Skip to main content

You are here

Commercial Energy Financing (PACE)

PACE: FINANCING FOR ENERGY EFFICIENCY AND RENEWABLES

PACE stands for Property Assessed Clean Energy, a new and innovative way for commercial property owners to pay for energy efficiency upgrades, on-site renewable energy proj­ects, and water conservation measures. PACE funding is provided or arranged by a local government for 100 percent of a project’s costs, and is repaid with an assessment over a term of up to 20 years.  PACE is a national initiative, but programs are locally based and tailored to meet local market needs.

  • PACE financing is available for all types of commercial and industrial properties, large and small.
  • Financing approvals are simple, but PACE projects must be permanently affixed to the property and save money for the property owner.
  • Benchmarking, energy audits, and evaluations can be used to ensure that projects make sense.
  • PACE is 100 percent voluntary. In communities that adopt PACE, assess­ments are only paid by participating owners, and only for their own projects.

Got 90 seconds?

Get a quick video overview of PACE.

PACE Offers Opportunity

In the United States, buildings consume more than 40 percent of the energy we use, and roughly 75 percent of all electricity. A 2012 Rockefeller Foundation and DB Climate Change Advisors study predicted an investment opportunity of nearly $280 billion over the next 10 years that would yield more than $1 trillion in energy savings, more than 3 million jobs, and 600 million fewer metric tons of carbon emissions per year. PACE is a way to improve building asset value and performance while meeting a market need.

  • Property owners can save money and make their buildings more valuable.
  • Mortgage lenders support projects that meet their clients’ objectives and increase the value of their collateral.
  • Energy service companies and contractors get help making sales.
  • Local governments like PACE because it creates jobs, promotes economic activity, and helps meet energy conservation goals.
  • Private market investors like PACE because assessment liens are a proven, strong credit.

PACE Features Make the Difference

PACE financing has many features that can uniquely solve barriers to adopting energy-based efficiency, resource conservation, and building technology improvements:

  • 100 percent financing requires no up-front cash investment.
  • Long-term financing (up to 20 years) generates immediate positive cash flow.
  • No payoff upon sale because PACE assessments (and energy and other performance savings) remain with the property.
  • Assessment costs and savings can be shared with tenants.
  • Can attract a wide range of private investors with competitive interest rates.
  • May be treated as off-balance sheet financing.
  • Non-recourse, non-accelerating financing.
  • Driven by local government partners that share the commercial sector’s interest in improving real estate asset values and performance, conserving energy and water resources, minimizing the environmental impact of growth, and stimulating local economies and job creation.
  • Has the potential to leverage additional rebates and project incentives.

 

PACE BENEFITS

For building owners:

  • Choose your own lender and contractor.
  • Customize your upgrades for highest performance and return on investment.
  • Lower rates and longer terms than conventional financing options.
  • Preserve capital for investment in core business activities.
  • Longer payback projects can be cash-flow positive from day one.
  • Assessment transfers to new owner if building is sold.
  • Repayment obligation reportable as an operating expense.

For mortgage lenders:

  • Opportunity to purchase PACE bonds.
  • Building owners must obtain mortgage holder consent.
  • Attract new mortgage and construction lending business.
  • Enhance cash flow and increase collateral value.
  • Reduce hedge risk.
  • Earn Community Reinvestment Act credit.

For investors:

  • Significant investment opportunity and ability to increase your portfolio value.
  • Flexible term allows for diverse project scope and ability to scale up to large projects.
  • Repayment fully secured through tax bill.
  • Secure platform for underwriting and servicing energy and performance investments in commercial, industrial, and multifamily buildings.
  • Flexible terms offer more choices in structuring transactions.

For contractors:

  • Allow clients to move forward with projects that have stalled for lack of funding.
  • Expand your client base.
  • Mitigate building operational costs and risk of future utility rate hikes.
  • Enhance competitiveness of client building assets in the marketplace.
  •   Solve clients’ "split incentive" dilemma with upgrades that allow cost and benefit to be shared fairly.

ELIGIBLE UPGRADES

No matter what size your business is,you cansave energy and money when you make upgrades that increase energy efficiency. PACE financing can help you take the next step toward implementing your energy efficiency project.

PACE financing is available for upgrades at:

  • Commercial offices
  • Industrial facilities
  • Apartment buildings
  • Retail and restaurants
  • Hotels
  • Faith community buildings and nonprofits

Use PACE financing to make upgrades in:

  • Heating, ventilation, and air conditioning (efficient chillers, boilers, and cooling towers)
  • Building automation systems and controls
  • Solar PV or fuel cells to generate electricity
  • Building envelope (roof, windows, and insulation)
  • Elevator modernization
  • High-efficiency lighting fixtures and lamps
  • Occupancy and day-lighting sensors
  • Industrial manufacturing equipment
  • Low-flow toilets

CASE STUDIES: PACE AT WORK

All across the country, businesses are building energy efficiency into their operations with PACE financing. They’re realizing the rewards that come from reducing energy use and lowering energy costs. Take a look at how some of these business are putting PACE to work for them.

