The facility supervisor leaned over to me and whispered “energy efficiency is a great goal but how do you pay for it?” He was asking the question during a presentation we were listening to discussing the many approaches for reducing wasted energy in commercial buildings.
During a break I attempted to answer the question when I asked if he was aware of Property Assessed Clean Energy financing or PACE as it is often referred to (see VIDEO). He admitted ignorance of the financing program and wondered what advantage PACE had over traditional bank or construction loans. Our break was almost over so all I could do was quickly list four advantages of PACE:
- Energy and water consumption savings must be greater than the entire cost of the project including legal and financing. The project must be cash flow positive
- No capital required – 100% financing for energy saving projects instead of the typical 60 – 80% for commercial loans
- The loan is repaid via a special property tax assessment – the same system used for streets, sewers and other improvements
- Long term loans at a fixed interest rate for up to 20 years – commercial loans are 10 years or less
His next question was once again whispered while the speaker resumed the presentation from the podium – “Is it available in Grand Rapids?” Sadly my response was a hushed “No!”
Hopefully that’s about to change!
PACE Requires County Approval
While PACE was created by Michigan statute in 2010, individual counties or municipalities must approve the use of their property tax system for repayment of PACE financing. Because of limited knowledge about PACE – especially why it’s a preferred financing option versus commercial loans and the resultant impact it can have on energy and water efficiency projects – or a lack of understanding who is ultimately at risk for repaying the loan (which is not the county or municipality), many local government decision makers have preferred to take a very cautious approach and wait for an outpouring of support from their constituents before taking action.
Unfortunately this creates a chicken or the egg scenario. If PACE financing is not available in a given county or municipality, it’s safe to assume the vast majority of property owners are unaware of it. How realistic is it then to expect these property owners to lobby their government officials to establish the requisite PACE district?
Fortunately a growing number of people are now learning about PACE from the many other counties and municipalities in Michigan who have already adopted the program. A large coalition of interested groups and individuals are now coming together to raise the awareness of PACE and encourage the approval of this energy friendly financing in West Michigan.
One organization that has taken the lead on the awareness strategy is the West Michigan Environmental Action Council (WMEAC). WMEAC has launched a website, a social media campaign and a forthcoming press release. Their goal is to inform business leaders, property developers and owners about the energy saving opportunities that result from using PACE financing and add them to an increasingly large list of constituents desiring this option. WMEAC already has a list of projects awaiting PACE, and they want to add these individuals to that list and ultimately present it to government decision makers to foster the action necessary to approve the financing.
“This week, owners and operators of more than 60 downtown buildings established Grand Rapids 2030 District, joining 11 other cities focused on reducing energy use, water use..” The Grand Rapids Business Journal
In late December 2015 the Grand Rapids 2030 district was established. The stated goal of the district is to dramatically reduce the collective waste of energy and water in the commercial and industrial properties that lie within the Grand Rapids downtown area by the year 2030.
While the goal of energy efficiency is admirable, the question asked about how to pay for it must be answered for those goals to be met. Property Assessed Clean Energy was created specifically to answer that question and hopefully West Michigan counties will be adopting PACE soon!
Do you have a project in West Michigan you would like to consider for PACE financing? Please contact Nicholas Occhipinti at WMEAC: firstname.lastname@example.org, 616-451-3051 ext. 23, so you can be added to the voices requesting PACE approval in West Michigan!
If you want to learn more about PACE consider attending the upcoming LIVE event on February 16, 2016.