You want to be more energy efficient, for any reason – you want to reduce your carbon footprint, reduce energy costs, improve the operating conditions and productivity of your staff. You have an existing building (only 1% of buildings in the US are “new”) and you know that there are opportunities to make it more energy efficient. But the problem is cash flow; you have to lay out money to install and operate the strategy. Yes, you will get the money laid out back in a short time, but with all the problems business are having with the pandemic (lost business, lost staff, lost customers and suppliers), cash for upfront payments is not always readily available.

Well, the good news is that with interest rates at historical lows (who would believe home mortgages at 2.65% interest!) it makes sense to borrow to be able to do an energy upgrade project now. If a modest energy project has a calculated rate of return of 15% per year, it would be crazy NOT to finance the project, if corporate loans are even 6 or 8% interest. In fact, lenders know that energy projects are the most reliable in terms of meeting the projected ROIs; they know the risk of non-payment is low. So lenders will compete with each other and lower rates to make energy loans!

Yet for owners of very old, poorer buildings, sometimes loans for energy projects are not available not allowing them to modernize. Enter PACE (Property Assessed Clean Energy), the government-backed program created to simplify energy efficiency finance. In PACE, the building is the collateral, not the business. This opens the door to immense opportunity in the business case for energy efficiency.

PACE enables energy efficiency upgrades and/or solar or wind systems through long-term financing. PACE is useful for projects with long-term financing (20 years is typical), which is useful for project, such as whole building retrofits and large equipment replacements. Long-term loans with long-term benefits.

But this leads to a problem. What if the building owner wants to sell the property during the loan’s term? PACE programs work differently. The PACE loan is tied to the building; not the owner or business. The PACE loan is set up as a lien on the asset, the facility, and is structured as a tax, with the idea that the energy savings exceed the added expense, allowing the passing of the cost to tenants.

PACE loans are established by state and local governments. Property owners within the district can voluntarily choose to participate in the program. An energy expert assesses the scope of desired improvements, often through an energy audit to develop projects and cost estimates. PACE loans are commonly paid to the municipality who transfers the money to the lending institute. Payment usually occurs along with property taxes. Therefore, it may occur only twice per year. Banks may reject a building owner with large debts or a bad historic record or one that has been in bankruptcy. Building buyers must continue payment of the PACE loan after the borrower has sold the building.

PACE is an innovative approach and another financing option to assist building owners in paying for the often high-up front cost of energy efficiency projects. PACE is limited to areas that have implemented a PACE program, so it may not be available in many parts of the US. PACE financing is available in most of New York State for energy projects.

CCES has the experts to perform the upfront work to recommend smart energy solutions and to work with PACE or other banking officials to help you finance these potential energy efficiency projects. Contact us today for more information at karell@CCESworld.com or at 914-584-6720.