Hospitality
Hilton Los Angeles/Universal City (CA) 

Medical
Cleveland Clinic (OH)

Multi-Use
Beardmore Building (ID)
International Brotherhood of Teamsters (CA)

Office
Alliance Center (CO) 
The Aventine (CA)
Johnson Braund Design Group, Inc. (WA)
Joseph Vance Building (WA)
Prologis (CA)

Retail
Small volume, high-profit retail franchise (national)

 

Ready to put PACE financing to work for your business? Let’s get started. 

Let's Get Started

Commercial PACE programs are available across the nine counties and 101 cities that make up the Bay Area Regional Energy Network. To get more information or to begin the process of applying for PACE funding, building owners or contractors should visit the websites listed below and learn about the options available for a particular property or project.

Note: by including this list, BayREN and ABAG do not endorse any specific commercial PACE financing entity or program offering. It is important that property owners and contractors do their own research into PACE terms, interest rates, fees, and other criteria before deciding to work with any program.

​OPEN YOUR DOOR TO PACE 

Do you want to:

  • Attract and retain tenants?
  • Improve cash flow?
  • Mitigate utility rate risk and regulatory risk?
  • Fund capital-intensive improvement projects?
  • Distribute costs and benefits appropriately between tenants and owners (current and future)?

Then PACE may be the right financing solution for your next energy efficiency project.

PACE provides 100 percent upfront, fixed-rate, long-term financing to property owners for qualified energy upgrades.  PACE changes the project financing game in several important ways:

  • PACE assessments may qualify as an operating expense. This means you can finance improvements without taking on additional debt and keep capital and credit lines for your core business investments. Also, under typical leases, payments and energy savings can be passed along to tenants.
  • The tax obligation, which is attached to the property, transfers upon sale to the new owner. Unlike other lending options, payments do not accelerate in case of default.
  • Projects can be structured to be cash flow-positive from completion. Financing is structured so energy savings more than offset the additional property tax assessment.
  • More ambitious energy upgrades are possible because the term of the assessment is up to 20 years and stays with the property rather than the owner.
  • Owners achieve lower operating costs, improved asset value from new equipment, increased cash flow, better indoor air quality and comfort for tenants, and enhanced property value.

Learn more about the types of projects that qualify for PACE financing.

Read how building owners nationwide are using PACE successfully to make upgrades that save energy and money. 

Ready to move your project forward with financing? Get started now.

BUILD YOUR BUSINESS WITH PACE

Access to financing can be the biggest roadblock when it comes to converting energy upgrade leads to actual projects. With PACE, you can increase sales by helping customers get convenient financing for energy upgrades in commercial buildings, including residential multifamily buildings of more than five units.

PACE offers property owners access to 100 percent upfront financing for up to 20 years. That means deeper energy efficiency and clean energy improvements are now more affordable.  PACE helps your customers:

  • Fund more comprehensive upgrades, including energy, water, and building analytics.
  • Move projects stalled by lack of financing.
  • Mitigate utility rate risk.
  • Stay ahead of regulation.
  • Enhance competitiveness of their assets.
  • Solve the “split incentive” and share costs and savings fairly with current tenants and future owners.

Get a competitive edge with PACE. Learn which upgrades are eligible for PACE financing.

PACE is a national initiative that is carried out locally in the Bay Area. For more information about PACE and how it can help you grow your business, contact BayREN's contractor support partner to learn more.

KNOW MORE, DO MORE

PACE can make it easier for commercial property owners to implement energy efficiency and renewable energy projects that save money and make properties more valuable. Learn more about PACE to help you determine if you can benefit from making your building more efficient through PACE financing.

ENERGY AUDITS

For projects installing energy efficiency measures, an American Society of Heating, Refrigeration and Air Conditioning Engineers (ASHRAE) Level II Energy Audit is required to determine the potential improvements and work scope. The audit cost can be covered by PACE funding following project approval.

An ASHRAE Level II Energy Audit is a detailed investigation that includes a comprehensive building survey, energy analysis, financial analysis and detailed evaluation of a building to define a variety of potential energy efficiency improvements for the following energy systems: building envelope; lighting; heating, ventilation and air conditioning; domestic hot water; and compressed air and process uses.

