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Case Study
PACE Program for Massachusetts Department of Energy Resources
Legislation and Implementation of PACE in Massachusetts
The Client
Massachusetts stands as one of the nation’s leaders in energy efficiency, investing heavily in renewables and programs to facilitate adoption of energy efficiency upgrades. As part of its commitment to promoting energy efficiency, the Massachusetts Department of Energy Resources engaged HB&C to evaluate options for financing energy efficiency upgrades in privately-owned commercial and industrial buildings, with a primary focus on property assessed clean energy programs (known as PACE). The existing PACE legislation, which granted cities and towns the ability to create their own PACE programs, contained several fundamental flaws that chilled the development of PACE programs at the municipal levels. One major drawback to the original legislation was that it relied on cities and towns to develop their own independent PACE programs, which created obstacles to developing economies of scale and knowledge sharing.
The key element of PACE financing is to secure the investors’ investments in the EE and RE improvements with a lien on the whole of the benefitted property that is senior to all commercial mortgages. To ensure that banks currently holding the mortgages on those properties are not unduly prejudiced, HB&C’s proposal follows Connecticut’s model in requiring mortgage holder consent before the PACE lien can be imposed. This gives existing commercial lenders the ability to confirm that the improvements being made offset against the repayment obligations of the PACE assessment. This results in a net improvement of the mortgage holder’s collateral and security position before consenting.
Following an evaluation of other states’ successes and failures, engagement of stakeholders from all sectors, and discussions with the DOER and MassDevelopment (the agencies likely to be charged with implementing any commercial PACE program) HB&C developed an innovative solution uniquely tailored to the political and commercial environment of Massachusetts. HB&C also drafted proposed legislation to implement it. The final product creates a program designed to facilitate flows of low-cost, low risk private capital to commercial EE and RE projects.
HB&C delivered a PACE model that combines innovation with results intended to transform the way PACE programs around the country are structured going forward. The PACE legislation that HB&C drafted is currently being debated in the Massachusetts legislature. The legislation is currently in committee and we’ll be sure to update you when that changes.
To view the document HB&C created for the Massachusetts DOER, see “Financing Energy Efficiency in Massachusetts: Analysis of the Proposed Massachusetts Energy Conservation Fund”
Our programs include: PACE, ON-Bill Financing, ESA/MESA Agreements,
Green Funds & Banks, and Sustainable Energy Utilities
Harcourt Brown & Carey (HB&C) is a national consulting firm with unrivaled experience maneuvering the clean energy marketplace. We deliver energy efficiency finance solutions that work in the real world.