Simple Breakdown of C-PACE Financing [Ultimate Guide]


by Eric Lam - Published 1/15/2024


C-PACE financing, also known as Commercial Property Assessed Clean Energy, offers a unique opportunity for property owners to fund energy efficiency, renewable energy, and resiliency improvements for their properties.

This innovative financing solution provides long-term, fixed-rate capital to cover the upfront costs of qualified projects, with repayment secured through a special assessment on the property.

Let's delve into the realm of C-PACE financing and discover the possibilities it holds for sustainable development and financial growth.

Key Takeaways:

  • C-PACE financing allows property owners to fund energy efficient improvements through a long-term, low-cost loan.
  • Eligible improvements include renewable energy installations, energy efficiency upgrades, and water conservation measures.
  • C-PACE financing is available for various asset classes and can be implemented in select locations through a partnership with local government agencies.

What is C-PACE Financing?

C-PACE, which stands for Commercial Property Assessed Clean Energy, is a financing structure that allows commercial, industrial, and multifamily property owners to obtain low-cost, long-term financing for energy efficiency, renewable energy, and water conservation projects.

The financing is provided by private capital providers and is repaid as a benefit assessment on the property's tax bill, which is similar to how municipalities finance improvements like sidewalks or sewers. This assessment is tied to the property rather than the property owner, meaning if the property is sold, the new owner takes over the repayment obligation.

One of the key features of C-PACE financing is that it often covers 100% of a project's hard and soft costs and can be repaid over a term of up to 20 to 30 years.

This long repayment term can result in the energy savings from the project exceeding the annual assessment payment, thereby creating a positive cash flow for property owners from day one.

C-PACE programs are enabled by state legislation and are administered at the local level. The availability and specific terms of C-PACE financing can vary widely depending on the location of the property and the local program that has been established.

What types of projects are eligible for C-PACE financing?

C-PACE financing primarily targets improvements that increase energy efficiency, water conservation, and the use of renewable energy. Eligible projects often include solar panel installations, HVAC system upgrades, improved insulation, lighting upgrades, and water-saving plumbing fixtures. New constructions can also qualify if they incorporate energy efficiency measures above certain standards.

What are the benefits of C-PACE financing compared to traditional financing methods?

C-PACE offers several advantages over traditional financing:

  • Long-term financing: Repayment terms can extend up to 20-30 years, aligned with the useful life of the improvements.
  • Competitive interest rates: Often lower than traditional loans due to the security of the repayment mechanism.
  • Non-recourse financing: The debt is tied to the property, not the property owner, reducing personal financial risk.
  • Potential to transfer with property sale: Obligations can stay with the property if it's sold, making it easier to invest in long-term improvements.
  • Immediate positive cash flow: Energy savings can exceed the annual assessment payment from the start.

How does the repayment process work, and what are the typical terms?

Repayment of C-PACE financing is made through an assessment on the property's tax bill, similar to a property tax lien. This ensures a secure repayment stream. Terms typically range from 10 to 30 years, based on the expected life of the installed improvements. Interest rates are competitive and fixed for the term, providing payment certainty.

Can C-PACE financing be combined with other incentives or grants?

Yes, C-PACE can be used in conjunction with other financial incentives such as federal tax credits, state and local grants, and utility rebate programs. This combination can further reduce the net cost of energy efficiency projects and enhance return on investment.

What is the impact of C-PACE financing on property value and saleability?

C-PACE-funded improvements can increase property value by reducing operational costs and increasing energy efficiency. However, the attached assessment might be viewed differently by potential buyers: some may value the improvements and the building's efficiency, while others may be cautious about taking on the assessment obligation. Generally, energy-efficient buildings attract more interest and command higher prices in the market.

Who is responsible for the C-PACE assessment if the property is sold?

The C-PACE assessment typically stays with the property upon sale, making the new owner responsible for continuing payments. This feature is often seen as a benefit, as the financing is directly tied to the improvements that save energy costs.

What are the steps and timeline for securing C-PACE financing?

The process involves:

  1. Project Proposal: Identify eligible improvements and potential providers.
  2. Application Submission: Apply through the local C-PACE program, including detailed project information.
  3. Approval and Financing: The C-PACE program and a capital provider approve the project and terms.
  4. Project Implementation: Commence the energy efficiency upgrades or renewable energy installations. The timeline can vary, from a few weeks to several months, depending on project complexity and local program processes.

Are there any risks or downsides to using C-PACE financing?

While C-PACE offers many benefits, there are risks to consider:

  • Senior lien status: C-PACE assessments may have seniority over existing mortgages, which can complicate refinancing or consent from mortgage holders.
  • Long-term obligation: The property is subject to a long-term lien, which may affect future financial flexibility.
  • Market perception: Some buyers or investors might be wary of properties with existing C-PACE assessments.

How does C-PACE financing affect my property taxes and tax deductions?

C-PACE assessments are added to the property tax bill, which may lead to a higher total tax payment. However, the energy cost savings often offset this increase. Additionally, the interest portion of C-PACE payments may be tax-deductible, similar to mortgage interest, providing a potential tax benefit.

