We've covered the travails of PACE (Property Assessed Clean Energy) in this publication in detail (see Seven Ways to Save PACE).  The home energy efficiency financing tool championed by Renewable Funding is not dead, but it's not exactly thriving either. 

The PACE program was/is an inexpensive and simple way for homeowners to affordably reduce energy usage, lower greenhouse gases and adopt renewable energy (more information on the program here).

But there is a conflict between a number of stakeholders, all of whom have different agendas.

The primary conflict is between PACE program proponents and mortgage entities Fannie Mae and Freddie Mac.  PACE can violate mortgage terms by changing lien priorities and potentially putting homeowners in default of their mortgages. The  FHFA oversees Fannie and Freddie and has attempted to block the PACE program.

The actions by the FHFA have stopped the once-thriving PACE effort in its tracks.  Municipalities looking to create jobs in energy retrofits are in limbo.

Jerry Brown, California Attorney General and gubernatorial candidate, said in a release, "Fannie Mae and Freddie Mac received enormous federal bailouts but now they're throwing up impermeable barriers to bank lending that creates jobs, stimulates the economy and boosts clean energy."

And the conflict has pitted elements within the solar industry against each other.  When we first wrote about the solar vs. Pace fight, both sides said they really didn't want a fight -- but the argument continues

In the words of Adam Browning of Vote Solar in an email to others working on PACE:

"It has recently come to our attention that SunRun, a residential solar third-party PPA provider, may be pursuing an amendment to HR 5766 (the Thompson bill to save PACE) that we find unhelpful.  It’s attached and excerpted below."
"In our view, the Thompson bill is meant to provide a mission-critical fix for the FHFA problem, which is currently stalling PACE programs around the country.  Nothing on PACE can move forward until that problem is fixed.  The amendment that SunRun is suggesting to the Thompson bill would have the effect of delaying FHFA relief in certain states until state law is amended to specifically include their business model.  While we support the inclusion of their model in state PACE programs, that’s an outcome that can be pursued separately -- and this amendment would have the effect of, in the best of scenarios, significantly delaying movement on PACE until the laborious and uncertain effort of amending state law is undergone, and, in the worst of scenarios, where state law for some reason can’t be amended, obviating the relief that the Thompson bill is meant to provide and blocking PACE permanently."
"Los Angeles Department of Water and Power, for example, has a ban on 3rd party PPAs in the city charter, and our efforts to date to change that have been met with a resounding ‘Hell No, Never.'  The amendment would mean that all of Los Angeles and LADWP territory could never use PACE to finance energy efficiency improvements.  There are entire states that are effectively in this category, some of which have/had PACE efforts underway.  The amendment would preclude them from doing a PACE program forever."
"As such, we believe that the amendment would be damaging to the cause, and wanted to bring it to your attention in the event that it comes up in your conversations on the Hill."
"To be fair, we have no idea if this proposal has been distributed, or made any inroads on the Hill.  And SunRun is suggesting that this is in fact a friendly amendment, and will have the effect of alleviating FHFA’s concern over risk exposure.  We do not agree with that interpretation, and encourage you to contact them directly in the event you want to learn more."
Requested language in HR 5766

"HR 5766, introduced by Congressman Thompson in support of PACE programs, could be amended to include solar leasing by adding the following language in section 2(a)… by the Department of Energy…. Provided that the PACE program in the municipality supports pre-paid power purchase agreements and pre-paid leases within 12 months of enactment of this act, [l]iens or other property obligations that secure property taxes."


