Company: Renovate America
Renovate America, the leading provider of residential Property Assessed Clean Energy (PACE) financing in the U.S., has today topped the $1 billion mark in energy and water conservation home improvements financed since the inception of its Home Energy Renovation Opportunity (HERO) Program in 2011. Renovate America will expand into new states in 2016, but the $1 billion of projects are all in California, spread across about 44,000 households. According to PACENow, a total of $1.045 billion in home improvements have been financed through PACE nationwide.
“American residential energy efficiency is at a tipping point,” said Renovate America CEO J.P. McNeill. “PACE financing is accelerating the adoption of renewable energy, energy efficiency, and water efficiency in the housing sector. Today’s billion dollar milestone is a tribute to California’s elected leaders, the small business contractors who install this technology, and families who choose to lower the operating costs of their homes and realize the promise of an energy-efficient future.”
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 FHA, which insures one in five new mortgages, announced it is developing guidance for the use of PACE financing. California’s drought has added urgency to homeowners doing water efficiency improvements, with 69 percent of the total water projects financed through HERO since 2011 coming after Governor Brown’s mandatory reduction order in April of this year.
The billion dollar mark shows momentum, yet it actually represents less than one half of one percent of the homes in California which could make PACE improvements. That points to the still enormous potential of energy efficiency across the country.
PACE has been adopted to address a problem conventional financing products have not solved. Each year, more than 20 million of the 135 million homes in the U.S. will have systems replaced that affect energy or water consumption – such as Heating Ventilation Air Conditioning (HVAC), windows, roofs, and water heaters – in most cases because existing products 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.1 According to a 2009 McKinsey study, the reason has much to do with access to affordable financing and identifies PACE as a viable solution.2 As the McKinsey study points out, conventional financing has simply failed for over three decades to address these barriers and significantly penetrate the market.
PACE provides crucial new options to homeowners to choose more efficient improvements: PACE finances 100 percent of the home improvement, requiring no upfront cash outlay; the term of the financing is based on the useful life of the product, up to 20 years, lowering the size of monthly payments; and collection is conducted through regular property tax payments. The products installed must meet federal and state efficiency standards, enabling homeowners to lower monthly utility bills and help pay for the cost of the improvement over time.
PACE was also designed to help achieve public policy objectives. As of today, the $1 billion financed through HERO are projected to save $2 billion on energy bills, conserve 6.7 billion kWh of electricity, reduce emissions by 1.8 million tons (the of 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.
“Riverside County, California is where the HERO Program started, and we have benefited immensely from residential PACE,” said Rick Bishop, Executive Director of the Western Riverside Council of Governments. “We have been able to help more than 14,000 homeowners make improvements to reduce energy and water which will save them nearly $700 million in lower utility bills as well as helping our communities conserve water and energy. As our population grows, energy and water will become even more important to our constituents. These are smart investments for the future.”
PACE enables local governments to add additional requirements to protect consumers not found in other payment options like credit cards or home equity loans. For example, 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.
About Renovate America
Renovate America is the fastest-growing provider of financing for energy and water efficiency home improvements in the U.S. The company’s HERO Program provides local governments with a comprehensive residential PACE financing solution that also includes consumer protection, business automation software, workforce training and ongoing access to private capital. This unique public-private partnership offers consumers access to more than 50 categories of products that reduce energy and water consumption. Public recognition of HERO includes the Governor’s Environmental and Economic Leadership Award in California, the Urban Land Institute Best of the Best, and the Southern California Association of Governments President’s Award for Excellence. Additional information can be found at www.renovateamerica.com and www.heroprogram.com.
1 JPMorgan, March 2014. “2014 HVAC Report”.