PACE. It's gone from an obscure acronym in the green building market to a popular policy initiative championed by several states and Vice President Joe Biden in less than a year.
And now there's a VC-funded PACE startup.
NGEN Partners, Draper, Fisher Jurvetson and NewCycle Capital have invested in$12.2 million Renewable Funding, a startup founded by Cisco DeVries, who co-invented the PACE financing concept while the chief of staff for the mayor of Berkeley. UC Professor Dan Kammen is the other inventor. The company essentially helps a government establish a PACE program and administers them. DeVries acts as president.
PACE – or property assessed clean energy – loans for retrofitting homes and commercial buildings for energy efficiency differ from conventional loans in that the money gets paid back through supplemental property tax assessments. That small twist brings a host of benefits. The owner doesn't have to worry about losing the value of any retrofit if the home gets sold because the new owner assumes the payments. The payments, ideally, can also be lower than the amount saved on energy bills, making the retrofits free. Local communities also see job activity in the area. And moribund banks get to write loans.
Fourteen states including Florida, Texas and Maryland as well as 30 municipalities have already passed PACE programs. Berkeley, Calif. became the first governmental body to issue PACE bonds in January. The House and Senate included provisions inside their versions of Waxman-Markey that would permit the federal government to guarantee the bonds, which would enhance their marketability. Interest on PACE bonds right now aren't tax free.
Last week, Joe Biden made PACE loans a central part of his Recovery through Retrofit program unfurled last week.
There are major questions swirling around the company. Typically, consulting/services companies have trouble scaling. The universe of potential customers is likely also limited and closing a sale or engagement could take time. Still, if the federal government passes pending proposals to guarantee PACE bonds, the market could cause consumer demand to explode.
"With a federal guarantee it grow from a hundreds of millions to a $400 to $500 billion program," said Jack Hidary, one of the principals of PaceNow, a nonprofit geared to drumming up national support, earlier this month. (Hidary was also behind Cash for Clunkers.) "It can also help the 1.5 million people out of work in the construction industry."
