Published 1Q Presidentt

Transcription

1 PACE Financing Consumer Survey Consumer Preferences and Attitudes about Property-Assessed Clean Energy Financing Programs Published 1Q Brian Daviss Research Analystt Clint Wheelockk Presidentt

2 Section 1 EXECUTIVE SUMMARY 1.1 Introduction As efforts to curb energy demandd turn to the residential sector, enabling homeowners to invest in energy saving home improvements has become an increasingly hot topic among regulators, activists and industry players. Willingness to invest in energy efficiency home improvements is often deterred by high costss and a reluctance to invest in projects with long payback periods when the average homeowner moves every five to seven years. In an effort to assuage these concerns, local and state governments began offering innovative financing plans known Property Assessed Clean Energy (PACE) programs. Under a PACE financing program, the cost of energy efficiency home improvements is paid back in the homeowner s annual property taxes via a special assessment on the home. Under such a program, a homeowner could install solar panels or additional insulation with little or no upfront costs and repayment plans of 15 to 20 years. In the event of a transfer of ownership, remaining payments would be made by the new owner because the assessment is tied to the property. This financing approach helps alleviate concerns about upfront costs and return on investment. As a result, numerous municipal governments began taking steps to make PACE programs available to their homeowners. By March 2010, 16 states had PACE-enablin ng legislation in place. Figure 1. 1 States with PACE-Enabled Legislation: March 2010 (Source: PACENOW.org) On July 6, 2010, the Federal Housing Finance Agency (FHFA) released a statement urging state and local governments to put PACE programs on pause citing unusual and difficult risk management challenges for lenders, servicers and mortgage securities investors. The inspiration for this statement has been attributed to the concerns of government 1

3 mortgage-finance agencies Fannie Mae and Freddie Mac, who are regulated by the FHFA. These agencies, which guaranteee more than half of U.S. mortgages, took issue with the PACE loan s senior position to that of the mortgage. This dictates that in the event of default or foreclosure, the PACE loan would be repaid before a first mortgage, creating added risk for mortgage lenders like themselves. Since the FHFA s statement, a number of active PACE programs have gone dormant. However, efforts to revitalize PACE programs are gaining momentum. The state of California, the Natural Resourcess Defense Council, and a handful of communities which had PACE programs in place have filed lawsuits against the FHFA citing Fannie Mae and Freddie Mac s refusal to accept loans with PACE financing as illegal. Alternatives to PACE have also begun to take shape including thee Federal Housing Authority s new program PowerSaver, which insures private lenders to offer loans of up to $ 25,000 for energy saving home improvements. Unlike PACE, a PowerSaver loan must be paid in full in the event of a transfer of ownership. In light of the roadblocks created by the FHFA, Fannie Mae and Freddie Mac, consumer interest in such programs may seem less pertinent. However, recent developments in the campaign to reinstatee PACE programs and President Obama s directivee to enable energy efficiency measures makes consumer attitudess towards financing models like PACE highly relevant. This whitepaper examines the results of the Pike Research consumer survey related specifically to PACE financing programs. Within the nationally representative and demographically balanced sample of 1,042 consumers, 669 were single family homeowners. This group of respondents was asked a series of questions dealing with attitudes and preferences toward the concept of PACE financing. 1.2 Key Findings 42% of single family homeowners were either extremely or very interested in PACE financing. This is significantly more than the quarter off single family homeowners who were either not very or not at all interested in the concept. Single family homeowners spending less than $200 per month on electricity showed significantly lesss interest in PACE programs than those spending more than $200. Within the group of respondents spending the least on electricity (less than $100) ), only 39% indicated interest in PACE versus 62% of those spending more than $200. Solar panels and tankless water heaterss were the most popular energy efficiency improvement options, each being chosen by 63% of PACE intenders. The most popular reason for a lack of interest in a PACE financing program, by a wide margin, was the additional financial liabilityy associated with the home improvement. 2

