How to “PACE” the Cost of Energy Efficiency Upgrades

Strategic upgrades on commercial buildings such as renewable energy installations or energy efficient equipment can notably reduce your carbon footprint. But they can also dramatically decrease your operating budget over the course of their lifetime, comfortably breaking even in 1 to 2 years. Steep up-front cost can make large-scale projects cost-prohibitive for many small to mid-size businesses.

One way companies are able to overcome this hurdle is using Property Assessed Clean Energy (PACE) financing. While PACE financing is new to the market, it has grown considerably in popularity during the past few years as it helps businesses pay for everything from seismic retrofits to rooftop solar panels and water efficiency products. The process is simple. PACE financing companies cover the cost of construction and installation for a business and allow for gradual repayment ranging anywhere from 5 to 25 years.

PACE financing companies minimize their risk by employing a voluntary assessment that ties repayment with the owner’s property tax. Unlike a bank mortgage backed by collateral in the form of the property itself, PACE financing carries forward to each new property owner until the debt is satisfied.

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Historically PACE payments have been given first position over mortgage payments when properties fall into foreclosure. However, the FHA and the federal government have recently stepped in to re-evaluate this structure and determine whether or not PACE payments should perhaps take second place. Their guidance on lien position, PACE payment structure and terms, property eligibility and equity requirements, among other factors, is expected to be announced soon.

PACE is a popular option for businesses looking to take advantage of incremental savings growth. Deferring steep upfront expenses, PACE loans can expedite the use renewable and more cost-efficient sources of energy from an interested business while reducing their greenhouse gas emissions. When and if your business should decide to sell, that debt is shifted to the next owner, reaping the same benefits.

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