A PACE Program in Alberta: An Analysis of the Issues

In December 2015, Canada participated in the COP21 Paris meetings, “committed to reducing greenhouse gas emissions, to be a leader in the transition to a low-carbon and climate resilient economy,” and to contribute towards reducing global temperature increases (Barter 2016). In Alberta, the Climate Leadership Plan has a number of key action points, including “putting a price on greenhouse gas emissions … ending pollution from coal-generated electricity by 2030 … developing more renewable energy” (Government of Alberta 2018b). Initiatives in “consumer rebates, supply chain incentives, and innovative financing options” can help achieve the federal and provincial targets (Advanced Energy Center 2016, 10). However, energy efficiency upgrades and renewable energy projects are major undertakings and require significant capital investments. A widely held view by environmental advisors, such as Harrington and Heart (2014), is that loans to finance such capital investments are difficult to obtain from traditional lenders. Bill 10: An Act to Enable Clean Energy Improvements was introduced in the Alberta legislature on April 12, 2018 “to let municipalities establish a Property Assessed Clean Energy (PACE) program that would make it more affordable for Albertans to upgrade their properties without having to put money down” (Government of Alberta 2018a). The Alberta government lists four steps that property owners will have to take to access the PACE program. First, property owners will have to decide what clean-energy upgrade they want for their property. Second, property owners, then, sign an agreement with the municipality to repay a loan to finance the upgrade through an annual surcharge on their municipal property taxes. Third, property owners will have to find an approved contractor to carry out the upgrades. Fourth, property owners pay the loans through property taxes and “the municipality passes that on to the lender” (Government of Alberta 2018a). See also Jensen (2018) for a capsule summary of how PACE programs work and their pros and cons. Bill 10 passed on June 6, 2018 and the Alberta government announced that it would bring forward regulations for approval by the fall of 2018 and develop a PACE program in partnership with Energy Efficiency Alberta, an agency of the provincial government (Government of Alberta 2018a). The program “will front the cost, using private capital from a bank or pension fund partner” (Stolte 2018). However, as of February 2019, the government is yet to announce PACE regulations. The Bill has support in Alberta’s two largest cities. While municipalities are not forced to participate in the program, Calgary Mayor Naheed Nenshi “expects council to sign on to the program once it is fully fleshed out next year” (Wood 2018). Edmonton Mayor Don Iveson also agrees that there is “a huge pent-up demand” for a PACE program (Stolte 2018). However, Alberta’s Environment Minister Shannon Phillips believes that “there will be enthusiasm for the program throughout Alberta, not just in Calgary and Edmonton” (Wood 2018). Alberta Construction Association, and the Building Industry and Land Development Association have expressed support for the PACE program (Wood 2018). Devon, Drayton Valley, Red Deer, Wabasca, and Brazeau County have all expressed interests in adopting PACE programs (Dodge 2017). A 2018 survey showed that 68 percent of surveyed Albertans feel the provincial economy would benefit by a “transition to a reliance on lower carbon energy sources” (Anderson 2018). This paper examines some of the major issues with PACE programs. It discusses the rationale behind the PACE program, which includes a discussion on market failures and market barriers associated with energy efficiency improvements. The experiences of US states and Canadian provinces with PACE programs provide lessons for PACE implementation in Alberta with regard to the administration, financing, access, and legislation. Finally, the paper concludes with highlights of key issues and challenges for PACE implementation in Alberta. At this time the regulations governing the operation of PACE programs in Alberta have not been issued by the government. The goal of this paper is to provide the government and the public with an understanding of how the PACE program works in general terms and the key issues and challenges that will have to be addressed based on the experience with PACE programs in the US, Nova Scotia and Ontario.