CA Clean Energy Bill Likely to Help Small Business

September 9, 2014 By Rachel Neil

Rachel Neil

Governor Brown has the opportunity to make energy-saving upgrades possible for families and small business owners by signing Assembly Bill 1883 (Nancy Skinner- Berkeley). This bill would significantly lower the cost of Property Assessed Clean Energy (PACE), a tool which enables property owners to take advantage of energy efficiency and rooftop solar PV for their homes or buildings with no money down, allowing them to pay off the investment over time through their property tax bill.

AB 1883 would streamline the PACE process and drive down the fixed transactional costs associated with commercial projects. Lowering these transaction costs is especially important for small businesses because high transaction costs can reduce the economic viability of the smaller energy upgrades that small business typically need. AB 1883 also incorporates new options for financing rooftop solar PV through PACE, which will enable a greater number of homeowners and small businesses to qualify for cost-saving solar PV contracts.

An obstacle for small businesses

To execute a PACE transaction, a property owner will agree to make financing payments through their property tax bills over the next 5 to 20 years. Typically a government agency, such as the California Statewide Communities Development Authority (CSCDA), will use these expected tax payments to issue a bond to an investor who will provide funding for the project. Currently, the bond is tied only to the tax payments on the specific property. CSCDA, the county, or the municipality wouldn’t take any risk for the repayment of the bond.

However, every time the CSCDA issues a bond they incur fixed overhead costs for lawyers and a trustee bank. These costs are usually passed on to the borrower and, on a percentage basis, can make the financing look expensive for smaller transactions (less than $250,000).

How AB 1883 can help

AB 1883 allows the relevant government agency, such as the CSCDA, to issue bonds for bundles of PACE deals, rather than being forced to issue a bond for each individual project. Under this provision, up to three years’ worth of PACE deals could be bundled into a single bond. These fixed fees will be spread across multiple transactions, and this change is expected to meaningfully reduce financing costs for smaller projects and make the investment more attractive for small businesses.

A new solar option for PACE

In addition to reducing the cost of commercial PACE projects, AB 1883 would give property owners even more opportunity to access rooftop solar PV. By allowing tools like solar leases to be assessed through PACE, AB 1883 opens up a new way for small business customers to qualify for these money-saving rooftop solar contracts.

Enabling more energy efficiency and clean energy deployment is a win for the customer who saves money, a win for the electric grid relieved of energy demand, and a win for the environment benefiting from cleaner and reduced energy consumption.

Rachel Neil, an energy policy fellow with the EDF, is focused on creating markets to finance energy efficiency and clean distributed generation projects. Currently she is working in California, Hawaii and other states to promote On-Bill Repayment (OBR) programs that enable third party capital financing. This article was republished with permission from the EDF.

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