BRATTLEBORO — Home loans for energy efficiency improvements at no or low interest are now approved for Brattleboro residents, with neighboring towns already implementing the program or on track to bring it to their residents as well.
The final hurdle for the implementation of the Property Assessed Clean Energy (PACE) program was cleared at the April 28 Brattleboro Selectboard meeting.
PACE is a clunky term for a new financing tool that turns home energy improvements into a no-brainer for many homeowners. Furthermore, Efficiency Vermont is offering an interest rate discount for eligible households, with rates as low as 0 percent.
Lester Humphries, the chair of the Brattleboro Energy Committee, calls PACE “the one program that could do more to help Brattleboro save energy than all other programs combined.”
The reason for this is simple: PACE removes one of the biggest barriers for making home energy improvements: how to pay for the project in a way that makes sense. Furthermore, it does so without the need for state subsidies or grants.
Sound too good to be true? Read on.
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How PACE works: Most loans for home improvements are personal loans. Whether it is a mortgage, a home-equity loan, or Grandma's good graces, the loan stays with the individual who originates the debt.
With PACE, the homeowner receives the financing through a new assessment on their home. Like a tax or a water bill, this assessment stays with the property until it is paid off.
If the homeowner takes out a PACE loan with a 20-year term, makes improvements on the house to make it more energy efficient, then sells the house in 10 years, the remainder of the PACE assessment is paid by the new owner. This makes perfect sense, since the new owner will reap the benefits in the form of lower energy bills and a more comfortable home.
One issue often raised by homeowners is how long they intend to live in their home: “I'd like to insulate and buy a heat pump, but I just don't know if it is a good deal. We aren't sure how long we are going to be living here.”
With PACE, they can finance this project over a long term, which leads to low monthly payments that are more than offset by the energy savings. If the homeowners decide to move to Outer Mongolia to join the circus, the new residents reap the financial benefits of a tighter, warmer house and also take over the PACE payments.
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The details: Improvements that can be financed through PACE include energy audits, weatherization/insulation measures, cold-climate heat pumps, high-efficiency oil, propane, and wood pellet central heating systems, heat pump water heaters, solar hot water systems, or even solar PV or a small-scale residential wind system.
If done properly, these home energy improvements will save a homeowner more money monthly or annually than the cost of the PACE loan. This is referred to as a “cash-flow positive” situation and means that the homeowner is better off financially from the time that the PACE loan is taken out and the measures are installed.
Then, when the PACE loan is paid off, the homeowner is sitting very pretty indeed. As an investment or retirement strategy, this is very sweet. It has a great return with a low-enough risk to almost be called “guaranteed,” and it helps the environment and local economy to boot.
On top of these economic advantages are the additional benefits that will accrue to the homeowner as energy prices rise, which just about everyone in the industry expects (the current dip in oil prices notwithstanding). The increased value of an energy-efficient home at resale is also a benefit of these improvements. The icing on the cake is the social halo that people receive from reducing their carbon footprint, known in the vernacular as the Climate Hero effect.
Terms of a PACE loan with the lower Efficiency Vermont interest rate are up to $15,000 and 20 years. A family of four earning less than $65,500 can get a 0-percent-interest PACE loan. Household income less than $81,875 qualifies for a 0.99-percent rate, and income less than $98,250 can get a 1.99-percent rate. It is not hard to take these rates, apply them to a loan for a specific improvement, and project how much energy and money will be saved.
Credit scores are not used in the assessment, a free analysis is available to determine the cost effectiveness of each project, there are certain debt-to-income and loan-to-value ratios required (as with any loan), and all mortgage, tax, and other town payments must be up to date. Applications to the PACE program are made to Efficiency Vermont. A $350 application fee will be waived for the first homeowners who participate; as of the end of April, 22 fee-waiver slots remain.
The program, funded by the U.S. Department of Energy, is expected to last for one to two years, says program coordinator Mark Kelley. After it expires, the standard PACE program remains, with loans up to $30,000 for 20 years and an interest rate currently at 6 percent.
This can be used now by people who do not qualify for the low-interest rate, who want to use PACE to pay for a solar photovoltaic system because they are not eligible for the discounted interest rate (such as for the Brattleboro Solar Summer program this year), or by people who want to use PACE to finance a project that costs more than $15,000.
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PACE has been a long time in coming to Brattleboro. It was first approved by the Vermont legislature in 2009 after a lengthy debate.
The approved PACE program works through a two-stage process whereby a town or city first votes to become a PACE district, as was done in Brattleboro by Representative Town Meeting in 2013 after a couple of years' work by the Brattleboro Energy Committee.
Selectboard approval is the final step.
The recent approval in Brattleboro comes on the heels of high-level negotiations between Brattleboro officials and the Vermont Energy Investment Corporation, which oversees both the PACE program and Efficiency Vermont. I's were dotted, t's were crossed, language was tweaked to give the town the ability to treat a delinquent PACE payment the same as it would a delinquent tax payment, and a final version was presented to the Selectboard.
For those of us on the Energy Committee who have been working for over four years to bring PACE to town, this approval brought big whoops and hollers.
So far in Windham County, Putney, Marlboro, and Brattleboro have adopted PACE. Halifax, Westminster, and Londonderry are halfway there, with their residents having voted for PACE but the Selectboards not yet formally adopting the program.
Dummerston has been sitting on the sidelines watching attentively as PACE develops, and Chuck Clerici, the Wilmington Energy Coordinator, believes that it is only a matter of time before his town signs on.
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PACE will not fill every available niche in the home-energy project-financing world; other loan options offer different benefits. In addition, a homeowner still needs to make sure to line up all of the other rebates and incentives, and ensure that the work is done right. Great financing for a sloppy insulation job or an oversized boiler is not going to benefit anyone.
Lastly, your town has to be on board. If it isn't, start beating the drum with your Selectboard and town manager, and/or get it on the agenda for your next Town Meeting.