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GEOTHERMAL ENERGY: How to help pay for it

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The State of Texas is blessed with abundant natural energy resources … including geothermal heat. All of our energy resources require exploration before production, and equipment to harvest them which can present significant capital hurdles. That’s where TX-PACE (Texas Property Assessed Clean Energy) financing can help.

In 2013 the Texas Legislature passed, and Governor Perry signed into law the Property Assessed Clean Energy (PACE) Act – codified as Chapter 399 of the Texas Local Government Code. Since that time, more than 80 cities and counties across Texas covering over 73% of state’s population have established local PACE programs as economic development tools that incent property owners to reinvest in and expand their properties using high efficiency energy and water systems.

Geothermal energy systems and equipment are generally eligible, as they meet the definition of a PACE-qualified improvement:

“Qualified improvement” means a permanent improvement fixed to real property and intended to decrease water or energy consumption or demand, including a product, device, or interacting group of products or devices on the customer’s side of the meter that uses energy technology to generate electricity, provide thermal energy, or regulate temperature.

While its clear geothermal heat pumps used for commercial or multifamily properties can access PACE, a large geothermal electric generating unit could also qualify if it resides on “the customer’s side of the meter”. Using PACE for such a project can align costs with benefits over its lifecycle, as PACE assessment loan terms can equal the useful life of the improvements – meaning it would show positive cashflow from day one of operations through decommissioning.

This unique program called PACE enables property owners to overcome traditional market barriers, such as extended payback periods and lack of capital, that discourage investment in energy efficiency and water conservation improvements. PACE provides a new source of property-secured financing for energy efficiency and water conservation projects that does not affect conventional lending sources, and it allows property owners to retain their operating capital for payroll, business expansion and other core mission priorities.

Are you a geothermal energy developer assembling a capital stack? Contact the Texas PACE Authority to learn more about PACE financing and how it could benefit your project.