IRA Implications on C-PACE Financing

The Inflation Reduction Act (IRA), enacted in August 2022, significantly impacts the renewable energy and energy efficiency landscape in the United States, with implications for Commercial Property Assessed Clean Energy (C-PACE) financing as well. While the IRA primarily focuses on broad incentives for renewable energy and energy efficiency, its provisions can enhance the attractiveness and utility of C-PACE financing for commercial property owners. Here's how:

Increased Incentives for Renewable Energy and Efficiency Projects

The IRA includes expanded tax credits for renewable energy projects (such as solar and wind) and energy efficiency improvements. This expansion can make C-PACE-financed projects more financially attractive, as property owners can potentially combine C-PACE financing with federal tax incentives to lower the net cost of their projects significantly.

Direct Pay and Transferability Options

For the first time, the IRA introduces "direct pay" and transferability options for certain tax credits, making them more accessible to a broader range of entities, including non-taxable entities like non-profits and municipal governments, which might use C-PACE financing. This means that entities that previously couldn't directly benefit from tax credits due to lack of tax liability can now receive direct payments or transfer their credits to someone else, enhancing the financial feasibility of their C-PACE projects.

Focus on Energy Efficiency and Electrification

The IRA provides substantial funding and incentives for energy efficiency upgrades and building electrification. These provisions align well with the types of projects typically financed through C-PACE, potentially increasing the demand for C-PACE as a financing tool for projects aiming to meet IRA criteria for energy efficiency and reduced emissions.

Support for Environmental Justice and Community Investment

The IRA allocates funds and incentives towards projects that benefit disadvantaged communities, including efforts to improve energy efficiency and reduce energy costs in these areas. C-PACE financing could play a role in facilitating these projects, offering a mechanism to fund improvements that align with the IRA's environmental justice goals.

Encouragement for Innovation and Adoption

By lowering the financial barriers to adopting renewable energy and making energy efficiency improvements, the IRA may encourage more commercial property owners to consider these projects. The enhanced incentives and broader eligibility criteria could lead to increased interest in C-PACE financing as a way to fund these now even more attractive investments.

While the IRA does not directly modify C-PACE programs, its provisions likely increase the attractiveness of C-PACE financing by enhancing the financial benefits of energy efficiency and renewable energy projects. This alignment could lead to greater utilization of C-PACE financing as part of the broader push towards sustainability and energy independence championed by the IRA.


C-PACE financing stands out as a transformative financial tool for commercial property owners seeking to make their properties more energy-efficient, sustainable, and resilient. By offering an innovative way to finance 100% of the costs for eligible improvements, C-PACE not only enhances the environmental performance of buildings but also boosts their economic value. The long-term, fixed-rate nature of this financing, secured through a property tax assessment, ensures that the projects are both financially feasible and beneficial from the outset, often resulting in immediate positive cash flow due to energy savings.

Moreover, the ability to combine C-PACE with other incentives further amplifies its attractiveness, reducing the overall cost of projects and accelerating the return on investment. While the assessment stays with the property if sold, transferring the benefits and obligations to the next owner, it underscores the enduring value added by energy efficiency and renewable energy upgrades.

Despite the potential challenges related to senior lien status and market perception, the advantages of C-PACE, including its positive impact on property value and saleability, generally outweigh these concerns. Property owners considering C-PACE financing must navigate the application and implementation process with due diligence, leveraging the long-term benefits while managing the risks.

As sustainability becomes increasingly paramount in the commercial real estate sector, C-PACE financing emerges as a key enabler, empowering property owners to contribute to environmental goals while reaping financial rewards. This alignment of economic and ecological interests makes C-PACE not just a financing option, but a strategic investment in the future.

Frequently Asked Questions

What is c-pace financing?

C-PACE (Commercial Property Assessed Clean Energy) financing is a program that offers long-term, fixed-rate financing for energy efficiency, renewable energy, and water conservation projects for commercial properties.

Who is eligible for c-pace financing?

Commercial property owners, including non-profits and government entities, are eligible for c-pace financing. The property must be located in a participating state or municipality and meet certain criteria set by the program.

How does c-pace financing work?

C-PACE financing provides funding for the upfront costs of energy efficiency and renewable energy projects. The funding is then repaid over a set period of time through an assessment on the property tax bill.

What types of projects can c-pace financing be used for?

C-PACE financing can be used for a variety of energy efficiency, renewable energy, and water conservation projects, such as solar panel installation, energy-efficient lighting, HVAC upgrades, and water-saving fixtures.

What are the benefits of using c-pace financing?

C-PACE financing offers several benefits, including low interest rates, long-term financing, and no upfront costs. It also helps reduce energy costs, increase property value, and promote sustainability.

Is c-pace financing available in all states?

C-PACE financing is currently available in 38 states and the District of Columbia. Each state and municipality has its own program guidelines, so it's important to check for availability and eligibility in your specific location.