Level II audit results describe a variety of energy efficiency measures including no- and low-cost measures, modifications to system controls and building automation, operational changes, and potential capital upgrades. The findings should include:

  • Identification of capital projects.
  • Utility bill analysis to assess the building’s efficiency (using ASTM BEPA methodology to establish the building’s baseline energy use).
  • Detailed investment and cost savings analysis of all recommended Improvements, including the owner’s constraints and economic criteria.
  • Detailed financial analysis including ROI, IRR, NPV, and payback period determination reflecting PACE financing.
  • Projected energy savings.
  • Information on operation and maintenance procedures.

All eligible auditors must comply with the following:

  • Certification: auditors must hold a certification from ASHRAE or the Association of Energy Engineers. These include Certified Building Energy Assessment Professionals, Certified Energy Auditor, and Certified Energy Manager.
  • Licensing: auditors must hold a current professional engineering license in the State of California or as required by the auditor certification programs listed above.
  • Experience: auditors must have a minimum of two years experience conducting audits.
  • ASHRAE audits: if conducting an ASHRAE audit for energy efficiency, auditors must have one of the following certifications: CEA, CEM or BEAP.

Special requirements apply for solar and water measures.

ENERGY ALIGNED LEASES

The “split incentive” issue occurs because building owners often pay the capital expenses for energy-efficient upgrades to the base building.   But tenants receive the financial benefits of energy savings through a reduction in their proportionate share of base building operating expenses.

Because PACE assessments are considered property taxes, payment of the PACE assessment generally flows to the same party that benefits from the cost savings—thus solving the split incentive problem. While PACE solves the split incentive in many triple-net or full-service gross leases without any modifications being necessary, in the case of a modified gross lease it may be beneficial to append the energy aligned lease provision to clearly and fairly address the issue.

Key Features of the Energy Aligned Lease Provision

  • Solves the split incentive problem in modified gross leases.
  • Standardized and easy to use.
  • Both parties benefit from energy savings.
  • Owners recover capital costs more quickly.
  • Tenants see energy savings right away.

Downloads

Energy Aligned Lease Provision

Property Owner Pledge to Operationalize the Energy Aligned Lease Provision

Property Manager Pledge to Operationalize the Energy Aligned Lease Provision

Tenant Pledge to Operationalize the Energy Aligned Lease Provision

PERFORMANCE TRACKING

Building performance tracking is the process of analyzing a building’s operations and energy consumption over time to identify anomalies and areas for potential improvement.

Measurement and verification (M&V) is a process of using actual measurement, calculation, and/or modeling to reliably determine actual energy/utility savings achieved within a facility by an energy management, energy conservation, or energy efficiency project.

The benefits of building performance tracking and M&V include:

  • Identify opportunities for improvement.
  • Enable transparent conversations with tenants about potential energy performance upgrades.
  • Improve engineering design and project payback analysis.
  • Document financial transactions.
  • Enhance financing options.
  • Manage energy budgets proactively.
  • Support evaluation and development of broader efficiency programs.
  • Increase market understanding of energy management.

Talk to your contractor about performance tracking for your building.

TAX INCENTIVES

The state and federal governments offer tax incentives and favorable accounting treatment to offset the cost of energy efficiency upgrades and on-site clean power generation. However, most of these are underutilized because few people understand how they work—or even know they are available. These incentives significantly improve the economics of many energy efficiency and on-site power generation projects, and they can be taken together—covering 50 percent or more of total project costs.

Talk with your tax advisor or accountant about your options.

FREQUENTLY ASKED QUESTIONS ABOUT PACE

What is PACE and how does it work in the Bay Area?

Property Assessed Clean Energy (PACE) is a land-secured financing framework that connects property owners with capital markets through a tax lien in the amount the property owner wants to have financed. Capital providers get the benefit of a senior (first and primary) lien and property owners get the benefit of lower interest rates and convenient repayment.
PACE is available to non-residential—and in certain counties or cities, to residential—property owners to fund energy-efficient, water-saving, and renewable energy upgrade projects through an assessment on their property tax bills. Throughout the nine-county Bay Area Regional Energy Network (BayREN) area, local county and city governments have adopted or expanded PACE program offerings to give building owners and operators competitive options in PACE financing. In many cases, property owners can choose their own PACE investor and negotiate their own rate and terms.

Find a PACE program in your city or county.

Is my property eligible?

Non-publicly owned commercial properties in BayREN counties that receive a property tax bill are eligible for PACE financing, including:

  • Commercial offices
  • Apartment buildings (five or more units)
  • Schools, private universities, faith community buildings, and nonprofits 
  • Industrial facilities
  • Hotels
  • Retail/restaurants

What commercial properties are good candidates for PACE?

  • Older buildings that need major upgrades
  • Properties with no mortgage or low loan-to-value
  • Portfolios of properties with a single owner, such as big box or grocery stores
  • Industrial/manufacturing facilities
  • Properties that need to comply with legal requirements
  • Properties leased to government agencies

Do residential properties qualify for PACE?

