Today the administrator of the CaliforniaFIRST property assessed clean energy (PACE) loan program completed a securitization of US$50 million in privately placed bonds. This is Renew Financial’s first use of this technique for PACE bonds.
CaliforniaFIRST provides loans for homeowners to make energy efficiency and water efficiency upgrades, as well as to install solar PV systems, which are paid back through property tax bills. The program is available to an estimated 20 million Californians in 300 municipalities and counties.
Renew Financial CEO Cisco DeVries, who developed the first PACE program in Berkeley, estimates that CaliforniaFIRST has completed financing for $68 million in energy efficiency projects in the past year alone.
"This bond issuance is an important milestone showing our progress toward enabling property owners nationwide to save money while reducing energy use," said DeVries.
Securitization was developed in the mortgage industry, and works by pooling a series of assets, such as mortgages, and selling notes backed by these assets to investors. One of the chief advantages of securitization is the ability to raise low-cost capital.
The technique was first used for solar assets by SolarCity, which has completed four securitizations to date. Raj Prabhu says that these sorts of deals are starting to gain momentum in renewable energy.
We have seen solar installers like SolarCity complete several securitization deals at sub 5% interest rates and access capital at a much lower rate to enable no upfront cost solar installations, notes Prabhu.
Now we are seeing similar PACE bond securitization deals to enable energy efficiency projects without large upfront costs to home owners, which is a positive development that could potentially unleash the large energy efficiency/retrofit market.