This week President Obama took the initiative to launch a major energy efficiency initiative, using the Property Assessed Clean Energy model – Maybe he’s reading Climate Crocks?
This is a pleasant surprise: President Obama announced today that he’s launching a $4 billion private-public initiative to upgrade the energy efficiency of the nation’s buildings. Bill Clinton joined Obama today in making the announcement, which shouldn’t be surprising–the former president has been pushing the very idea that comprises the backbone of the initiative for some time now.
According to an independent analysis, this effort to retrofit inefficient buildings will create tens of thousands of jobs, and will cost the taxpayer a grand total of nothing.
How’s that? The statement issued from the White House explains: (emphasis mine)
The $4 billion investment announced today includes a $2 billion commitment, made through the issuance of a Presidential Memorandum, to energy upgrades of federal buildings using long term energy savings to pay for up-front costs, at no cost to taxpayers. In addition, 60 CEOs, mayors, university presidents, and labor leaders today committed to invest nearly $2 billion of private capital into energy efficiency projects; and to upgrade energy performance by a minimum of 20% by 2020 in 1.6 billion square feet of office, industrial, municipal, hospital, university, community college and school buildings
In an interview last week (above), Bill Clinton spent much of his time extolling the job creating virtues of PACE programs for retrofitting and upgrading buildings, for efficiency and renewable energy.
JUDY WOODRUFF: Now, one of the things you talk about in the book is something that you highlighted today with President Obama, and that is retrofitting or making buildings more energy-efficient, and in the process creating, I guess, tens of thousands of construction jobs. President Clinton, that’s an area that clearly was hard hit. But this kind of project is short-term, isn’t it?
BILL CLINTON: Not if we do as much as we should. That is, this is the nearest thing that America’s got to a free lunch. That is, you can – if you can set up a financing mechanism where you let the people who own the building – whether they’re schools, state, county or local buildings, federal buildings, museums, hospitals or big commercial buildings like the one the president and I visited today — with no debt — if you can set it up so they can pay that money back only from their utility savings, then you can create jobs and there’s no net out-of-pocket cost to the people who own the buildings. And when the debt’s paid off, they have a huge drop in their utility bills.
It’s the nearest thing we got to a free lunch. And the return is very high. For every billion dollars you spend on building retrofits, you get between 7,000 and 8,000 jobs.
For example, Delaware’s doing a lot of building retrofits now because the government of Delaware issued a bond and sold it, which will pay the contractors a guaranteed return. And then the — the government will receive re-payments from the people who own the buildings from their savings and pay bond holders off. So that’s the kind of thing — that — that’s not big government, small government; not liberal or conservative; it puts people to work. It creates jobs. It’s the kind of thing that we ought to be doing.
And we can create — I think for three years you could have a million more people in the construction industry employed just doing this if we can work the financing out everywhere. That’s why the AFL-CIO has already raised more than a billion dollars from pension funds to put into this. They can get a more reliable return from this than they could investing their pension funds through the stock market.
JUDY WOODRUFF: And is that a message that’s received well on both sides of the political aisle?
BILL CLINTON: Well, I don’t know. I hope so, because there’s no tax dollars involved — that is, you don’t have to appropriate or raise taxes. And as I said, it’s pretty close to a free lunch because the utilities benefit too. That is, this building, this big, 1964-office building is being retrofitted. They’re going to cut their energy use between 40 percent and 50 percent. That’s like giving a tiny power plant back to the local utility. And for that amount of energy, it’s a lot of cheaper to get it that way than to build a new power plant. You just give it back to them and they accommodate more growth in the area.
The PACE model of financing is powerful because the techniques for efficiency retrofitting are so advanced, that major, game-changing savings can be realized in existing buildings – with enough revenue savings to lower owner’s bills and still pay back contractors.
What is PACE?
Property assessed clean energy (PACE) programs enable local governments to finance renewable energy and energy efficiency projects on private property, including residential, commercial, and industrial properties. The model eliminates the chief barrier to clean energy installations: the large upfront cost.
PACE is rooted in traditional land-secured municipal finance. A local government creates an improvement district; a bond, secured by real property within the district, is issued; and the bond proceeds are used to fund renewable energy and energy efficiency projects. Property owners then repay the debt service on the bond in fixed payments as part of their property tax bill.
There are two major characteristics, however, that make PACE unique. First, property owner participation is 100% voluntary. Only those property owners who choose to participate in the PACE program pay the costs of the additional assessment. Second, the bond proceeds are used to pay for prequalified clean energy improvements on participating properties. Improvements that a property owner may often choose from include renewable energy technology including solar panels, energy efficiency projects such as high efficiency furnaces, and in some states water conservation measures.
PACE is a powerful tool for municipal governments to stimulate the local green economy while providing a competitive financing program for residential and commercial property owners.