The assumption that building green costs more is not rare. However, the lifetime energy savings resulting from more efficient buildings and products typically outweighs the increased upfront expenses.
Unfortunately, when construction budgets are tight, energy efficiency measures and renewables are often the first to go. Thankfully, there’s a program that incentivizes environmentally-friendly building and design–and it works.
What is PACE?
Property Assessed Clean Energy (PACE) programs offer a solution to these competing priorities by providing long-term financing for energy- and water-saving measures.
Here’s how it works: PACE funding is secured by a voluntary property tax assessment, with no out-of-pocket expenses. Assessments are repaid according to the property tax bill schedule, similar to other tax assessments routinely used to finance infrastructure upgrades.
The program has been very successful over the past several years. PACE programs have rapidly expanded across the United States, and now 19 states actively offer PACE financing for building improvements.
DC United is setting the PACE
Here in the region, the Mid-Atlantic PACE Alliance is promoting the program in DC, Maryland, and Virginia. In fact, the District of Columbia’s Department of Energy and Environment’s DC PACE program recently made headlines when the DC. United soccer team used $25 million of DC PACE financing for Audi Field, a 20,000-seat soccer stadium that is slated to open in 2018. As of September 2017, the project was the nation’s largest single financing of a PACE project.
DC PACE worked with DC United to put together a creative financial package that enhances money-saving green measures, including water, stormwater, energy efficiency, and solar energy systems. DC PACE unlocked additional funds to green the stadium to LEED Gold standards by incorporating a 884 kW solar system and LED field lighting, as well as aggressive stormwater management measures including bio-retention areas in the plaza around the stadium, multiple stormwater basins, and 7,000 square feet of green roof.
The PACE-funded measures used in this project should reduce stadium energy use by 25 percent, cut CO2 emissions by 820 metric tons per year (equivalent to taking 173 cars off the road), and retain 55,000 cubic feet of stormwater on site (enough to fill the Washington Monument more than twice).
What’s in it for building owners?
PACE assessments are typically structured so that annual savings on electricity, water, and maintenance bills are greater than annual payments, making projects cash-flow positive from day one. The secure repayment mechanism under PACE allows a wide range of commercial and nonprofit clients to access financing, with terms of up to 20 years (longer than typical bank loans.)
PACE assessments attach to the property and transfer to the new owner if the property is sold, allowing building owners to immediately benefit from building upgrades even if they plan to move. For commercial building owners, the PACE note may also be considered off balance sheet, preserving debt capacity.
It’s not just large projects that can benefit from DC PACE. Multi-family real estate, including rental, co-ops and certain condominium properties are also eligible. Any commercial, institutional, or industrial real estate–including for non-profit owners who may not currently pay real estate taxes–can potentially qualify.
DC PACE is boosting solar and green jobs
This year the DC PACE program had a record-setting summer, with $4.1 million in projects in July and August. The eight recent closings included four multifamily housing complexes, a church, a brewery, and a charter school. To date, over $34 million has been financed through DC PACE, making it the third-largest commercial PACE program in the US and the first in per-capita commercial PACE financing nationwide. However, there remains much more work to be done in the District, which still has hundreds of large energy inefficient properties.
Solar energy systems have been particularly popular under DC PACE, as the District is one of the most lucrative markets in the country for solar installations. DC PACE can also finance measures that are substantially related to or necessary for the installation of energy and water conservation measures (e.g. a new roof to support a solar system), as well as both hard and soft costs such as initial energy audits and engineering.
Financing green improvements in the built environment also helps to expand green jobs in the region. The DC PACE program has 35 registered service providers in the metropolitan area that are trained to implement projects.
Finally, these projects bring direct environmental benefits to the region. According Urban Ingenuity's calculations, PACE-funded efficiency and renewable projects save an estimated 2.3 million kWh of electricity and offset 2600 tons of CO2–making greater Washington a greener Washington.
GGWash readers: What do you think about PACE funding? Would you consider using it?