by Mitch Kokai
Senior Political Analyst, John Locke Foundation
As an innovative but controversial green energy financing mechanism picks up steam, hacked communications from a former White House official provide previously unreported insight into the confluence of public policy, private investment, and political money that helped fuel its rise.
Property Assessed Clean Energy (PACE) is quickly gaining popularity as a means of outfitting commercial and residential properties with solar panels, energy efficiency improvements, and other environmentally conscious modifications. …
… While demand is certainly strong, PACE has also benefitted from politically powerful allies who have worked behind the scenes to remove significant regulatory barriers to its expansion, even as the regulators warn of potential costs to taxpayers and a lack of sufficient oversight.
The result has been an explosion in the volume of PACE loans, a trend that has some market-watchers raising red flags about what the Wall Street Journal described this week as a potential credit bubble with troubling similarities to the housing market of a decade ago.
“As the loans spread, so do problems that echo the subprime mortgage crisis,” warned reporter Kirsten Grind.
The industry rejects that suggestion, pointing to the relatively low number of defaults on PACE loans to date. However, credit rating firms say it hasn’t been around long enough to gather sufficient data on the soundness of PACE financing in general.
Concerns about the structure of PACE loans have led to pushback from one government agency in particular: the Federal Housing Finance Agency. The unique structure of the loans, which generally prioritize repayment to PACE lenders before mortgage lenders in the event of default, “increases the risk of losses to taxpayers,” FHFA said in late 2014.
The agency’s general counsel reiterated some of those concerns in testimony before the California state legislature last year.