Commercial property owners in 140 California cities and counties will be able to invest in energy- and water-saving upgrades with no upfront costs after the launch last week of the nation’s largest property assessed clean energy (PACE) program.
The CaliforniaFIRST program, run by Oakland-based Renewable Funding for the California Statewide Communities Development Authority (CSCDA), is available to owners of office, multi-family residential (5 or more units), retail, industrial, and agriculture properties in 14 counties and 126 cities.
Eligible improvements (PDF) include not only energy-saving equipment such as insulation, lighting, and HVAC systems but onsite renewable energy (rooftop PV, wind turbines, and fuel cells) and water-saving upgrades such as low-flow plumbing fixtures and grey water systems. Projects must be worth $50,000 or more to secure financing.
Much of the appeal for a property owner of PACE financing is avoidance of the upfront cost to install money-saving upgrades. After an audit identifies energy- and water-saving opportunities, property owners wishing to pursue PACE financing enter into an assessment contract with CSCDA to finance the project.
The contract stipulates that the property owner agrees to repay the cost of the improvements through an annual property tax assessment lasting up to 20 years. If a building is sold or transferred, the PACE lien remains tied to the property.
Projects are funded by private capital (Wells Fargo’s Sustainable Infrastructure group was listed as a backer in the CaliforniaFIRST launch press release) channeled through a bond issuance – in this case tax-exempt municipal bonds issued by CSCDA. Read the CaliforniaFIRST FAQs (PDF) and program overview (PDF) for more details.
According to Renewable Funding, the program has already received applications for solar and energy efficiency projects across California and is backed by $250 million of private capital. In a future post, I’ll update readers on the number and value of projects funded.
CaliforniaFIRST is not the nation’s first statewide commercial PACE program; that honor goes to Connecticut. I reported in June that Connecticut Governor Dannel P. Malloy had signed a bill authorizing a statewide commercial PACE program. Kerry O’Neill, a senior advisor at the Clean Energy Finance Center (CEFC) told me that the hope is to launch the program by year’s end. But, because of the size of the California market, the CaliforniaFIRST program promises to mainstream commercial PACE financing.
Considerable demand exists for energy efficiency project financing in the United States. For a post I published in April on the launch of a PACE program in South Florida, Ygrene Energy Fund President Dan Schaefer told me that billions of dollars of projects await funding nationwide. Kerry O’Neill told me that Connecticut officials have been “bombarded” by inquiries from national and local financial players, energy service companies (ESCOs), service providers, and deal originators keen to jump into the commercial PACE market.
For now, the CaliforniaFIRST program applies only to commercial properties but the plan is to expand to the residential sector once federal regulatory issues are resolved, according to Renewable Funding. Such a change would mean that officials at the Federal Housing Finance Agency (FHFA) drop their resistance to PACE liens (see my August 24 post for an update on the status of the residential PACE financing).
