Sergey Nikolaev pays about $1,400 a month for electricity to power the BP gas station, repair shop and carwash he owns along Georgia Avenue NW in Brightwood. Through a new city-government-backed program, Nikolaev will install solar panels on his roof next month in the hope of cutting his electric bill to just $300 a month.
Nikolaev will pay no upfront costs for the $157,000 project, and after he repays his loans for the panels over 20 years, he expects to save $56,000.
The administration of Mayor Muriel E. Bowser (D) announced Friday that the city’s Property Assessed Energy Act program is officially open for business — and Nikolaev’s soon-to-be-retrofitted gas station is its first client. The PACE program, which is tied to legislation the District approved in 2012, allows the city to finance energy upgrades through property tax bills.
“The solar-panel system always made financial sense, but the absence of financing was a big reason why I couldn’t do it before,” Nikolaev said. “It’s definitely saving me money, and it’s beautifying the station.”
This is the Bowser administration’s latest clean-energy announcement — a push city officials see as closely connected with the local economy.
Last week, officials announced that the city is receiving enough electricity from wind power to meet one-third of the local government’s electricity needs through a deal with the Spanish energy company Iberdrola Renewables that took effect Aug. 1.
The PACE program will allow commercial building owners in the city to avoid upfront costs and obtain relatively low-interest loans to retrofit their properties with energy-efficient amenities.
Here’s how the program works:
An interested property owner contacts Urban Ingenuity, the local clean-energy firm the D.C. government tasked with spearheading the program. Urban Ingenuity will assess the property, determining which energy-efficient technology makes sense and how much it would cost to upgrade.
If the cost of the upgrades — solar roof panels, for instance — and total accrued interest on the loan is less than the energy savings for the lifetime of those panels, the property is eligible for the program.
Next, the customer agrees to a financing arrangement with a bank Urban Ingenuity coordinates for them, and the customer will repay the loan twice each year through a surcharge on their local property tax bill.
One of Urban Ingenuity’s vetted local contractors will install the upgrades.
Nikolaev’s gas station qualifies for PACE because it is estimated he will save far more in electric bills than the $157,000 it cost to install the panels — even when factoring in the interest he will pay on the 20-year loan. United Bank is providing the loan at an interest rate of 5.17 percent over 20 years, with rate adjustments every five years.
“My concern about risk is not too extreme. The dollar figures relative to the value of the property is fairly modest,” said Thomas Nida, regional president for United Bank, adding that if a property owner reneges on the taxes, the city has a mechanism in place to collect them.
Urban Ingenuity says the program is a win-win for everyone involved. Banks see these property owners as more attractive borrowers because they have the local government behind them. Property owners save on their energy bills with no upfront costs. And the construction process is a boon to the local economy.
A recent study from the U.N. Industrial Development Organization found that investing money in clean-energy fields yields more jobs than spending that same amount of money in the fossil fuel sectors.
“It’s a very innovative green financing tool,” said Tommy Wells, director of the District’s Department of Energy & Environment, which is overseeing the program. “The mayor has said repeatedly that what is good for the environment is good for the District’s economy.”
Twenty-nine states and the District have enacted PACE-enabling legislation. The District approved its legislation in 2012 and, for the past three years, has been running pilot programs and working to get banks on board.
Despite the program’s growing popularity, it hasn’t been without controversy.
Mega mortgage-finance agencies Fannie Mae and Freddie Mac don’t like PACE because if the borrower defaults, the taxing authorities are paid before the mortgage holder. For now, that’s why the program in the District applies only to commercial properties, not residential ones.
Also, if an owner sells the property before fully paying for the energy-efficient upgrades, that special property assessment would be passed on to the next owner, whether or not he or she wants those clean-energy amenities.
Wells and Bracken Hendricks, the chief executive of Urban Ingenuity and the administrator for PACE in the District, said he doesn’t expect that to be an issue for prospective buyers because the savings on electric bills are guaranteed to be more than the additional tax payments.
“It’s a benefit, not a burden, to the new property owner,” Hendricks said.
Nonprofit groups are also eligible to participate in the program. Hendricks said a number of potential PACE projects are in the pipeline in all eight wards of the city, including a public housing development and several churches.
“We are open for business,” Hendricks said. “D.C. PACE is ready.”