Here Is How To Get C-PACE Financing [Ultimate Guide]


by Eric Lam - Published 1/15/2024


C-PACE financing, also known as Commercial Property Assessed Clean Energy financing, is a valuable tool for property owners looking to make energy-efficient improvements to their buildings.

Understanding the ins and outs of C-PACE is crucial for those seeking to take advantage of its benefits.

Whether you're a property owner or a professional in the real estate and energy sectors, this guide will provide essential insights and resources to help you navigate the C-PACE financing landscape with confidence.

So, let's dive into the essential details of C-PACE financing and empower you to make informed decisions for your energy efficiency projects.

Key Takeaways:

  • Understand the basics of C-PACE financing, including eligibility and how it works.
  • Learn about the types of projects that can be funded through C-PACE and the benefits of using this financing option.
  • Find out where C-PACE financing is available and how to connect with experts for additional information and resources.

Understanding C-PACE Financing

PACE (Property Assessed Clean Energy) financing is a program that enables property owners to finance energy efficiency, renewable energy, and other improvements through a voluntary assessment on their property.

This innovative financing mechanism provides property owners with the opportunity to upgrade their properties to be more energy-efficient and sustainable, without the need for upfront costs. PACE financing typically covers a wide range of improvements, including solar panel installations, HVAC system upgrades, insulation, energy-efficient windows, and more.

The primary purpose of PACE financing is to help property owners access funding for these environmentally friendly upgrades, which can lead to long-term savings on energy bills and contribute to a greener environment.

What is C-PACE?

Commercial Property Assessed Clean Energy (C-PACE) is a financing mechanism that allows commercial property owners to fund energy efficiency, renewable energy, and water conservation projects through a voluntary assessment on their property tax bill. Specifically designed for commercial, industrial, and multi-family residential properties, C-PACE enables long-term, competitive financing that can cover up to 100% of the project cost, including solar energy installations.

The unique aspect of C-PACE financing is that the loan is attached to the property rather than the borrower, making it a secure form of investment for capital providers. This is because the repayment obligation transfers to the next owner if the property is sold. Additionally, the loan terms can extend up to the expected life of the improvement (often 20-30 years), which can make annual payments manageable and often lower than the energy savings generated by the project, leading to immediate positive cash flow.

C-PACE programs are enabled through state legislation and are administered at the local level, with specifics varying by jurisdiction. The approach not only helps businesses reduce energy costs and improve property values but also supports local job creation and environmental sustainability goals.

Key benefits of C-PACE for commercial solar projects include:

  1. No Upfront Costs: Allows property owners to install solar panels and other energy improvements without upfront capital investment.
  2. Long-Term Financing: The repayment period is long, often matching the useful life of the solar installation, which spreads out the cost and minimizes annual payments.
  3. Potential to Pass Through Costs: For leased properties, owners might be able to pass through a portion of the tax assessment to tenants, who will also benefit from the reduced energy costs.
  4. Increased Property Value: Energy-efficient properties with lower operating costs are more attractive to buyers and tenants, potentially increasing property values.
  5. Positive Cash Flow: The energy savings from solar installations can exceed the annual assessment payment, resulting in a net positive cash flow.

To utilize C-PACE financing, property owners must be in a jurisdiction where a C-PACE program has been established. They typically need to work with approved contractors and have their project meet certain energy efficiency or environmental criteria set forth by the local program guidelines.

How Does C-PACE Work?

Commercial Property Assessed Clean Energy (C-PACE) financing works by providing commercial property owners with a mechanism to finance energy efficiency, renewable energy, and water conservation projects through a special assessment added to their property tax bill. This innovative financing model is designed to make energy upgrades more accessible and financially viable for commercial properties. Here's a breakdown of how C-PACE works:

  1. Legislative Framework: C-PACE programs are enabled by state legislation, which authorizes local governments to participate. Each participating local government then establishes its own C-PACE program, often in collaboration with a third-party administrator to manage the program details.
  2. Project Eligibility: Property owners interested in C-PACE financing must propose projects that qualify under their local C-PACE program's guidelines. Eligible projects typically include renewable energy installations like solar panels, energy efficiency improvements, and water conservation measures.
  3. Funding Application: Once a project is deemed eligible, the property owner applies for C-PACE financing through the program. This involves providing details about the proposed project, including cost estimates, expected energy savings, and technical specifications.
  4. Capital Providers: C-PACE programs connect property owners with private capital providers who fund the approved projects. The financing terms can be very attractive, often with low-interest rates and repayment periods that can extend up to 20-30 years, roughly matching the expected life of the improvement.
  5. Property Tax Assessment: The financing is secured through a voluntary assessment on the property's tax bill. This lien is senior to most other liens on the property, which secures the investment and makes it attractive to capital providers. The assessment is fixed and will not fluctuate like conventional loans might.
  6. Repayment: The property owner repays the financing over the agreed term through an additional line item on their property tax bill. If the property is sold, the repayment obligation can transfer to the new owner, as the assessment is tied to the property, not the individual owner.
  7. Project Implementation and Savings: Once financing is secured, the property owner can proceed with the energy improvement project. Ideally, the energy cost savings generated by the project will cover or exceed the annual assessment payment, making the project cash flow positive from the start.

