PACE 2.0 Restructuring PACE programs Team Crown Joules

PACE’s primary goal is funding 1.Provide low-interest financing for economical demand-reduction home improvements. 2.Do not burden property owners with personal lien.

PACE interacts directly with owners

Obstacles facing PACE 1.Property lien 2.Scale of energy demand reduction 3.Administrative burden

Proposed PACE 2.0

Proposed PACE 2.0, continued 2 Financing Program approval Auditing

Proposed PACE 2.0, continued 3 Identify efficiency opportunities Submit project proposals Implement approved proposals

Proposed PACE 2.0, continued 4 Accept improvements

Proposed PACE 2.0, continued 5 Major advantages of new PACE program: 1.Economy of scale 2.Allocative efficiency 3.Streamlined administration and publicity 4.Credit-worthiness 5.No interference with mortgage liens

Proposed PACE 2.0, continued 6 Major advantages for utilities: 1.Increased return opportunity 2.Access to attractive financing 3.Decreased demand-side risk

Proposed PACE 2.0, continued 7 Major advantages for property owners: 1.Free or low-cost property upgrade 2.Increased rental value 3.Immediate energy cost savings 4.No interference with mortgage liens

Incentives are balanced Low administrative burden to state Return bonuses to utilities Low liability and default risk to utilities Low/zero up-front cost to property owners

Key levers for optimizing PACE 2.0 Financing Implementation Program qualifications Outreach

Case example Approved program: Building:200,000 sq. ft. office building (cold climate) Total cost of retrofit:$400,000 Energy demand reduction:35% PACE loan to utility:$320,000 Interest rate:5% Annual payment:$55,302 (7 payment periods)

Case example, continued 2 Energy demand reduction: Annual energy cost, before:$410,000 ($2.05 per ft^2) Annual energy cost, after:$266,500 ($1.33 per ft^2) Annual savings:$143,500 Annual bonus payment to utility:$71,750 (50% of savings) for 7 periods Net profit to utility:$16,448 annually Rate of return to utility:10%

Case example, continued 3 Distribution of return: Rate of return to utility:10% Rate of savings to property owner:18% (and greater after payback period) Rate of return to PACE:5%

PACE 2.0 will target specific markets Tailored for regulated electricity markets Targets large property owners Aligns interests of utilities with all demand-side reductions (efficiency, distributed generation)

Considerations for PACE 2.0 Minimum standards for PACE proposals? How to distribute risk? Minimum incentive to engage owners?

Recap: PACE 2.0