After years of wandering the property-assessed clean energy (PACE) desert, it looks like startup Renewable Funding is finally approaching the promised land. In March, it got its residential market back in California. In April. it raised a $20 million VC round, its second in five years, with investors including Prelude Ventures, Angeleno Group, Apollo Investment Corp, Claremont Creek Ventures and NGEN Partners.

Now the firm has secured a $300 million credit facility to fund residential PACE program across the state, CEO Cisco DeVries said in an interview last week. While he wouldn’t name the financial partners involved, he did say more details on the plan would be announced soon.

That’s probably the biggest residential PACE financial package in the country, considering that the entire market consists of no more than $400 million in projects to date in California, Colorado and a handful of other states, he said. Renovate America, another PACE provider in California, reported about $200 million in projects financed to date in April.

But DeVries said that the amount is justified, given recent developments that could finally put residential PACE financing back on the map. With California now reopened for business, “we’re about to launch a very large program, and we anticipate very high volumes,” he said.

DeVries came up with the concept of backing home efficiency and solar projects with property tax assessments while working as chief of staff for Berkeley’s mayor, and he founded Renewable Funding in 2008 to help the city launch one of the country’s first PACE programs. The startup raised $12.2 million in 2009, and “we went to work setting up and launching PACE programs around the country,” he said.

“That came pretty much to a crashing halt in 2010,” however, when the Federal Housing Finance Agency warned that putting efficiency and solar improvements on tax bills could cause mortgage problems. Programs around the country shut down, and those still underway shifted their focus to commercial properties.

“We hit those roadblocks; we had to retool,” he said. Working with the state of California, the cities of Los Angeles, Chicago and Melbourne, Australia, and other select clients, “we built this technology platform to help homeowners get energy efficiency upgrades, and we put that platform to work on a contract basis, while we figured out what to do [in the absence of] residential PACE.” 

That’s led to some new models, such as the Warehouse for Energy Efficiency Loans (WHEEL) program, launched in February in partnership with Citi and the Pennsylvania Treasury Department. That $100 million fund will provide loans through contractors, rather than through property taxes, providing a workaround to the FHFA mortgage problem.

In California, the solution ended up being a $10 million loan-loss reserve fund, created by Gov. Jerry Brown and State Treasurer Bill Lockyer to cover home lenders in case of customer default. As one of the administrators of the California First program, Renewable Funding is now deploying its origination engine and network of contractors on behalf of customers in 167 cities and counties across the state, he said.

Local governments are the only entities that can create the special tax assessment districts that underpin PACE programs. Some, like California’s Sonoma County, run the entire thing in-house, he said. But “most don’t want to run their own program, and don’t have the volume” of projects and financing to bring economies of scale to the picture, he said.

"We will run that program for you for free, and we will bring the private capital,” DeVries said. Research shows that homeowners who invest in efficiency or solar tend to be better-than-average credit risks, he noted. Renewable Funding and others are working on other ways to link energy efficiency savings into the payback stream, such as through utility bill payment.

Renewable Funding has plenty of competitors, of course. Sonoma, Calif.-based Ygrene is doing residential PACE projects in Sacramento and developing commercial PACE projects in Miami. Deutsche Bank sold the first securities constructed from $103 million in residential PACE loans via Renovate America’s HERO program. On the commercial PACE front, Figtree Financing closed a $60 million fund in March to support projects around the country.

As for the potential market, DeVries said that a well-run PACE program can get about 1 percent of owners of single-family homes in a region involved in the first year or so. Applied across California, that would add up to 72,000 projects at an average cost of about $18,000 apiece, or $1.3 billion in total.

“This will be a competitive market, which we welcome,” he said. “But we certainly intend to be the biggest and the best.”