Solar Leasing and Power Purchase Agreements, which are in all respects Energy Service Contracts, are driving the solar industry forward in California with 174% growth comparing Q1 2012 and Q1 2011.  Even as the California Solar Initiative (CSI) program is winding down in Northern California, the Solar Lease is picking up the slack, especially in the residential sector.

The CSI program was designed to decrease every six months based on a calculation of market demand, with an incentive that is calculated for each job based on a model of potential output based on location, shade, angle, and orientation, with quality assurance.  The program stood in as a proxy for market forced and real performance, and created a data set that allowed the transition to energy service contracts and market forces.  

We should all be watching his exciting transition from a performance based public grant program, into a market that is attracting hundreds of millions of dollars of private investment and has created a value proposition that makes sense for consumers (buy guaranteed results and no risk), as well as making quality something driven not just by regulation but instead by markets mitigating risk.

This path from program to markets is also the goal of market transformation programs utilizing performance-based incentives in energy efficiency sector (such as California's Energy Upgrade California program).  The goal is for market forces to step in and replace rebate programs with capacity markets and private capital investment.

Solar Leasing: Solar's Next Big Thing
If you thought the solar industry was dead in the water, think again. A fairly new concept is catching fire, and it's attracting moneyed investors: leasing residential solar energy systems to homeowners who pay a monthly fee to enjoy clean energy, without the up-front costs. 

READ FULL ARTICLE: http://www.greentechmedia.com/events/live/u.s.-solar-market-insight/agenda

For years I have been hearing about the need for secondary markets to engage on energy efficiency lending.  In very simple terms, this is the same basic structure that enables you to buy a house, a car... heck, a cell phone.  Someone makes you and perhaps 50,000 of your best friends a loan.  The lender than bundles up all those loans, and "sells" them to a the senior capital markets, who essentially buy the portfolio, giving the lender their money back so they can make more loans.

It is like a perpetual motion machine... or at least a wheel.  A perpetual source of capital.

Considering that achieving a 25% saving on say 100 million homes across the country, we are talking about needing something on the order of $1 Trillion dollars.  By any measure, that is a lot of money!  

The WHEEL program is the first time that secondary markets are playing in residential energy efficiency as a distinct asset class with its own investment grade rating.  While the initial program is focused on leveraging revolving loan funds coming out of the Recovery Act, there is nothing that prevents this structure from being rolled out more broadly to private markets.  

This is a huge step forward for energy efficiency, and I believe, in the long run, will be viewed as one of the key success stories of the Recovery Act.

Warehouse for Energy Efficiency Loans (WHEEL) Program
NASEO and the Energy Programs Consortium are pleased to announce that the Warehouse for Energy Efficiency Loans (WHEEL) program has been approved by the U.S. Department of Energy. NASEO and EPC recently hosted a webinar for interested state and local officials and program managers with Citibank and Renewable Funding on Wednesday, June 13, at 3:00 p.m. ET. For further details, please see the following presentation and full audio recording.

Today, the Federal Housing Finance Agency (aka FHFA) released their ruling on the future of Residential Property Assessed Clean Energy... or PACE Financing.  PACE offered great promise to provide a vehicle for communities to leverage property tax districts to finance energy efficiency and renewable energy projects to create local jobs and save our environment.  Today's ruling, it would seem, puts another nail in the coffin of this well meaning and widely supported community and State lead effort.

While it starts by laying out many arguments, primarily for PACE, from a wide community of respondents, in the end FHFA rules strongly against PACE and direct enterprises (banks) to secure their rights on any existing properties encumbered by a PACE lien, and to consent to any future PACE liens or purchase any mortgages that include a PACE lien.  Don't get tricked by their three options for mitigation at the end... from what I understand, this is a pretty resounding NO.

View the complete ruling at: http://www.fhfa.gov/webfiles/24014/77_FR_36086_6-15-12.pdf 

Here is the meat of the document to save you some time:

A. The Proposed Rule

The Proposed Rule would provide for the following:

1. The Enterprises shall immediately take such actions as are necessary to
secure and/or preserve their right to make immediately due the full amount
of any obligation secured by a mortgage that becomes, without the consent of the
mortgage holder, subject to a first-lien PACE obligation. Such actions may
include, to the extent necessary, interpreting or amending the
Enterprises’ Uniform Security Instruments.

2. The Enterprises shall not purchase any mortgage that is subject to a first-
lien PACE obligation.

3. The Enterprises shall not consent to the imposition of a first-lien PACE
obligation on any mortgage. In light of the comments received in
response to the ANPR and FHFA’s responses to those comments, FHFA
believes that the Proposed Rule is reasonable and necessary to limit, in the
interest of safety and soundness, the financial risks that first-lien PACE
programs would otherwise cause the Enterprises to bear.

The Green Deal in the UK is potentially a great source of learning for the US (on someone elses dime!).  The basic plan is remarkably similar to the US.  Put an asset label on lots of houses.  Create financing tools to make it "free" to do upgrades.  Require upgrades at time of sale / remodel.  Solve climate change.  Create jobs in a recession.  We all live happily ever after.

So why does it seem to be falling on hard times and what can we learn to help us avoid a similar fate?

Green deal floundering as home insulation rate plummets
Government's own assessment shows it's flagship policy is failing to convince people to adopt energy efficiency measures.
Damian Carrington

guardian.co.uk, Monday 11 June 2012

 The government's flagship green policy to transform the energy efficiency of 14 million homes and create 65,000 jobs appears set for failure, after revelation that its own impact assessment shows the number of lofts being lagged per year will plummet by 83%. 

Read full Article:   http://www.guardian.co.uk/environment/2012/jun/11/green-deal-policy-floundering?newsfeed=true