This month, the Utah Governor’s Office of Energy Development (OED) will launch an updated version of Utah’s Commercial Property Assessed Clean Energy (C-PACE) financing program. With the help of a substantial stakeholder group, OED introduced a proposal in the 2017 legislative session to revise the program processes and structures to encourage greater use of the financing tool.
C-PACE is a way to finance energy efficiency, renewable energy, water conservation and other building improvement projects on commercial real property. C-PACE financing started in the United States in 2009 and there are currently 46 active PACE programs in operation in the U.S. As of December, 988 commercial C-PACE projects have been completed nationwide totaling $322 million financed.
C-PACE offers many benefits not realized with traditional forms of construction lending, according to a release from the OED. For example, C-PACE allows commercial building owners to finance 100 percent of the project costs (including soft costs) with no money down and fixed interest rates over the term of the assessment, up to 30 years.
The financing is secured by a voluntary assessment placed on the improved real property. Most importantly, the OED release said, financed energy or water improvements help commercial building owners save money. In fact, C-PACE can often help building owners reduce their utility bills enough that savings exceed the building owner’s C-PACE payments, making the project “cash flow positive” from Day One. These projects increase property value, save money and save energy and water.
Initiated in 2013, one of the challenges identified in the program structure was the requirement that municipalities issue bonds to raise capital. Municipalities were reluctant to issue bonds and the fees associated with bond issuance limited the scope of financially feasible projects. The new legislation provides an alternate option to bonding that supports a more flexible avenue for C-PACE financing.
OED will relaunch the Utah C-PACE program thanks to the successful passage of SB273, passed by the 2017 Legislature. Improvements to the program include:
• Bonding is no longer required, greatly reducing the fees associated with each transaction. An assessment on the real property will still secure the financing, but rather than issuing a bond to raise capital, an assessment lien may be assigned to the third-party lender.
• Program administration and all major tasks may be performed upon request by OED through a statewide C-PACE district, so municipalities will no longer need to allocate limited resources to businesses that want to participate in the program.
• In addition to the previous list of qualifying projects (energy efficiency, renewable energy, water conservation, electric vehicle charging infrastructure and energy storage), the program was expanded to allow financing for seismic upgrades and extensions of existing natural gas distribution company lines.
Meghan Dutton, renewable energy segment manager for the Power Systems Division of Wheeler Machinery Co., worked closely with Shawna Cuan, managing director for OED, to evaluate and revise the C-PACE program.