Recent U.S. Regulatory Developments Regarding Renewable Energy Loans

In an effort to promote renewable energy sources and efficient energy consumption, more than 25 states have instituted Property Assessed Clean Energy (PACE) programs. Started in 2008, PACE programs authorize local governments to make loans to homeowners for energy related home-improvement projects such as the installation of solar panels or energy efficient windows. Local governments raise the capital needed for the loans by issuing bonds to private investors. Homeowners then repay the loans through assessments added to their property taxes. The loan attaches to the property such that if the home is sold before repayment is complete the subsequent purchaser of the home assumes the obligation to pay the remainder. The program benefits homeowners by defraying the high initial cost of energy projects. It also benefits private investors by using the property-tax system as the vehicle for repayment.