I never liked PACE, something always felt perverse about financing Energy Upgrades through your Tax Bill. I mean, why not use the Energy Bill?
Lately, some unpleasant consequences of this stupidly designed loan product have been coming to light. When I found out there was an opportunity to register comments with the Department of Energy, I threw this argument against PACE together:
Dear DOE,
PACE financing is another opaque, complex, perverse financing mechanism that, like NINJA and Teaser Loans, creates short, medium and long term harm to the exact financially unsophisticated and vulnerable demographic that it was intended to help.
Pace allows people whose only asset might be their home, to tap into those assets to finance dubious investments that usually have little to no residual value. These assets are often labeled “energy improvements’ although all evidence suggests energy savings associated with these improvements are usually geometrically overstated.
Pace in practice does nothing to help create meaningful wealth for the poor and middle class. Instead, by creating the appearance of credibility, it actually steals wealth from a class who can ill afford it. It is a wealth creation experiment that places at risk the wealth of those who can least afford the loss.
When compared to other secured financing, Pace interest rates are abusive. The cost of initiating financing is high and confusing, options for prepayment are complex. The only argument for this financing seems to be “look at all the sales this is creating!” This argument has no integrity. It is the same argument used to justify the bad loans that led to the housing crisis, the harms of which are still causing harm to the poor and the general economy nearly a decade later.
Here are links to two well written articles that express problems with PACE more eloquently than I can:
If we are to move Residential Energy Efficiency mainstream, there needs to be more cost and benefit transparency, not less. There needs to be on-going direct correlation between cost and savings.
On Bill Recovery Financing, securitized by the energy meter, possibly financed by Utilities as a capital asset (very low capital cost) is a much better solution. The cost and benefit are accounted for on the same bill, providing clarity of net benefits. These programs are having good success in many places (most NY utilities, Midwest Energy, etc…)
http://bit.ly/HowSmartMWE, http://bit.ly/obrNYloan
On Bill Recovery has numerous ancillary benefits beyond transparency, low cost, and accountability. On Bill Recovery allows strengthening of the relationship between utilities and their customers. This provides additional incentive for utilities to focus on more comprehensively serving the client instead of simply serving the meter. This alignment of interests and partner creation will help accelerate deployment of Energy Efficiency.
Pace financing should be relegated to the heap of “bad ideas implemented quickly during desperate times.” It is a bad idea whose time has come and gone.
Sincerely,
Ted Kidd, One Knob Consulting
So what do you think? Is PACE just another way to steal from the poor, keep them enchained in debt?
Did you look at the articles I linked? They help better inform perspective – providing individual cases of harm, how cost disclosure and comparisons to other loans are not required, and point out problems that occur when you can indiscriminately put new loans to first lean position.
Pick pocketing the poor is despicable. Our government should not allow itself to be complicit.
Please leave your thoughts in the comments below!