RD740 - Residential - Property Assessed Clean Energy (R-PACE) Work Group Report – December 1, 2021
The Commonwealth recognizes that effectively addressing climate change and enhancing resilience will advance the health, welfare, and safety of its residents. In order to address climate change, it is the established policy of the Commonwealth to reduce carbon emissions by maximizing energy efficiency programs and enhancing the ability of private property owners to generate their own renewable energy.(*1) Creating financing mechanisms will be necessary to meet these goals. This was the impetus for the creation of the R-PACE Work Group established pursuant to Budget item 125 (E) in the 2020 – 2022 biennium budget.
PACE is a financing tool for energy efficiency, clean energy and resiliency upgrades to residential and commercial property. PACE enables property owners to finance the upfront costs of such upgrades through securing a special assessment lien on the property that is collected and enforced in a manner similar to real property taxes. PACE programs exist for commercial properties (commonly referred to as commercial PACE or C-PACE) and residential properties (commonly referred to as residential PACE or RPACE).
The focus of this report is on residential PACE, which is not currently available in Virginia as opposed to commercial PACE, which was adopted in 2009. R-PACE and C-PACE are similar in that they require permissive legislation at the state level followed by an enabling ordinance by a locality to establish a program. However, R-PACE has not been adopted across the country to the same extent as C-PACE due to concerns regarding consumer protections, impacts on mortgage lenders and other programmatic issues.
This report summarizes the issues and considerations identified by Virginia Energy and the R-PACE Work Group. Furthermore, this report assesses the feasibility and approach to a potential R-PACE program by examining a number of factors such as: experience in other states, federal action on R-PACE, regulatory frameworks, consumer protections and energy equity. The work group did not reach full consensus on the approach to a Virginia R-PACE program, and it is Virginia Energy’s recommendation to await further developments from R-PACE enabled states before pursuing a program. However, if the General Assembly elects to adopt an R-PACE program in the near term, this report concludes with legislative guidance and program recommendations that could serve as a path forward for R-PACE in Virginia.