The Economist takes a quick look at why green loans are not attracting homeowners in droves. PACE programs in the USA help finance energy efficiency improvements through loans repaid either through slightly higher local taxes or through the homeowner’s utility bill. However, uptake of these programs has not been tremendous. The article points out that the green loan interest rates look comparatively high when stacked up against short-term interest rates. Additionally, some homeowners are skeptical that the efficiency upgrades (resulting in energy bill cost savings) will offset the costs of loan repayments. PACE programs could use this feedback to revise their programs to encourage more participants. It’s not all bleak: Germany, in fact, has had good success with their green loan program with 250,000 households enrolling annually.
RETROFITTING houses to use less energy should be a no-brainer for homeowners. Over time, money spent on ways to reduce heat loss from draughty houses should produce a handsome return in lower fuel bills. In practice, many are cautious. Some improvements, such as solid-wall insulation and solar panels, can take over 25 years to cover their initial cost. Few owners are willing to wait that long: by then many are likely to have sold up and moved on.
Several governments have started finance schemes designed to address this problem. Since 2008 PACE programmes have offered American homeowners loans to finance improvements, repaid through higher local taxes on the property, whoever it belongs to. In Britain, the Green Deal offers loans over a 25-year period, with repayments added to energy bills. Countries including France and Canada have similar initiatives.