A legislation was passed last week by the New York state to provide loans for households and businesses that wish to improve their energy efficiency.

The funds come under the Property Assessed Clean Energy (PACE) act and will be used to cover the costs for installing solar energy systems or making energy efficiency improvements to properties.

This voluntary system operates by formulating ‘clean energy finance districts’ in cities or counties that can issue low-interest bonds.

The users can then cover the costs of renewable energy and efficiency improvements on a property by making use of the bonds.

The loan is to be repaid over a 20-year period through a property tax, which is typically less than the energy bill savings generated by the improvements.

According to congressman Steve Israel, by passing the municipal sustainable energy loan program bill, New York municipalities have been put in a position to compete for $454 million in federal stimulus funds.

The legislation has also successfully resolved one of the biggest hurdles in adopting solar power, the cost.

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