Multifamily buildings with five or more units can qualify for commercial PACE funding. Property owners with a single family detached home or multifamily home with fewer than five units should visit to learn more about residential PACE  programs in the region that offer the PACE financing for these properties. 

What are the PACE eligibility requirements?

  • Applicant must be the legal owner of the property and all legal owners of the property must agree to participate.
  • Mortgage holders must explicitly consent to the PACE assessment in writing.
  • Property owner must be current on any existing mortgages; property owner must not have defaulted on the deeds of trust.
  • Property must not be subject to any involuntary liens or judgments.
  • Property must not have been delinquent on property taxes for the past five years or since the date of the most recent transfer, if less than five years.
  • Property will be subject to the appropriate jurisdiction’s permitting inspections and all other applicable federal, state, and local codes and regulations.
  • Property owner must not be in bankruptcy and must not have declared bankruptcy within the last 10 years.

How do property owners benefit from PACE?

  • Commercial property owners can finance up to 100 percent of project costs, allowing projects to be amortized over a longer period of time so they can be “cash-flow positive” from day one. 
  • PACE helps property owners reduce operating costs while increasing property value.
  • Capital investments in energy efficiency that use PACE financing can help owners increase rent, enhance building performance and health, decrease vacancy rates, and attract high-quality tenants.
  • Most commercial leases classify property taxes as operating expenses. Operating expenses, such as a PACE assessment, may be able to be passed through to tenants, eliminating a split incentive issue.
  • Qualification for PACE financing does not require a personal guarantee.
  • If the property is sold, the financing assessment stays with the property and transfers to the new property owner because the improvements remain with the property.

What is the typical financing term?

The financing term is tied to the expected useful life of the project. For example, solar PV may be financed up to 20 years. Property owners may elect to finance for fewer years than the expected useful life, but not more years.

Can I combine rebates with PACE financing?

Yes, you can combine PACE with other tax incentives and utility rebates that can significantly bring down the cost of your energy and water efficiency projects. Combined incentives and rebates can fund much of the project cost. Rebates help provide quality assurance without costing the program and participants. If you choose to participate in PACE, you must provide a list of all approved rebate applications when you submit the PACE application.

Is there a minimum project dollar amount?

Commercial PACE is convenient from any size business, and can be used for a wide range of projects, from $25,000 to several million dollars. However, California legislation (AB-1883) that is expected to become effective January 2015 will allow for private equity funding and investment to reduce transaction costs and create a considerably more flexible range for effective project sizes and costs.  

What is the maximum amount I can finance?

Generally, property owners may finance no more than the equity they have in the property.

Can  I integrate PACE with other sorts of financing? 

Yes. You can finance some or all of your project costs. It is best to speak with your contractor, and perhaps your lending bank, to explore other potential financing options that might be leveraged with a PACE-supported building upgrade.

Can I integrate PACE with leases or Power Purchase Agreements (PPAs)? 

Yes, you can combine PACE with leases or PPAs. Your contractor can begin discussion of these options with the Program Customer Service representative for your county.  

Do I need authorization from my current mortgage lenders to participate in PACE? 

Mortgage lender authorization ensures you are in compliance with your mortgage contract. See here for Building Owner/Operator resources, including a standard form Mortgage Lender Acknowledgement.

How does AB-1103 affect PACE?

California Assembly Bill 1103, which went into effect January 1, 2014, requires non-residential building owners to provide certain energy usage and energy efficiency information to prospective buyers, tenants, and lenders by tracking energy performance in the ENERGY STAR® Portfolio Manager. PACE financing uses a building’s ENERGY STAR portfolio rating to measure improvement. If a building has an ENERGY STAR score, disclosure of that score will be requested before and after improvements. Improvements financed through PACE are likely to increase a building’s ENERGY STAR score, making it more marketable at times when disclosure is required per AB-1103.

When will I make the first payment?

PACE assessments function in the same way as other contractual assessments and follow the same collection schedule—twice-a -year payments, with an interest-only payment due March 2 and a principal plus interest payment due September 2. This collection schedule is dictated by California law and is not flexible; however, there is a wide flexibility to structure the details, term, and interest rate of the transaction.

What are the steps to getting started?

  • Find and contact the PACE program in your jurisdiction.
  • Complete your initial application.
  • Have your property audited for energy use.
  • Fund your project and start your upgrade.

