Nonresidential buildings are responsible for over a quarter of primary energy consumption in the United States. Efficiency improvements in these buildings could result in significant energy and utility bill savings. To unlock those potential savings, a number of market barriers to energy efficiency must be addressed.
Commercial Property Assessed Clean Energy (C-PACE) financing programs can help overcome several of these barriers with minimal investment from state and local governments. With programs established or under development in 22 states, and at least $521 million in investments so far, other state and local governments are interested in bringing the benefits of C-PACE to their jurisdictions.
A new Berkeley Lab report, Lessons in Commercial PACE Leadership: The Path from Legislation to Launch, aims to fast track the set-up of C-PACE programs for state and local governments by capturing lessons learned from leaders in the field. The report examines potential program design options and important decision points in setting up a C-PACE program, tradeoffs for available options, and experiences of stakeholders that have gone through (or are going through) the process.
C-PACE uses a voluntary special property assessment to facilitate energy and other improvements in commercial buildings. For example:
- Long financing terms under C-PACE can produce cash flow-positive projects to help overcome a focus on short paybacks.
- Payment obligations can transfer to subsequent owners, mitigating concern about investing in improvements for a building that may be sold before the return on the investment is fully realized.
- 100% of both hard and soft costs can be financed.
To capture the benefits of C-PACE financing, state and local governments must navigate numerous decision points and engage with stakeholders to set up or join a program. Researchers interviewed experts (including state and local sponsors, program administrators, capital providers and industry experts) on their lessons learned and arrived at the following key takeaways for state and local leaders:
- Enabling legislation
- Carefully developed enabling legislation (which includes certain key provisions) and early stakeholder input can greatly improve the chances of program success.
- Options for program administrative structure
- At least four program administrative structures are in use.
- Certain administrative structures inherently result in more standardized product offerings and, potentially, economies of scale.
- Approaches to program and project capitalization
- Two approaches to capitalization have been used: bonding (project capital is raised through a bond sale) and direct funding (capital providers fund projects directly).
- Programs can rely on one capital provider (a closed market) or allow multiple capital providers to participate (an open market).
- What and who qualifies for the program
- Some programs require a minimum project savings-to-investment ratio; other programs encourage it or are indifferent.
- Estimating and documenting project energy cost savings
- Estimating and documenting energy and cost savings can add costs to projects but also demonstrate C-PACE program value.
- Stakeholder engagement
- Key stakeholder groups to engage include community leaders, local governments, building owners, contractors, utilities, capital providers and mortgage holders.
- Stakeholder engagement should be tailored to each particular group.
- Start-up and ongoing costs.
- Understanding set-up and ongoing costs can help program sponsors plan for funding C-PACE programs and projects.
The U.S. Department of Energy's Office of Weatherization and Intergovernmental Programs funded the report.