AC bills). $15mil city fund, 235 projects, very active, no let-up in activity. Owners are signing a disclosure letter that they’re aware that it’s going to make it difficult to refinance or sell. Ave size loan: $29,900.
Leasing vs owning a car: If you know you’re not going to exceed the mileage, it can be better for you to lease instead of own. Same applies to PACE vs mortgage: if you know you’re not going to need to refi soon, you’re better off getting PACE assessment.
Boulder county CO: $125k in energy savings in 1st yr.
Energy Efficiency block grant ARRA money was just about to be released (a few days after FHFA killed PACE). DOE had offered $150 mil in loan guarantees and offered to only allow PACE in limited areas, but FHFA killed it anyway. DOE then had to redirect the loan guarantee money. DOE had best practices specified, no more than 10% of property, better than 1.0 SIR. Would have been a defacto set of national standards. This would have been better for lining up investors.
Maine had applied for the grant money, and wrote their PACE legislation to use that money. It’s basically an assumable mortgage.
VT is taking a different direction. The state is working on legislation:
– Explicitly junior to any other existing mortgages.
– 2% contribution from property owner.
– Designated $1 mil. efficiency funds from Regional energy fund to add 5% credit enhancement. “VT has a bias to action, like Babylon, NY (phrase came from Dorian).”
Will prove demand, gather data, help us determine how much the FHFA rule is costing us. Provide an economic answer to the FHFA letter.
Note: achieving the volumes that CA and CO achieved in just 2 yrs, is incredible, and should be kept in mind.
Sadie McKeown, Sr. VP, The Community Preservation Corporation
Why lending community came out strongly against PACE when it first came out. In 2001 – 2002, market was amazing, “everyone” cashed in on their equity. House became an ATM via home equity loans. These home equity loans were secondary/subordinate to first mortgages.
This is the world that banks lived in. We didn’t care about efficiency (as bankers). Efficiency work is perceived as a renovation to a house. I can’t have a house w/o water and sewer – that’s what bankers see as a public purpose. I can have a house w/o solar panels or w/o special light bulbs.
Since 2008, everything fell apart.
– financing world changed
– debt is much harder to come by
– underwriting has been severely restricted
Efficiency Emerges
– cost of oil spikes
– savings
PACE emerged in the middle of this.
– lenders are licking their wounds
real estate has lost significant value
foreclosure are way up
– new lending is way down
Idea for PACEE is great
– save money during a recession
-introduce new capital as the banks pull back
There’s no question you need a new source of capita
Lenders see red
– PACE obligation seen as a threat to full first mortgage repayment
– portfolios everywhere are underwater
— pace further depletes repayment in the event of foreclosure
– Perspective may be flawed
— pace advocates see it as a viable option to a broken mortgage market.
Bankers are afraid of losing more. PACE is more depletion on “my” ability to be repaid in full.
Residential v Commercial
– Houses are smaller loans, lower risk, high loan to value
– is there a perpetual source of capital for them?
– is there originations infrastructure to handle the demand for these loans? (Until there’s consistent demand, in a large enough percentage of the population, making the numbers work is hard.)
– will it work across the income spectrum?
Commercial
– scopes and loans are larger
– lien position is a greater concern
PACE part of the solution:
In the absence of PAC, what will the lending community do?
How can we engage the broader markets to take n energy efficiency as part of the process?
The math is clear, energy savings can cover the cost of the debt required to do the work.
Retrofit Financing Soliutuin: Make it part of the Mortgage Delivery System
Majority of buildings have 2 things in common:
– all use energy
– all have a mortgage
Make benchmarking & retrofit part of the loan process (don’t make the energy something separate/different)
– train loan officres to benchmark
– audit 3rd party report lke an appraisal or a phase one
To get to retrofit at scale – financing is key
– the money is in the private sector
– awareness will increase and demand will grow.
— just like Phase Ones.
We’ve developed some benchmarks, now we can have a conversation, translate it into math to show how money will be saved. We’ve made it part of our loan program.
Getting to scale: when you think about making all the buildings out there efficient, it’s overwhelming.
CPC Green Initiative
Closed to date:
– 14 loans,
1395 units,
$30 million dollars,
$20 mil subsidy and incentives
Pipeline
– 1551 units
– $49 mil CPC dollars
– $33 mil subsidy and incentives
Dead deals
– 42 loans, 2520 units
– $72 million – CPC
– $3 mil subsidy and incentives.
Why is it attractive:
Prove you can underwrite the savings
All property types
Considers buildings holistically
No added step to access capital
How do we get there:
– Demand has to increase
– Need to Overcome retrofit apathy
— Govt regulation (green reinvestment act)
— Oil and utility prices spike permanently and drive conservation
“We should no longer be preparing our students for careers on the Titanic.”
the VT Commons strategy!