4 PAC Section 2 CE FINANCING PROGRAMS 2.1 Overall Interest in PACE Financing Programs Since PACE financing programs are only available to homeowners, questions regarding the concept were only asked to respondents owning single family homes. To introduce these respondents to the concept, the followingg description was provided: Some local and state governments are considering a new financial tool called Property Assessed Clean Energy (PACE) financing. PACE programs provide low-cost financing to homeowners to make energy efficiency improvements for their home including insulation, energy efficient heating and cooling, high-efficiency hot water heaters, and small renewable energy systems such as solar panels or small wind turbines. PACE programs requiree no upfront investment, and homeowners pay them back over 20 years via an annual assessment on their property tax bills. If you selll your home before the loan l is repaid, it is transferred to the new homeowner. Based on this description, the survey asked respondents to provide their level of interest in this approach for financing energy efficiency and renewable energy home improvements. Chart 2.1 above shows that 42% of single family homeowners were either extremely or very interested in PACE financing. This is significantly more than the quarter of single family homeowners who were either not very or not at all interested in the concept. Chart 2.1 Interest in PACE Financing Program (Base: Single Family Home Owners) Not at all interested 11% Extremely interested 16% Not very interested 14% Very interested Somewhat interested/ somewhat disinterested, 32% n=669 (Source: Pike Research) 3

5 2.2 Interest in PACE Financing by Demographic Segment In an effort to reveal trends between interest in PACE financing and demographic traits, responses to this question were sorted based on the following respondent characteristics: Education Income Gender Age group Chart 2.2 below shows extremely or very interested responses based on this segmentation analysis. This analysis yielded few significant findings. Differences in education revealed inconsistent results and levels of interest were similar across income and gender segments. Across age groups, older homeowners tended to be less interested in PACE financing. However, this trend did nott apply to the youngest age group (under 30) as they showed slightly less interest than homeowners between the ages of 30 and 64. Chart 2.22 Interestt in PACE Financing by Demographic c Segment (Base: Single Family Home Owners) Extremely interested Very interested TOTAL 16% 42% Less than high school 23% 23% 46% High school graduate 11% 25% 36% Education Tech school/some college 2 year college degree 4 year college degree 16% 21% 15% 32% 18% 23% 38% 38% 47% Graduate school 24% 31% 55% Income Less than $35K $35K to $75K More than $75K 20% 16% 18% 22% 29% 42% 45% 45% Gender Female Male 14% 20% 27% 41% 46% Under 30 11% 30% 42% Age % 23% 25% 43% 48% 65 or older 10% 24% 35% 0% 10% 20% 30% 40% 50% 60% n=667 (Source: Pike Research) 4

6 2.3 Interest in PACE Financing by Behavioral Segment In addition to demographic segmentation, percentages of extremely and very interested responses were calculated based on the respondents monthly electric bill and inclination to adopt new technologies. As illustrated in Chart 2.3 below, this breakdown of the respondent base provides some more distinct trends in PACE financing interest. There is a strong correlation between monthly spending on electricity and interest in a PACE program. Single family homeowners spending less than $200 per month on electricity showed significantly less interest in PACE programs than those spending more than $200. Within the group of respondents spending the least on electricity (less than $100), only 39% indicated interest in PACE versus 62% of those spending moree than $200. This is an intuitive trend since PACE financing offers homeowners the opportunity to cut their electricity usage without a large upfront investment. The disparity between interestt levels across this behavioral characteristic is greater than other energy efficiency concepts covered in Pike Research s consumer survey such as demandd response (DR) programs. This suggests that owners of high energy demanding homes are more drawn to energy efficiency measures that they can own, control and add to their home s value. This analysis also revealed that homeowners who identifiedd themselvess as early adopters of technology had significantly greater interest in PACE programs than the average homeowner. Over two-thirds (69%) of the tech early adopter segment expressed interest in the concept versuss 43% interested among all homeowners. This behavioral segment is a strong target market for many energy efficiency-enabling concepts. Chart 2.3 Interestt in PACE Financing by Behavioral Segment (Base: Single Family Home Owners) Extremely interested Very interested TOTAL 16% 43% Monthly Electric Bill Less than $100 $100 to $200 $200 to $300 More than $300 15% 16% 25% 23% 24% 39% 42% 37% 38% 62% 62% Tech early adopters 39% 30% 69% 0% 20% 40% 60% 80% n=669 (Source: Pike Research) 5

