After being eclipsed by residential property-assessed clean energy financing in 2014, commercial PACE projects lined up considerable funding in 2015, and not just in California.
The Connecticut Green Bank just announced that Hannon Armstrong will provide up to $100 million for commercial PACE projects through the Green Bank’s C-PACE program.
PACE programs allow investments in water- and energy-efficiency retrofits and distributed renewable generation to be paid back through property taxes, which lowers the risk for both lenders and owners and can potentially open up a far larger swath of the energy-efficiency market.
The Connecticut Green Bank has been a leader in commercial PACE. Eighteen months ago, it was the first entity to securitize commercial energy efficiency loans. It has closed about $50 million in C-PACE projects and currently has about $50 million more in the pipeline.
Connecticut is also a leader in the size of commercial projects. CleanFund recently closed the largest commercial PACE project at more than $8 million to renovate State House Square, a class A office space in Hartford. The project included new chillers, natural-gas boilers, steam boilers and a heat exchanger.
In the U.S., there is a total of about $190 million in completed commercial PACE projects.
This year has seen an injection of cash into financing future projects, which now total more than $1 billion for committed commercial PACE financing, according to PACENow. In spring, CleanFund closed $60 million in financing for commercial PACE. In September, PACE Equity announced $200 million for new financing for commercial PACE in various cities in California, as well as Texas and Michigan.
In October, ReNewAll, a California financing company, announced $300 million for clean-energy projects for members of the National Electrical Contractors Association, including those financed through PACE, as well as leases and power-purchase agreements. New York also lined up $75 million from Bank of America Merrill Lynch for financing through Energy Improvement Corporation, which is the development corporation that runs Energize NY.
The increasing funds for commercial PACE are a fraction of the residential PACE total, which has passed the $1 billion mark in completed projects in 2015, almost all of which was deployed by Renovate America’s HERO program in California.
It is not just commercial programs that are growing beyond California. Residential PACE is poised to do so as well in 2016. In October, the Florida Supreme Court removed a barrier that will allow PACE to expand across the state, and Florida could become the second-largest state for residential PACE.
Earlier this year, the White House established new PACE guidelines through the Federal Housing Administration that should also help other states scale up residential PACE.
Not only is there increased guidance from the federal level that will help unlock PACE nationwide, but there is also an emerging body of evidence that suggests PACE does not put lenders at risk.
All of the momentum and activity in this domain, including a few more states that passed or amended PACE legislation in 2015, suggests that 2016 could finally be the year that PACE financing scales up significantly beyond a handful of key states.