American commercial builders and retrofitters determined to deliver a lower-carbon product are signing up in droves for long-term financing using the Property Assessed Clean Energy (PACE) mechanism and hammering home cumulative savings of 6.3 billion kWh, the amount of electricity used annually by around 25,000 commercial office buildings.
Citing data from the private advocacy group PACENation, the American Council for an Energy-Efficient Economy (ACEEE) reports that the PACE market “increased by 75% from 2016 to 2017, completing US$251 million in funding by the end of 2017.”
The advantage of PACE, writes ACEEE, is that retrofit costs are “repaid as an assessment on a property’s tax bill,” meaning that “the loan stays with the property rather than the customer, even if the property is sold.” The mechanism is proving very popular, with the current tally of U.S. states with PACE-enabling legislation running at 36 plus the District of Columbia.
Commercial PACE, or C-PACE, is thriving, having been “driven by expansion into new markets,” including $7 million in financing for a new Marriott hotel in Milwaukee, “the first new construction project to use PACE financing in its capital stack.” The upgrade produced 42% energy savings over building code requirements, with improvements to HVAC, water heating, windows, and controls.
Arkansas, Colorado, Kentucky, and Missouri are among other states currently hosting PACE-financed commercial building projects. Other jurisdictions, including Alabama, Connecticut, and Utah, have begun to use PACE as a mechanism to finance comprehensive upgrades whose chief objective is to build resilience through “building envelope improvements and energy efficiency measures paired with distributed energy, storage, and non-energy measures targeted at flood mitigation and wind resistance.”
The biggest such projects so far have involved retrofitting a rehab and nursing centre in Florida and a hospital in California.
While C-PACE providers are beginning to finance retrofits of apartment buildings and condos, uptake has been slow “because of the complexity of the financing deals, access to other (possibly more favourable) financing options, limited technical support, and competing priorities within project scopes,” ACEEE notes. PACE has also struggled a bit in the residential sector: While “R-PACE has gained a major foothold in California, Florida, and Missouri, with more than $5 billion in financing across 220,000 home upgrades,” there are concerns that consumer protection laws may be too weak to protect homeowners from predatory lending rates.
Efforts to redress this problem are accelerating, however, following California’s passage of legislation in 2017 “placing residential PACE administrators under the regulatory oversight of a state agency, establishing licencing requirements for contractors, and adopting new underwriting guidelines that emphasize ability-to-pay standards.”