How To Overcome the Upfront Costs of Retrofitting

Rainbow for rentBy Janine Kubert

Cisco DeVries is a man on a mission. He wants to make green building retrofits as affordable and prevalent as iPhones. During his presentation Solving the Upfront Cost Barrier for Retrofits at West Coast Green this past Thursday, he pointed out, “How many of you would be willing to pay $20,000 up front to be able to use your iPhone for the next 20 years? We don’t do that with our iPhones, we don’t do that with our PG&E bills, and there is no reason we should do it with solar power. We should pay as we use the service.”

Property Assessed Clean Energy (PACE) Financing, a powerful new financing model offered by his company Renewable Funding, allows property owners in each city to install solar systems and energy efficiency upgrades with no upfront cost. Similar to Mello-Roos law, PACE is a type of financing well-known to local governments and the bond market. Through this financing program, a city or county pays for the cost for a property owner’s retrofit, allowing property owners to repay the cost of the energy project (plus interest) over 20 years through their twice-yearly property tax bill. Property owners are able to choose their own contractor and installer. When the property is sold, the solar system, retrofits, and the remaining debt stay with the property.

The program was pioneered by Cisco when he worked for the City of Berkeley, where it is known as BerkeleyFIRST , and a number of other cities and counties have followed closely behind. In just a year and a half since the launch of BerkeleyFIRST, 15 states have enacted laws which enable their residents to take advantage of this financing program.

Rodney Dole, the Treasurer of Sonoma County, has used the new state law AB811 to set up the new Sonoma County Energy Independence Program and is thrilled with the results. The commercial plan was launched on March 25, 2009 and already there are over $20 million in applications for energy efficiency upgrades. The county will be helping local property owners install water and energy-efficient appliances, dual-pane windows, renewable energy systems, and weatherize their buildings. He has disbursed $9 million so far. This has been a boon to contractors, who have leapt to support the program by creating an Advisory Council, standards for energy audits and retrofits, and engaging in advocacy and marketing of the program to customers.

Removing the upfront cost barrier could be a key selling point to property managers as well. However minimizing payback time and guaranteeing cost savings still requires some analysis and planning. One recommended approach is to engage an ESCO, or Energy Service Company, to do an assessment of the property and recommend guaranteed cost-saving retrofits.

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