May 27, 2010
Development of Municipal Loan Program for Energy Efficiency Retrofits Approved

The Austin City Council today accepted $10 million in federal grant funds to develop a municipal loan program to help make energy-efficiency improvements and solar energy installations available to a greater number of Austin Energy businesses and residential customers.

The funding from the American Recovery and Reinvestment Act, which requires no local match, will not be used to provide loans to customers but rather to design a menu of effective and efficient financing options that may well lay the groundwork for the next generation of Energy Efficiency Retrofit (EER) programs both in Austin and across the country.

One potential component of the program would be development of a Property-Assessed Clean Energy (PACE) financing mechanism whereby property owners could use money from a financing pool and then repay their loans through a property tax assessment that would stay with the property even if it were sold. The financing pool could come from either municipal or private financing. Both options will be explored during program development.

The public financing approach is supported by 2009 Texas House Bill 1937, approved by the Legislature. The cities of San Antonio and El Paso also have expressed their intention to move forward to develop PACE-type programs. And today, in a related action, the Austin City Council also approved an interlocal agreement under which Austin Energy and San Antonio will work together in developing their programs. San Antonio also was awarded $10 million in federal funding for PACE program development.

Austin Energy estimates creation of a $96.5 million EER program would result in energy efficiency and solar installations to some 7,250 homes and businesses during the first three years of the program. The improvements would save 129,000,000 kilowatt-hours of electricity, savings equivalent to powering 1,075 average-size Austin homes year-round -- as well as avoiding 76,000 metric tons of carbon dioxide emissions. It also is estimated that a program of this size would create or retain more than 300 jobs over the first three years.

Under such a program, Austin property owners would be able to invest in energy efficiency and solar energy improvements without large upfront costs. In addition, an EER program could provide financing with additional reasonable flexibility regarding the credit rating of participants, thus increasing eligibility while helping to assure the lowest financing rates available.

Nationally, similar PACE-type legislation has been passed in 17 states with programs currently planned or under way in more than 10 cities and counties across the U.S.