Residential PACE Programs

While the BayREN PACE Program currently focuses mainly on Commercial PACE Programs, many of the nine counties that make up the BayREN region offer or support Residential PACE as well. In some but not all cases, PACE Providers offer both commercial and residential financing, so be sure to check applicability to your specific situation. For information about specific Residential PACE offerings, please refer to the resources below:

 


 

ABAG Local Government PACE Portal

As residential PACE continues to expand across California, with new residential PACE Providers entering into the market (oftentimes overlapping with other Providers), BayREN saw a need for a special education resource tailored just for local governments. So in partnership with the U.S. Department of Housing and Urban Development (HUD), BayREN developed the Local Government PACE Portal, a "one-stop shop" by and for local governments interested in allowing property owners to take advantage of residential PACE financing. Visit www.abag.ca.gov/bayren/pace for more information.

pace-mobile

About PACE

About

PACE: FINANCING FOR ENERGY EFFICIENCY AND RENEWABLES

PACE stands for Property Assessed Clean Energy, a new and innovative way for commercial property owners to pay for energy efficiency upgrades, on-site renewable energy proj­ects, and water conservation measures. PACE funding is provided or arranged by a local government for 100 percent of a project’s costs, and is repaid with an assessment over a term of up to 20 years.  PACE is a national initiative, but programs are locally based and tailored to meet local market needs.

  • PACE financing is available for all types of commercial and industrial properties, large and small.
  • Financing approvals are simple, but PACE projects must be permanently affixed to the property and save money for the property owner.
  • Benchmarking, energy audits, and evaluations can be used to ensure that projects make sense.
  • PACE is 100 percent voluntary. In communities that adopt PACE, assess­ments are only paid by participating owners, and only for their own projects.

Got 90 seconds?

Get a quick video overview of PACE.

PACE Offers Opportunity

In the United States, buildings consume more than 40 percent of the energy we use, and roughly 75 percent of all electricity. A 2012 Rockefeller Foundation and DB Climate Change Advisors study predicted an investment opportunity of nearly $280 billion over the next 10 years that would yield more than $1 trillion in energy savings, more than 3 million jobs, and 600 million fewer metric tons of carbon emissions per year. PACE is a way to improve building asset value and performance while meeting a market need.

  • Property owners can save money and make their buildings more valuable.
  • Mortgage lenders support projects that meet their clients’ objectives and increase the value of their collateral.
  • Energy service companies and contractors get help making sales.
  • Local governments like PACE because it creates jobs, promotes economic activity, and helps meet energy conservation goals.
  • Private market investors like PACE because assessment liens are a proven, strong credit.

PACE Features Make the Difference

PACE financing has many features that can uniquely solve barriers to adopting energy-based efficiency, resource conservation, and building technology improvements:

  • 100 percent financing requires no up-front cash investment.
  • Long-term financing (up to 20 years) generates immediate positive cash flow.
  • No payoff upon sale because PACE assessments (and energy and other performance savings) remain with the property.
  • Assessment costs and savings can be shared with tenants.
  • Can attract a wide range of private investors with competitive interest rates.
  • May be treated as off-balance sheet financing.
  • Non-recourse, non-accelerating financing.
  • Driven by local government partners that share the commercial sector’s interest in improving real estate asset values and performance, conserving energy and water resources, minimizing the environmental impact of growth, and stimulating local economies and job creation.
  • Has the potential to leverage additional rebates and project incentives.

 

PACE Benefits

PACE BENEFITS

For building owners:

  • Choose your own lender and contractor.
  • Customize your upgrades for highest performance and return on investment.
  • Lower rates and longer terms than conventional financing options.
  • Preserve capital for investment in core business activities.
  • Longer payback projects can be cash-flow positive from day one.
  • Assessment transfers to new owner if building is sold.
  • Repayment obligation reportable as an operating expense.

For mortgage lenders:

  • Opportunity to purchase PACE bonds.
  • Building owners must obtain mortgage holder consent.
  • Attract new mortgage and construction lending business.
  • Enhance cash flow and increase collateral value.
  • Reduce hedge risk.
  • Earn Community Reinvestment Act credit.

For investors:

  • Significant investment opportunity and ability to increase your portfolio value.
  • Flexible term allows for diverse project scope and ability to scale up to large projects.
  • Repayment fully secured through tax bill.
  • Secure platform for underwriting and servicing energy and performance investments in commercial, industrial, and multifamily buildings.
  • Flexible terms offer more choices in structuring transactions.

For contractors:

  • Allow clients to move forward with projects that have stalled for lack of funding.
  • Expand your client base.
  • Mitigate building operational costs and risk of future utility rate hikes.
  • Enhance competitiveness of client building assets in the marketplace.
  •   Solve clients’ "split incentive" dilemma with upgrades that allow cost and benefit to be shared fairly.
Eligible Upgrades

ELIGIBLE UPGRADES

No matter what size your business is,you cansave energy and money when you make upgrades that increase energy efficiency. PACE financing can help you take the next step toward implementing your energy efficiency project.