7 2.4 Preferred Home Energy Efficiency Improvements Respondents who established an interest in PACE financing (PACE intenders) weree then asked to identify specific energy saving home improvements that they would consider implementing if they participated in a PACE program. Respondents were able to select multiple energy efficiency improvements. As shown in Chart 2.4 below, solar panels and tanklesss water heaters were the most popular selections, each being chosen by 63% of PACE intenders. High efficiency air conditioners/evaporative coolers and insulation were close behind with each option selected by 58% of homeowners interested in PACE. Among the top six options chosen, four were higher efficiency appliances indicating that consumerss view appliance replacement as one of the more effective methods to reducee energy consumption. The least chosen options were high efficiency pool pumps and wood/ /pellet stoves, with 12% and 15% respectively. Notably, small wind turbines were selected by only 37% of PACE intenders suggesting that wind power still trails solarr power in consumer preference by a significant margin. Chart 2.4 Preferred Home Energy Efficiency Improvements with PACE Financing (Base: Respondents s Interested in PACE Programs Multiple Responses Accepted) Tankless hot water heater Solar panels High efficiency air conditioner/evapora ative cooler Insulation Solar hot water heater High efficiency furnace Storm windows Air sealing/duct sealing Insulating exterior doors Programmable thermostats Reflective roof shingles Small wind turbine Insulating shutters Wood/pellet stove High efficiency pool pump Other 4% 15% 12% 23% 51% 48% 48% 47% 46% 41% 40% 37% 63% 63% 58% 58% 0% 10% 20% 30% 40% 50% 60% 70% n=285 (Source: Pike Research) 6

8 2.5 Reasons for Lack of Interestt in PACE Financing Program Turning our attentionn to the homeowners who were not interested in PACE financing, Pike Research asked these respondents why the concept did appeal to them. Multiple responses were accepted for this question. Chart 2.5 below showss summarizes the results. The most popular reason for a lack of interest in a PACE financing program by a wide margin was the additional financial liability associated with the home improvement. A majority (56%) chose this option demonstrating an existing perception among many consumers that the cost of energy efficiency y improvements is higher than the potential electricity cost savings. A lack of understanding how the PACE program would work was cited second most (30%) by homeowners uninterested in the concept. A slightly smaller percentage (19%) stated that their home was already very energy efficient. Few respondents cited a lack of interest in the improvements themselves 9% were uninterested in renewable energy improvements and only 4% were uninterested in energy efficiency improvements. Chart 2.5 Reasons for Lack of Interest in PACE Financing Program (Base: Respondents Not Interested in PACE Program Multiple Responses Accepted) I would not want to take on the additional financial liability 56% I don t really understand how the PACE program would work 30% My home is already very energy efficient 19% Other I am not interested in renewable energy improvements such as solar panels or small wind turbines I am not the owner of my home 6% 9% 11% I am not interested in making energy efficiency improvements to my home 4% 0% 10% 20% 30% 40% 50% 60% n=384 (Source: Pike Research) 7

