State of NY Commercial PACE Financing Program

An Energy Audit is required in order to be eligible for the program. Loan can only be made for energy efficiency improvements determined to be appropriate through an energy audit. In the PACE Statute these are defined as “a formal evaluation of the energy consumption of a permanent building or structural improvement to real property…for the purpose of identifying appropriate energy efficiency improvements to be made to or incorporated into the construction of the property.”

History of NY State PACE legislation:

In 2009 New York enacted two separate bills — A.B. 8862 in August and A.B. 40004A in November — authorizing local governments to offer these types of programs using different mechanisms. Although some similarities exist between the two authorizations, the latter is generally much broader in scope and allows for a more versatile set of local programs than the former.

In order to qualify for a loan, energy audits or renewable energy feasibility studies must be performed by a contractor certified according to standards set by the New York State Energy Research and Development Authority (NYSERDA) or by a local government under standards at least as stringent as those developed by NYSERDA. Energy efficiency improvements must meet cost-effectiveness criteria also established by NYSERDA.

The definition of eligible renewable energy systems includes solar photovoltaic, solar thermal, wind, geothermal, anaerobic digester gas, and fuel cell systems that generate electric or thermal energy. NYSERDA is permitted to approve additional renewable energy technologies as eligible, with the exception of those that involve combustion or pyrolysis of solid waste. Loans may not be issued for energy efficiency improvements that have not been determined to be appropriate by an energy audit or for renewable energy systems that have not undergone a feasibility study.

Municipal corporations are permitted to fund these programs using federal grant assistance or federal credit support mechanisms including direct loans, loan guarantees, and debt instruments. Municipal corporations may, but are not required, to provide for repayment of the loan through a charge on the real property which benefits from the loan. If a municipal corporation chooses this option, the charge must be collected at the same time and in the same manner as municipal taxes, but must be listed separately from other charges on the bill. In all cases, the loan constitutes a lien against the real property upon which the improvements take place.

In August 2009, the New York legislature enacted A.B. 8862, allowing towns to create residential home energy efficiency programs funded by periodic charges or fees for the services rendered. The effect of this policy, although not precisely a loan, is similar to a loan. In towns that offer such a program, the town would be permitted to enter into contracts for home energy audits and energy efficiency improvements on behalf of participating residents. Participating residents benefit by having improvements made upon their property by the town at no up-front cost to themselves and are permitted to repay the town for the improvements through a periodic fee or charge. The charges associated with the service constitute a lien upon the property on which the improvements took place.

In a characteristic unique to New York, the law integrates towns’ ability to offer these programs into existing provisions under which towns create refuse and garbage improvement districts and collect fees for the provision of these services. The law specifically allows for programs that are designed for “the prevention or reduction of waste matter consisting of carbon components or energy waste from residential properties and the performance of energy audits and the purchase and installation of energy efficiency improvements on such residential properties.” Solar thermal technologies are considered an eligible energy efficiency improvement for the purpose of such programs. The law itself appears to be modeled after the Long Island Green Homes Program which uses the same program structure. The Long Island Green Homes program was initiated in 2008 by the Town of Babylon.