PACE financing is available for upgrades at:

  • Commercial offices
  • Industrial facilities
  • Apartment buildings
  • Retail and restaurants
  • Hotels
  • Faith community buildings and nonprofits

Use PACE financing to make upgrades in:

  • Heating, ventilation, and air conditioning (efficient chillers, boilers, and cooling towers)
  • Building automation systems and controls
  • Solar PV or fuel cells to generate electricity
  • Building envelope (roof, windows, and insulation)
  • Elevator modernization
  • High-efficiency lighting fixtures and lamps
  • Occupancy and day-lighting sensors
  • Industrial manufacturing equipment
  • Low-flow toilets
Case Studies

CASE STUDIES: PACE AT WORK

All across the country, businesses are building energy efficiency into their operations with PACE financing. They’re realizing the rewards that come from reducing energy use and lowering energy costs. Take a look at how some of these business are putting PACE to work for them.

Hospitality
Hilton Los Angeles/Universal City (CA) 

Medical
Cleveland Clinic (OH)

Multi-Use
Beardmore Building (ID)
International Brotherhood of Teamsters (CA)

Office
Alliance Center (CO) 
The Aventine (CA)
Johnson Braund Design Group, Inc. (WA)
Joseph Vance Building (WA)
Prologis (CA)

Retail
Small volume, high-profit retail franchise (national)

 

Ready to put PACE financing to work for your business? Let’s get started. 

Let's Get Started

Building Owners and Operators

​OPEN YOUR DOOR TO PACE 

Do you want to:

  • Attract and retain tenants?
  • Improve cash flow?
  • Mitigate utility rate risk and regulatory risk?
  • Fund capital-intensive improvement projects?
  • Distribute costs and benefits appropriately between tenants and owners (current and future)?

Then PACE may be the right financing solution for your next energy efficiency project.

PACE provides 100 percent upfront, fixed-rate, long-term financing to property owners for qualified energy upgrades.  PACE changes the project financing game in several important ways:

  • PACE assessments may qualify as an operating expense. This means you can finance improvements without taking on additional debt and keep capital and credit lines for your core business investments. Also, under typical leases, payments and energy savings can be passed along to tenants.
  • The tax obligation, which is attached to the property, transfers upon sale to the new owner. Unlike other lending options, payments do not accelerate in case of default.
  • Projects can be structured to be cash flow-positive from completion. Financing is structured so energy savings more than offset the additional property tax assessment.
  • More ambitious energy upgrades are possible because the term of the assessment is up to 20 years and stays with the property rather than the owner.
  • Owners achieve lower operating costs, improved asset value from new equipment, increased cash flow, better indoor air quality and comfort for tenants, and enhanced property value.

Learn more about the types of projects that qualify for PACE financing.

Read how building owners nationwide are using PACE successfully to make upgrades that save energy and money. 

Ready to move your project forward with financing? Get started now.

For Contractors

BUILD YOUR BUSINESS WITH PACE

Access to financing can be the biggest roadblock when it comes to converting energy upgrade leads to actual projects. With PACE, you can increase sales by helping customers get convenient financing for energy upgrades in commercial buildings, including residential multifamily buildings of more than five units.

PACE offers property owners access to 100 percent upfront financing for up to 20 years. That means deeper energy efficiency and clean energy improvements are now more affordable.  PACE helps your customers:

  • Fund more comprehensive upgrades, including energy, water, and building analytics.
  • Move projects stalled by lack of financing.
  • Mitigate utility rate risk.
  • Stay ahead of regulation.
  • Enhance competitiveness of their assets.
  • Solve the “split incentive” and share costs and savings fairly with current tenants and future owners.

Get a competitive edge with PACE. Learn which upgrades are eligible for PACE financing.

PACE is a national initiative that is carried out locally in the Bay Area. For more information about PACE and how it can help you grow your business, contact a specific county’s PACE program. 

Resources

Resources

KNOW MORE, DO MORE

PACE can make it easier for commercial property owners to implement energy efficiency and renewable energy projects that save money and make properties more valuable. Learn more about PACE to help you determine if you can benefit from making your building more efficient through PACE financing.

Audits

ENERGY AUDITS

For projects installing energy efficiency measures, an American Society of Heating, Refrigeration and Air Conditioning Engineers (ASHRAE) Level II Energy Audit is required to determine the potential improvements and work scope. The audit cost can be covered by PACE funding following project approval.

An ASHRAE Level II Energy Audit is a detailed investigation that includes a comprehensive building survey, energy analysis, financial analysis and detailed evaluation of a building to define a variety of potential energy efficiency improvements for the following energy systems: building envelope; lighting; heating, ventilation and air conditioning; domestic hot water; and compressed air and process uses.