9 Section 3 SUMMARY AND CONCLUSIONS While the future of PACE financing programs remains uncertain, the results of Pike Research s consumer survey indicate that interest in the concept is strong among consumers. These findings illustrate that a clear markett opportunity exists for energy efficiency home improvement financing programs such as PACE. In the absence of PACE, this opportunity is likely to inspire similar programs that help overcome the financial barriers faced by homeowners seeking to make their homes more energy efficient. A solution to concerns about achieving a fair return on investment for energy efficiency upgrades remains a challenge for these programs. The PACE solution of tying the loan to the property and not the owner through tax assessments faces serious viability challenges since this is the element of the program that raised concerns at the FHFA. However, eliminating this aspect of PACE financing may result in a weaker level of consumer interest than the results of this survey indicate. Manufacturers of energy efficient appliances such as water heaters, air conditioners and furnaces are likely to benefit from financing programs such as PACE, according to the survey ss results. A majority of PACE intenders stated that they would consider using PACE funds to invest in tankless or solar hot water heaters, high efficiency air conditioners or evaporative coolers. A near majority (48%) indicatedd an interest in high efficiency furnaces. With such high levels of interest in using PACE programs to finance energy efficient appliances, suppliers of these products are prime candidates to support and participate in the creation of similar financing plans. Providers of residential solar systems also falll in this category given that 63% of PACE intenders would consider using the financing for a solar panel installation. Adoption of energy efficiency home improvements suffers due to the large capital investments required. This situation is worsened when poor economic conditions lead to an overall decrease in consumer spending. Of the single family homeowners who were not interested in PACE financing, 56% stated that they were unwilling to take on the additional financial liability that an energy-saving home improvement would require. While low cost financing programs like PACE help to alleviate these concerns, economic recovery is required before many consumers consider these types of investments. As the global economy slowly recovers and the appeal of energy efficiency improvements grow, availability of attractive financing will be a key component to the market s development. 8

10 Section 4 TABLE OF CONTENTS Section Executivee Summary Introduction Key Findings... 2 Section PACE Financing Programs Overall Interest in PACE Financing Programs Interest in PACE Financing by Demographic Segment Interest in PACE Financing by Behavioral Segment Preferred Home Energy Efficiency Improvements Reasons for Lack of Interest in PACE Financing Program... 7 Section Summary and Conclusions... 8 Section Table of Contents... 9 Section Table of Charts and Figures Section Scope of Study Survey Methodology

11 Section 5 TABLE OF CHARTS AND FIGURES Chart 2.1 Chart 2.2 Chart 2.3 Chart 2.4 Chart 2.5 Interest in PACE Financing Program... 3 Interest in PACE Financing by Demographic Segment... 4 Interest in PACE Financing by Behavioral Segment... 5 Preferred Home Energy Efficiency Improvements with PACE Financing... 6 Reasons for Lack of Interest in PACE Financingg Program... 7 Figure 1.11 States with PACE-Enabled Legislation: March

12 Section 6 SCOPE OF STUDY Pike Research has prepared this report to provide participants involved in the renewable energy and energy efficiency markets with a study of consumer demand for PACE financing and energy-saving home improvements. One of the major objectives of the report is to impartially assess levels of consumer interest in PACE financing, renewable energy and energyy efficiency retrofits. Pike Research also provides an evaluation of key attitudes and behaviors that aree relevant to this market. Great care was taken in constructing a survey questionnaire that would yield the most accurate and unbiased results possible. However, it should be noted that consumerss often have difficulty providing survey responses that will accurately predict their purchase behavior for products that have not yet been introducedd in the market. SURVEY S METHODOM OLOGY Pike Research conducted a web-basesurvey invitation was sent to a nationally-representative and demographically- balanced sample of consumers who are members of a largee online panel. Respondents were offered a survey of 1,042 U.S. consumers using a structured online questionnaire. The chance to win prizes in exchange for their participation. Thee margin of error for these survey results is +/- 3 percent with a 95 percent confidence interval. 11

13 Published 1Q Pike Research LLC 1320 Pearl Street, Suitee 300 Boulder, CO USA Tel: This publication is provided by Pike Research LLC ( Pike ). This publication may be used only as expressly permitted by license from Pike and may not otherwise be reproduced, recorded, photocopied, distributed, displayed, modified, extracted, accessed or usedd without the express written permission of Pike. Notwithstanding the foregoing, Pike makes no claim to any Government data and other data obtained from public sources found in this publication (whether or not the owners of such data are noted in this publication). If you do not have a licensee from Pike covering this publication, please refrain from accessing or using this publication. Please contact Pike to obtain a licensee to this publication. 12