Does energy efficiency really pay for itself?
We have been hearing for years that it can, and now there is a financing tool to make it happen.
Property Assessed Clean Energy (PACE) is a new way for property owners to pay for energy efficiency upgrades, on-site renewable energy, and water conservation measures without incurring any upfront cost. PACE loans typically have longer terms — typically ranging from 15 to 20 years at a fixed rate. Longer terms mean the borrower’s loan payments are lower than what the property owner is saving from the energy project – generating immediate and lasting positive cash flow. Businesses with average combined monthly electric, gas, and water costs of at least $5,000 are excellent candidates; $500,000 – the higher the bill the better the project!
Before any of this can happen, Kent County needs to let it happen. This new financing tool is possible because local governments that establish a PACE program allow the PACE loan to be treated as a special assessment property tax. In other words, the debt is attached to the property rather than the owner, offering benefits that other types of financing cannot provide. For example, upon the sale of a PACE project property, subsequent owners pick up the remaining PACE payments while also reaping the benefit of low energy costs. This makes PACE an excellent choice for businesses who want to install energy upgrades, but aren’t sure if they will be in the same property for the long term.
The bottom line is that PACE allows businesses to capture energy savings from measures such as insulation, refrigeration, HVAC, lighting, windows, doors, roofs, boilers, pumps, solar, geothermal, and other new or retrofit energy upgrade projects in a way that makes financial sense. PACE is truly a win-win-win for all parties involved: business owners experience positive cash flow through long-term financing and capitalizing on energy saving opportunities; local governments create a business-friendly environment; contractors have the opportunity to complete more and bigger projects; and lenders have an avenue for safe, long-term investments.
To date, 25 local governments across both peninsulas have established a local PACE program by joining Lean & Green Michigan, Michigan’s statewide PACE program. For a complete list, visit www.leanandgreenmi.com.