Level II audit results describe a variety of energy efficiency measures including no- and low-cost measures, modifications to system controls and building automation, operational changes, and potential capital upgrades. The findings should include:

  • Identification of capital projects.
  • Utility bill analysis to assess the building’s efficiency (using ASTM BEPA methodology to establish the building’s baseline energy use).
  • Detailed investment and cost savings analysis of all recommended Improvements, including the owner’s constraints and economic criteria.
  • Detailed financial analysis including ROI, IRR, NPV, and payback period determination reflecting PACE financing.
  • Projected energy savings.
  • Information on operation and maintenance procedures.

All eligible auditors must comply with the following:

  • Certification: auditors must hold a certification from ASHRAE or the Association of Energy Engineers. These include Certified Building Energy Assessment Professionals, Certified Energy Auditor, and Certified Energy Manager.
  • Licensing: auditors must hold a current professional engineering license in the State of California or as required by the auditor certification programs listed above.
  • Experience: auditors must have a minimum of two years experience conducting audits.
  • ASHRAE audits: if conducting an ASHRAE audit for energy efficiency, auditors must have one of the following certifications: CEA, CEM or BEAP.

Special requirements apply for solar and water measures.

Leases

ENERGY ALIGNED LEASES

The “split incentive” issue occurs because building owners often pay the capital expenses for energy-efficient upgrades to the base building.   But tenants receive the financial benefits of energy savings through a reduction in their proportionate share of base building operating expenses.

Because PACE assessments are considered property taxes, payment of the PACE assessment generally flows to the same party that benefits from the cost savings—thus solving the split incentive problem. While PACE solves the split incentive in many triple-net or full-service gross leases without any modifications being necessary, in the case of a modified gross lease it may be beneficial to append the energy aligned lease provision to clearly and fairly address the issue.

Key Features of the Energy Aligned Lease Provision

  • Solves the split incentive problem in modified gross leases.
  • Standardized and easy to use.
  • Both parties benefit from energy savings.
  • Owners recover capital costs more quickly.
  • Tenants see energy savings right away.

Downloads

Energy Aligned Lease Provision

Property Owner Pledge to Operationalize the Energy Aligned Lease Provision

Property Manager Pledge to Operationalize the Energy Aligned Lease Provision

Tenant Pledge to Operationalize the Energy Aligned Lease Provision

Performance

PERFORMANCE TRACKING

Building performance tracking is the process of analyzing a building’s operations and energy consumption over time to identify anomalies and areas for potential improvement.

Measurement and verification (M&V) is a process of using actual measurement, calculation, and/or modeling to reliably determine actual energy/utility savings achieved within a facility by an energy management, energy conservation, or energy efficiency project.

The benefits of building performance tracking and M&V include:

  • Identify opportunities for improvement.
  • Enable transparent conversations with tenants about potential energy performance upgrades.
  • Improve engineering design and project payback analysis.
  • Document financial transactions.
  • Enhance financing options.
  • Manage energy budgets proactively.
  • Support evaluation and development of broader efficiency programs.
  • Increase market understanding of energy management.

Talk to your contractor about performance tracking for your building.

Incentives

TAX INCENTIVES

The state and federal governments offer tax incentives and favorable accounting treatment to offset the cost of energy efficiency upgrades and on-site clean power generation. However, most of these are underutilized because few people understand how they work—or even know they are available. These incentives significantly improve the economics of many energy efficiency and on-site power generation projects, and they can be taken together—covering 50 percent or more of total project costs.

Talk with your tax advisor or accountant about your options.

FAQs

FREQUENTLY ASKED QUESTIONS ABOUT PACE

What is PACE and how does it work in the Bay Area?

Property Assessed Clean Energy (PACE) is a land-secured financing framework that connects property owners with capital markets through a tax lien in the amount the property owner wants to have financed. Capital providers get the benefit of a senior (first and primary) lien and property owners get the benefit of lower interest rates and convenient repayment.
PACE is available to non-residential—and in certain counties or cities, to residential—property owners to fund energy-efficient, water-saving, and renewable energy upgrade projects through an assessment on their property tax bills. Throughout the nine-county Bay Area Regional Energy Network (BayREN) area, local county and city governments have adopted or expanded PACE program offerings to give building owners and operators competitive options in PACE financing. In many cases, property owners can choose their own PACE investor and negotiate their own rate and terms.

Find a PACE program in your city or county.

Is my property eligible?

Non-publicly owned commercial properties in BayREN counties that receive a property tax bill are eligible for PACE financing, including:

  • Commercial offices
  • Apartment buildings (five or more units)
  • Schools, private universities, faith community buildings, and nonprofits 
  • Industrial facilities
  • Hotels
  • Retail/restaurants

What commercial properties are good candidates for PACE?