Edward Fenster, SunRun's Chief Executive, and Lynn Jurich, the President of SunRun, have responded to the Vote Solar claim in an email correspondence with Greentech Media.  Here is their response:

"SunRun’s goal is, and always has been, to create a sustainable residential solar market.  Our approach is to mitigate investor risk by performing exhaustive due diligence and to tirelessly identify and confront issues head on to attract investment in building the industry. We admit we have at times been poor politicians, but we do have a specialization in finance and work hard to deliver a hassle-free customer experience."
"PACE was intriguing to us right away because it has the potential to offer a low-cost way to deliver on SunRun’s mission.  We realized quickly that the prospect of inexpensive capital through property assessments was predicated on PACE being respected as a property tax, rather than re-characterized as a loan.  If a court determines that PACE really is a loan program, buyers of PACE bonds will lose out when homes are foreclosed or short sold.  The stakes are high.  Long-term success for the solar industry requires not only designing a solution for today when lenders are unpopular, but sustaining that solution for at least the 20-year duration of PACE bonds."
"When SunRun evaluated creating a PACE-based business line, we performed extensive analysis of these risks. We discovered nontrivial legal, policy and market barriers, many of which have been recognized by pro-solar organizations.  Although some PACE proponents have chosen to make Fannie Mae and Freddie Mac the “bad guys,” other respected organizations have recognized PACE’s shortfalls.  These organizations include the Treasury Department’s Office of Controller of the Currency, San Diego’s own Office of the City Attorney, as well as progressive organizations The Center for American Progress and The Berkeley Planet."
"Our best interpretation of the situation was that PACE’s shortcomings regarding risk, aggregate debt levels and the underlying value of retrofits needed resolution for PACE to deliver a scalable solution.  We raised our concerns for discussion, and they are appreciated by many constituents.  Some asked us to propose a solution ourselves.  We tried.  We proposed an amendment to a piece of federal legislation to mitigate three key lender risks:

1)   PACE loans are typically larger than solar equipment value,
2)   PACE loans do not always create clear savings, and
3)   Solar inverters fail in 8-12 years ,while PACE lien payments persist 15-20 years.

Just yesterday, Vote Solar wrote, “All parties agree that PACE programs should be designed to mitigate risk to lenders.”  This is what SunRun’s proposal intended to do.  Instead, it has been stated that our proposed amendment would preclude jurisdictions like Los Angeles from using PACE because SunRun’s model is not permitted there.  This claim is incorrect.  SunRun has to date provided hundreds of leases to Los Angelinos, and done so with the blessing of the city’s municipal power company.  Also, SunRun last week communicated to a prominent member of the PACE coalition that the Company was not advocating for this amendment while we discussed it with PACE stakeholders."
"SunRun supports consumer choice and knows including third-party owners in PACE can reduce loan and lien amounts by more than 30 percent for the same solar facility, while providing reduced risk and greater customer service for homeowners.  Nevertheless, we will withdraw this proposed amendment because industry infighting over the proper PACE strategy has become a distraction to operating our business and delivering on our mission."
"Instead, SunRun will continue to work hard on improving solar policies, especially the foundational ones that lead to a sustainable solar market, such as net metering, functional and sufficient rebate programs, and renewable portfolio standards. This is the work on which all solar advocates should be focused as these elements are prerequisites to achieving successful financing options, PACE or otherwise."

"Our goal is to deploy solar and create a sustainable market that can grow to serve everyone who wants clean energy.  Just this quarter, a report analyzing the impact of the California Solar Initiative for the California Public Utilities Commission concluded, 'The growth in third-party ownership implies that third-party financing may have resolved financial barriers of the high initial cost to expanded growth of PV into the residential market.'
In the past year, SunRun has entered 4 new states and helped over 4,500 homeowners obtain solar.  SunRun supports 25 local solar installers and over 2,500 jobs by providing financing for their customers.  We’ve already committed $225 million to building solar systems, leading the transition for homeowners from fossil fuels to clean energy.  Just ask one of our customers, who recently wrote, 'SunRun is a company doing good. It deserves to do well, too, and, by all indications, it is doing well. It has enabled my small environmental contribution, and is somehow managing to make money for both of us while doing so. I firmly believe that leasing is the way solar should be done, and that a few years down the road SunRun will be recognized as a trailblazer in an established industry.'"