C-PACE's unique approach addresses several barriers typically associated with energy upgrades, such as the high upfront cost and the hesitation to invest in long-term improvements for properties that might be sold before the benefits are fully realized. By aligning the repayment with the lifecycle of the improvement and tying the obligation to the property tax bill, C-PACE makes sustainable investments more feasible and attractive for commercial property owners.

How Do You Qualify For C-PACE

Qualifying for Commercial Property Assessed Clean Energy (C-PACE) financing requires meeting specific eligibility criteria that vary by location, as the program is enabled by state legislation but administered at the local level. Firstly, the property in question must be of an eligible type, which typically includes commercial, industrial, multi-family residential properties with five or more units, and sometimes non-profit and religious institutions. Importantly, the property must be located within a municipality or county that participates in a C-PACE program, as not all areas within states that have enabled C-PACE legislation offer the program. The intended project must focus on energy efficiency improvements, renewable energy installations, or water conservation measures, aligning with the energy savings or environmental criteria defined by the local C-PACE program.

Additionally, the applicant must either own the property or have explicit consent from the owner to carry out the proposed upgrades. In many cases, securing approval from existing mortgage lenders is also necessary because C-PACE financing results in a senior lien on the property tax bill, which could affect the lenders' interests. Lastly, demonstrating financial health is often a requirement to ensure the property owner can manage the additional assessment on their property tax bill. This holistic set of criteria ensures that C-PACE financing supports impactful energy and water projects that are financially viable and beneficial for both property owners and the environment.

What Are The Steps To Apply For C-PACE?

Applying for Commercial Property Assessed Clean Energy (C-PACE) financing involves a structured process that can vary slightly by jurisdiction, given the program's local administration. However, the core steps to apply for C-PACE financing generally include:

  1. Confirm Eligibility: The first step is to verify that your property is located in an area with an active C-PACE program and that your proposed project meets the program’s criteria for energy efficiency, renewable energy, or water conservation improvements.
  2. Project Development: Develop a detailed project plan, including the selection of energy-efficient technologies or renewable energy systems you intend to install. This plan often requires conducting an energy audit or feasibility study to identify the most beneficial improvements and to project the energy savings or production the project will achieve.
  3. Select a C-PACE Provider: Identify and choose a C-PACE capital provider or a program administrator in your area. This could involve soliciting proposals from multiple providers to find the best financing terms.
  4. Application Submission: Complete and submit the C-PACE financing application through the selected provider. This application will require detailed information about the property, the owner, the proposed project, and financial documents to demonstrate the property owner’s ability to repay the financing.
  5. Obtain Consent from Mortgage Lender(s): Since C-PACE financing creates a lien on the property, it's often necessary to obtain consent from any existing mortgage lenders. This step is crucial as it ensures that lenders are aware of and agree to the senior lien status of the C-PACE assessment.
  6. Approval and Closing: Once the application is submitted and all necessary consents are obtained, the C-PACE provider will review the application. If approved, the property owner and the C-PACE provider will proceed to close the financing, which includes signing the agreement and setting the terms for repayment through the property’s tax bill.
  7. Project Implementation: With financing in place, the property owner can begin the implementation of the energy efficiency or renewable energy project. This typically involves hiring contractors to install the improvements.
  8. Repayment: Repayment of the C-PACE financing begins as agreed, with payments made through an additional assessment on the property’s tax bill. These payments are typically structured to align with the useful life of the installed improvements and can be transferred to new owners if the property is sold.

Throughout this process, it's advisable to work closely with a C-PACE program representative or a financial advisor to ensure that all steps are completed correctly and that the project meets local program guidelines and requirements.

Frequently Asked Questions

What is c-pace financing?

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

How does c-pace financing work?

C-PACE financing is repaid through a voluntary assessment on the property owner's tax bill, which allows for long-term financing at competitive interest rates. The assessment is tied to the property, not the owner, and is transferred to the new owner if the property is sold.

Who is eligible for c-pace financing?

Eligible properties include commercial, industrial, and non-profit buildings that are located in a state or municipality that has an active C-PACE program. The property must also meet certain requirements for energy efficiency and renewable energy projects.

What types of projects can be financed with c-pace financing?

C-PACE financing can be used for a variety of energy efficiency and renewable energy projects, including HVAC upgrades, lighting improvements, solar panel installations, and water conservation measures. These projects must meet certain energy savings and cost-effectiveness criteria.

How can I apply for c-pace financing?

To apply for c-pace financing, you will need to contact your local C-PACE program administrator. They will guide you through the application process and help you determine if your project is eligible for financing.

Is c-pace financing available in all states?

No, c-pace financing is not available in all states. Currently, 33 states and the District of Columbia have active C-PACE programs. However, the number of states offering C-PACE financing is constantly growing, so it is important to check with your local program administrator for the most up-to-date information.