It’s time that Michigan business and industry leaders learn a new acronym — PACE — for Property Assessed Clean Energy, an energy finance program that helps qualifying businesses increase energy efficiency and create a positive cash flow from day one.
The Energy Alliance Group (EAG) of Michigan, with offices in Ann Arbor and Grand Rapids, can help companies navigate the entire process, from start to energy-saving finish. EAG is committed to reducing costs and improving profits through green technologies and services.
Recently, EAG of North America, the parent company of EAG of Michigan, was listed as a PACENow PACE service provider along with other national PACE market leaders. PACENow is a non-profit organization formed in 2008 to encourage energy efficiency and promote PACE by providing information and resources to PACE stakeholders, including governments, businesses, service providers, labor and trade organizations, environmental groups and individuals nationwide.
“PACE is a great finance program that makes it affordable for existing businesses to make energy-efficient renovations and save money. It’s just win-win, all the way around. We need to get the word out, so companies can take advantage of this,” says Scott Ringlein, CEO of EAG of Michigan.
Two PACE programs are active in Michigan — a large statewide program called Lean and Green Michigan, a private-public partnership leveraging a market-based approach to finance, and a smaller program created by the city of Ann Arbor. Earlier this year, Washtenaw County commissioners voted to make the entire county a PACE district, working with Lean and Green Michigan.
Here’s why business and industry leaders in Washtenaw County and other PACE districts should consider using PACE to finance their projects.
- Companies begin with an energy audit to learn how much energy they could save in all areas like lighting, heating and cooling, air compression, water usage, etc. Companies spend a lot on energy and it’s estimated that about 30 percent of that is unnecessary expense. It’s just wasted — the energy and the money to pay for it.
- The company then determines what it can do to improve energy through new equipment, systems, renewable energy etc. EAG figures the installation costs, but also provides a 20-year life cycle cost analysis and calculates the energy savings, maintenance expense, utility costs, incentives and expected usable life of the equipment/improvements so the business owners have a complete long-term picture.
- A Lean and Green Michigan PACE finance application is completed. It helps if the business owns the property (or has an agreeable landlord) and holds some equity in the property. If there’s a mortgage, the mortgage lender is asked to consent to the plan. Lean and Green Michigan helps secure funding, from banks or other funding sources, sometimes even the bank that holds the mortgage on the property.
- Typically there is no down payment on the project. Building owners won’t pay short-tern loans or cash for a project that has a longer return on investment. On PACE-funded projects, companies must save more money than they pay in semi-annual special assessment payment (it’s paid with summer and winter faxes but is not a tax, just a long-term way to replay the loan. The length of the special assessment period varies depending the project size and expected life of the improvements..
- The contractor guarantees the energy savings on all projects of $250,000 and up.
- If the property is sold, the special assessment goes with the property. If the owner defaults on the special assessment, the county can start foreclosure on the property.
Currently, through Lean & Green Michigan, PACE districts have been created in eight Michigan counties, including Eaton, Grand Traverse, Ingham, Huron, Macomb, Saginaw, Washtenaw and Wayne, (with other counties considering the option) and three cities, Rochester Hills, Southfield and Royal Oak.
To learn more about PACE or to learn how to bring PACE to your area, visit the Energy Alliance Group of Michigan website, www.energyalliancegroup.org, or the Lean and Green Michigan site, www.leanandgreenmi.com.
“Since PACE is available in 31 states and Washington DC, we believe PACE financing could help many businesses update their facilities, with a positive cash flow from the beginning of the improvements,” Ringlein added.