Everything You Need to Know about PACE Financing

PACE Info:

What Is Property Assessed Clean Energy Financing?

Property assessed clean energy, or PACE financing is a financing solution that provides low-interest loans to businesses and homeowners to fully cover the cost of clean energy and other relevant improvements. The PACE loan is noted on a property tax bill as an assessment.

Building owners can pay it back the loan via their annual property tax bill for as long as 30 years. As it is being paid out in portions over a longer period of time, the building's managers and owners will be able to take time to make the necessary energy-efficiency upgrades.

PACE lending has been implemented in 38 states and Washington, D.C., according to PACENation. While PACE lending criteria vary depending on the state or local governing body, it can be used to create energy and water-saving solutions.

Commercial owners would apply for a commercial property assessed clean energy, or C-PACE, financing, which can be applied to new construction projects or renovations of existing properties. In addition to funding energy-efficient systems, C-PACE can also be used to fund projects that promote resilient infrastructure. This helps buildings in regions that are susceptible to structural damage due to inclement weather or other disasters.

What Does C-PACE Financing Cover?

C-PACE is financing that is allocated specifically to commercial assets, including industrial and multifamily/affordable housing buildings, as well as schools and hospitals. The Department of Energy reports projects involving energy-efficient upgrades commonly cost $250K or more. For example, commercial properties use the C-PACE program for solar conversions, which can cost thousands of dollars. The average starting cost for commercial solar panels is around $50K, according to GreenBuildingElements.

C-PACE financing can cover the cost of labor and materials. In addition to PACE funding for solar programs, the types of commercial repairs and upgrades that C-PACE would cover are:

LED lighting.*

Roof replacement.

HVAC systems.

Heating and cooling.

Infrastructure for clean water.

* PACE loans can’t be used to finance portable items, such as screw-in lightbulbs. However, the funds can be used to replace incandescent and fluorescent lighting.

How Does The C-PACE Program Work?

Upon submitting an application and receiving approval for a loan from an appointed C-PACE administrator, it will become a legal claim and the assessment will be tacked onto a property tax statement. The building owner uses the funds to cover the services performed by the contractor and energy service company.

Payments for a C-PACE loan are collected annually. While building owners have between 10 and 30 years to repay the loan, the repayment process can be started at any time. Otherwise, an amount for repayment will be included with each yearly property tax bill. The interest doesn’t change and has typically been between 5% and 6%.

Owners can typically split the cost of the loan with building tenants. Additionally, because the C-PACE is connected to property taxes, should the original building owner choose to sell the building, it would be passed onto the next owner.