Panel Paper: Closing the "Energy-Efficiency Gap": An Empirical Analysis of Property Assessed Clean Energy

Saturday, November 10, 2012 : 3:50 PM
Adams (Sheraton Baltimore City Center Hotel)

*Names in bold indicate Presenter

A. Justin Kirkpatrick and Lori Bennear, Duke University

Property Assessed Clean Energy (PACE) is a nascent policy instrument for financing residential solar installations through secure property tax assessments – a homeowner wishing to invest in energy generation or efficiency may easily secure a loan from their city’s PACE program and will then repay that loan on their annual property tax bill.  The first ever PACE program was introduced in 2008, but in July of 2010 the Federal Housing Finance Agency halted all PACE programs nationwide.  Questions over the impact of the programs remain integral to a policy discussion.  Using differences-in-differences and synthetic control group models and data from 2007-2011, we assess the effect of California’s PACE programs on residential solar panel installations.  We find that cities with a PACE program installed significantly more watts per owner-occupied household relative to similar cities that did not adopt a PACE program.  When applied statewide, results predict an increase in installations by approximately 25 homes per year for an average-size Californian city, or 14,170 installations per year statewide.  We explore the underlying reasons for this impact and find that PACE loans typically offer higher interest rates than comparable home equity or mortgage loans; hence the impacts are not thought to be driven by price incentives.  Rather, terms of financing appear to be key drivers of PACE loan applications.  Notably, if a homeowner moves, the new owners assume the payments as well as the solar system.  Finally, we apply the results of the PACE programs to the “energy-efficiency gap”—the gap in installation of objectively net beneficial energy efficiency technologies—and identify specific elements of the gap which may be addressed by PACE programs.