New York has joined more than a dozen other states in approving a fast-spreading new method of financing renewable-energy and energy-efficiency improvements.

New York Governor David A. Paterson recently announced the passage of the municipal clean energy loan program legislation. The Senate and Assembly passed the bill, which empowers communities to launch Property Assessed Clean Energy (PACE) loan programs.  The legislation allows municipalities to leverage federal funds in order to provide loans to commercial and residential property owners to finance energy efficiency retrofits and renewable energy systems such as photovoltaic solar panel systems.

By enabling homeowners to pay for clean-energy projects through increased property taxes, the financing model allows them to avoid the high up-front costs often associated with these projects. Typically, the municipality, which can borrow at low rates, covers the up-front costs, and then a homeowner provides reimbursement through taxes

"Through my ‘45 by 15' clean energy initiative, New York has significantly expanded energy efficiency incentive programs that are helping residents and businesses reduce their energy costs," Governor Paterson said. "Now, thanks to the leadership of President Obama and Congressman Israel, the federal government is offering programs that encourage the use of PACE loan programs. But to strengthen New York's ability to tap this federal funding, we needed to pass this legislation, which will authorize municipalities to administer PACE loan programs."

The Governor Paterson's "45 by 15" initiative, a goal of meeting 45% of the state's electricity needs through improved energy efficiency and renewable energy by 2015. It is estimated that the expanded use of clean energy technologies will create some 50,000 new jobs in New York.

"By passing the municipal sustainable energy loan program bill during the extraordinary session, we are putting New York municipalities in a position to compete for $454 million in federal stimulus funds," Congressman Israel said. "PACE programs will save home and business owners money, create new sustainable green jobs, bring clean energy companies to the State to compete for our business, and help wrench New York out of this painful recession."

“To ensure New York ’s ability to tap into this federal funding, we needed to pass this legislation, which authorizes municipalities to administer” the programs, Mr. Paterson said.

Since the financing mechanism is through property taxes, the system allows homeowners to pass on the cost of energy improvements to future owners, if the house is sold.

Without the legislation, “each municipality (county, town, city, village) would have to get their own special enabling legislation passed in Albany allowing them to set up such a program,” said Carol Murphy, executive director of the Alliance for Clean Energy New York, in an e-mail message.

“The passage of this law means that all municipalities now have the ability to enact such a program once they also pass a local law,” Ms. Murphy added. But she emphasized that New York also needed to fix a law that provides incentives to businesses, schools and nonprofit groups to put in solar systems that meet only a fraction of their energy needs.

According to the Database of State Incentives for Renewables and Efficiency, 16 states — including New York — now allow these programs, which originated in California and Colorado last year.

New York has had a somewhat similar mechanism, perhaps modeled on a widely praised efficiency initiative from the town of Babylon, in place since August, according to the database. But Ms. Murphy of the Alliance for Clean Energy New York said the new law was far more inclusive. For example, she said, the August version applied only to towns, but the new law includes towns, cities, villages and counties.

Source SolarKnowledge by Maureen McHale