We are seeing a Renaissance of PACE programs and related energy efficiency and renewable financing programs for home and commercial markets.

PACE (Property Assessed Clean Energy) "is the legislation that allows local governments to issue bonds to finance energy efficiency, water or renewable measures," explained JP McNeill, the CEO of Renovate America, one of several growing firms in the business of helping municipalities structure and administer PACE-based programs. PACE became popular in Berkeley, California in 2008 and gained some traction in regions across the U.S. before being stymied by federal housing regulators.

The CEO pointed out that his firm's HERO program currently finances 95 percent of all residential PACE projects, with "a total of $200 million financed to date." The program is approved in over 137 cities, including San Jose and San Diego, Ca. The program is voluntary and there is no cost for the city to participate. PACE programs can support energy efficiency upgrades such as HVAC, windows, roofing and water savings products, and solar power as well.

Solar microinverter firm Enphase just announced that 1,200 solar systems using Enphase microinverters have been installed in Southern California over the last two years that were financed through the HERO program. For solar power, it's yet another innovation in financing that is making installing solar power an easier and cheaper decision.

But a rooftop solar system is just one of 50 product categories and an Enphase microinverter is just one of 850,000 product models eligible for financing under the energy efficiency program.

Other firms such as Renewable Funding, Figtree and Ygrene are also looking to open the efficiency ecosystem with PACE programs of their own. And municipalities can offer the consumer a choice of a number of vendors. Each of the firms have a different product and process, said the Renovate America CEO. McNeill said that a city can offer any one of his firm's four offerings to their constituents by signing a resolution to form a joint power authority.

PACE allows investments in energy-efficiency retrofits and distributed renewable generation to be paid back through a tax that is tied to the property, lowering the risk for both lenders and owners, reports GTM's Katie Tweed. Commercial PACE-financed projects climbed to nearly $60 million in 2013 with another $215 million in the pipeline, according to PACENow, a nonprofit that promotes PACE programs.

In the Lone Star state, the organization Keeping PACE in Texas just released a draft of its “PACE in a Box” toolkit, which will be finalized before summer. The toolkit is intended to be “a uniform, user-friendly, sustainable and scalable turnkey program to assist local governments in establishing and implementing PACE programs,” according to the group. GTM's Lacey points out that Figtree Financing closed a $60 million fund to support commercial PACE projects around the country.

Firms like Renovate America generate revenue by providing the service to the homeowners and making money the same way any lender generates profit.    

Deutsche Bank sold the first securities constructed from $103 million in residential PACE loans via Renovate America's HERO program. A recent empirical study from the Institute for Market Transformation concluded that energy-efficient households are 32 percent less likely to default. An EDF blog post notes, "Despite all of the financings coming from a single county, 20-year maturities for the underlying loans, and an overcollateralization of only 3 percent, the rating agency provided a AA rating, the second highest possible."

Compare that to SolarCity's recent Asset Backed Securities offering with a BBB+ rating. The efficiency project pool has a better rating because of the higher predictability of repayment.

Financial innovations like PACE and third-party ownership of energy assets are driving tens of billions of investment dollars into energy efficiency and distributed generation. “This partnership is accelerating solar growth," said Enphase CEO Paul Nahi.

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Stephen Lacey and Katherine Tweed contributed to this article.