We all know that you must sometimes spend money to save money—certainly that’s the case when it comes to implementing energy-efficient design in new buildings or retrofits. We can talk all we want about “low-hanging fruit” and return on investment, but ultimately, there’s no free lunch when it comes to energy efficiency—it’s all about “show me the money”.
And because, as they say, money changes everything—let’s look at how funding shenanigans and successes are impacting two different federally funded energy efficiency programs.
Earlier this week, the US Department of Agriculture (USDA) granted $275,000 in Rural Energy for America Program (REAP) funds to 15 Mississippi poultry producers for the construction of energy-efficient poultry production houses. REAP was created through the 2002 Farm Bill and is administered by the USDA’s Rural Department. The purpose of REAP is to help ranchers and rural small businesses implement renewable energy and energy efficiency into their operations.
Poultry is big business in Mississippi; some estimates put poultry revenue for the state in the $2-billion range, and almost 50,000 jobs are in some way linked to the industry. Because poultry is the state’s largest agricultural commodity, even a relatively small increase in energy efficiency can yield big results. In fact, the USDA estimates that these improvements will save Mississippi poultry farmers as much as 300,000 kWh per year (estimated savings put the annual range between 18,768 kWh and 386,522 kWh). The REAP money will supplement the over $800,000 being provided by nonfederal fund for the purpose of a slew of energy improvements, including: cool cells, brooders, controllers, fans, lighting, and insulation.
If REAP represents funding gone right, then the recent evisceration of the Property Assessed Clean Energy Financing programs (PACE) represents the dark side. As reported in the Los Angeles Times, a combination of the May 2010 decision by Fannie Mae and Freddie Mac (both federally controlled mortgage lenders), to refuse any loans associated with PACE and the Federal Housing Agency’s recent statement that the PACE loans “present significant safety and soundness concerns,” has seriously undercut the effectiveness of the PACE program.
PACE, which was included in the Obama administration’s stimulus package, provides “bond-backed loans” to homeowners so that they can make energy-efficient upgrades to their property, like solar panel installations or weatherization improvements. Lenders are concerned because, in most states, the PACE funds “acquire a priority lien over existing mortgages” in the case of a foreclosure or loan default.
The cautious attitude being assumed Fannie and Freddie towards the PACE funds means that borrowers living in PACE jurisdictions may experience tighter financing. Fannie and Freddie have said that they will be changing the income-to-debt ratios and loan-to-value rations for borrowers in PACE jurisdictions—making it much more difficult for all mortgage seekers (even those who are not participating in PACE).
For states like California, which had hope the PACE program could help cut greenhouse gas emissions and create new jobs, this stance by federal lenders seems counter-productive.
A statement from California Governor’s Office describes the decision as a “bureaucratic breakdown” that “threatens one of California’s most promising new engines of job creation in this struggling economy”.
“This decision not only puts at risk millions of dollars of Recovery Act funds, but sends a message to local governments and private businesses that energy independence is not a priority,” said Governor Arnold Schwarzenegger.
Additionally, members of the House Energy and Commerce Committee Chairmen Henry A. Waxman (D-Beverly Hills) and Barney Frank (D-Mass) sent a letter to Treasury Secretary Timothy F. Geithner, Energy Secretary Steven Chu and Edward DeMarco (acting director of the housing finance agency) in support of the PACE program.
So what do you think? It’s clear that for rural businesses, the REAP program is poised to push forward energy efficiency in the ranching and farming industry. Do you think REAP will eventually be able to push the farming industry towards sustainable onsite power generation in the form of biomass and biofuels? As for the PACE program, we all know 80% of residential energy use is consumed in single-family homes. With that percentage in mind, shouldn’t it be a top priority to help homeowners implement energy efficiency? Or is the reliance on government funding the problem in and of itself?