  • Older buildings that need major upgrades
  • Properties with no mortgage or low loan-to-value
  • Portfolios of properties with a single owner, such as big box or grocery stores
  • Industrial/manufacturing facilities
  • Properties that need to comply with legal requirements
  • Properties leased to government agencies

Do residential properties qualify for PACE?

Multifamily buildings with five or more units can qualify for commercial PACE funding. Property owners with a single family detached home or multifamily home with fewer than five units should visit to learn more about residential PACE  programs in the region that offer the PACE financing for these properties. 

What are the PACE eligibility requirements?

  • Applicant must be the legal owner of the property and all legal owners of the property must agree to participate.
  • Mortgage holders must explicitly consent to the PACE assessment in writing.
  • Property owner must be current on any existing mortgages; property owner must not have defaulted on the deeds of trust.
  • Property must not be subject to any involuntary liens or judgments.
  • Property must not have been delinquent on property taxes for the past five years or since the date of the most recent transfer, if less than five years.
  • Property will be subject to the appropriate jurisdiction’s permitting inspections and all other applicable federal, state, and local codes and regulations.
  • Property owner must not be in bankruptcy and must not have declared bankruptcy within the last 10 years.

How do property owners benefit from PACE?

  • Commercial property owners can finance up to 100 percent of project costs, allowing projects to be amortized over a longer period of time so they can be “cash-flow positive” from day one. 
  • PACE helps property owners reduce operating costs while increasing property value.
  • Capital investments in energy efficiency that use PACE financing can help owners increase rent, enhance building performance and health, decrease vacancy rates, and attract high-quality tenants.
  • Most commercial leases classify property taxes as operating expenses. Operating expenses, such as a PACE assessment, may be able to be passed through to tenants, eliminating a split incentive issue.
  • Qualification for PACE financing does not require a personal guarantee.
  • If the property is sold, the financing assessment stays with the property and transfers to the new property owner because the improvements remain with the property.

What is the typical financing term?

The financing term is tied to the expected useful life of the project. For example, solar PV may be financed up to 20 years. Property owners may elect to finance for fewer years than the expected useful life, but not more years.

Can I combine rebates with PACE financing?

Yes, you can combine PACE with other tax incentives and utility rebates that can significantly bring down the cost of your energy and water efficiency projects. Combined incentives and rebates can fund much of the project cost. Rebates help provide quality assurance without costing the program and participants. If you choose to participate in PACE, you must provide a list of all approved rebate applications when you submit the PACE application.

Is there a minimum project dollar amount?

Commercial PACE is convenient from any size business, and can be used for a wide range of projects, from $25,000 to several million dollars. However, California legislation (AB-1883) that is expected to become effective January 2015 will allow for private equity funding and investment to reduce transaction costs and create a considerably more flexible range for effective project sizes and costs.  

What is the maximum amount I can finance?

Generally, property owners may finance no more than the equity they have in the property.

Can  I integrate PACE with other sorts of financing? 

Yes. You can finance some or all of your project costs. It is best to speak with your contractor, and perhaps your lending bank, to explore other potential financing options that might be leveraged with a PACE-supported building upgrade.

Can I integrate PACE with leases or Power Purchase Agreements (PPAs)? 

Yes, you can combine PACE with leases or PPAs. Your contractor can begin discussion of these options with the Program Customer Service representative for your county.  

Do I need authorization from my current mortgage lenders to participate in PACE? 

Mortgage lender authorization ensures you are in compliance with your mortgage contract. See here for Building Owner/Operator resources, including a standard form Mortgage Lender Acknowledgement.

How does AB-1103 affect PACE?

California Assembly Bill 1103, which went into effect January 1, 2014, requires non-residential building owners to provide certain energy usage and energy efficiency information to prospective buyers, tenants, and lenders by tracking energy performance in the ENERGY STAR® Portfolio Manager. PACE financing uses a building’s ENERGY STAR portfolio rating to measure improvement. If a building has an ENERGY STAR score, disclosure of that score will be requested before and after improvements. Improvements financed through PACE are likely to increase a building’s ENERGY STAR score, making it more marketable at times when disclosure is required per AB-1103.

When will I make the first payment?

PACE assessments function in the same way as other contractual assessments and follow the same collection schedule—twice-a -year payments, with an interest-only payment due March 2 and a principal plus interest payment due September 2. This collection schedule is dictated by California law and is not flexible; however, there is a wide flexibility to structure the details, term, and interest rate of the transaction.

What are the steps to getting started?

  • Find and contact the PACE program in your jurisdiction.
  • Complete your initial application.
  • Have your property audited for energy use.
  • Fund your project and start your upgrade.

Residential PACE Programs

Other PACE Programs

While the BayREN PACE Program currently supports Commercial PACE Programs only, many of the nine counties that make up the BayREN region offer or support Residential PACE Programs as well.  For information on Residential PACE, please refer to 3 resources: