HERO Financed $1 Billion Of PACE Projects

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Originally published on the ECOreport

Renovate America CEO J.P. McNeill does not give many press conferences. In fact, this is the first I have attended in the three years I have covered this company’s HERO PACE, but yesterday was a watershed. HERO financed $1 billion of PACE projects.

Hero Has Financed $1 billion of PACE projects

“Our industry organization PACE now … has identified a total of $1.05 billion in home improvements which have been financed through the use of of Property Assessed Clean Energy, or PACE, in the United States. Renovate America, in partnership with the Western Riverside Council of Governments and 350 other cities and counties in California, has today topped the one billion mark in dollar financed,” said McNeill.

“The $1 billion financed through HERO are projected to save homeowners more than $2 billion in lower utility bills, conserve 6.7 billion kWh of electricity, reduce emissions by 1.8 million tons (the equivalent taking 347,000 SUVs off the road for a year), and save more than 2.1 billion gallons of water (the equivalent of 68 million showers). HERO has already created more than 8,400 jobs and generated a local economic impact of more than $1.7 billion.”

Origins in Riverside County

McNeill drew attention to Riverside county because that was where the HERO PACE program started, in 2011, and where 14,000 of the company’s 44,000 completed projects are located.

“There are a number of reasons why we became interested in PACE and ultimately the HERO PACE program,” said Rick Bishop, Executive Director of the Western Riverside Council of Governments.

“First, our cities and elected leaders viewed the HERO Program as a way to bring contracting jobs into Western Riverside county, which was really important considering that the area was coming out of the recession and a number of jobs related to the construction industry had all but disappeared.

“Secondly, we saw that there were tremendous environmental benefits that would come through water conservation.”

“Thirdly, we viewed the PACE program as being …a  potential National best practice, where we were able to meet environmental goals and also providing for economic advancement to our region.”

“Fourthly we saw the program as a way to improve the region’s older housing stock in Western Riverside county, to make it appealing to future homebuyers.”

The Year Ahead

Up until now, most residential projects have been in California.

In August, President Obama named PACE as an innovative, voluntary tool to meet the country’s clean energy and energy efficiency goals and encouraged its use. In conjunction, the Federal Housing Authority, which insures one in five new mortgages, announced it is developing guidance for the use of PACE financing.

Renovate America has been considering expanding into four or five other states. Its negotiations are most advanced in Florida, which is the only state McNeill initially mentioned by name. He subsequently confirmed that his company has been talking with some of the Governor’s staff in New York.

Room For Growth

There is still much room for growth, even within California.

“Passing the $1 billion mark shows momentum, but it only represents ½%  of all the homes in California,” said McNeill.

“Each year, more than 20 million of the 135 million housing units in the United States will need to replace have systems – such as Heating Ventilation Air Conditioning (HVAC), windows, roofs, and water heaters – and in most cases because they are coming to the end of their useful life and are failing. Unfortunately, the majority of homeowners still select the least-efficient solution because homeowners are not sure how long they are going to stay in their home. As a result, the least-efficient solutions end up being the most expensive when taking into account the total cost of ownership when energy or water costs are factored in.

“A 2014 JP Morgan report highlights that three out of four HVAC systems purchased in 2013 did not meet minimum U.S. Department of Energy efficiency standards. According to a 2009 McKinsey study, the reason has much to do with access to affordable financing and identifies PACE as a viable solution. As the McKinsey study points out, conventional financing has simply failed for over three decades to address these barriers and significantly penetrate the market.”

Why homeowners choose HERO PACE financing:

1. They can make energy-saving home improvements without having to pay any money down.
2. They can finance their loan for up to 20 years, which reduces the size of their annual payments.
3. Homeowners’ payments are made through their property taxes.
4. The HERO Program requires contractors to be licensed with the state and in good standing with HERO, homeowners to obtain all required permits, products and labor to meet fair pricing standards, homeowners to use products certified as efficient by the U.S. Department of Energy or water-conserving by the Environmental Protection Agency, and that payment only be made when the homeowner signs off that the job has been successfully completed.

All images courtesy Renovate America