Residential or commercial property assessed clean energy (PACE) is a financing tool that allows residential or commercial property owners to fund the in advance cost for qualified energy, water, resilience, and public benefit tasks with financing through a voluntary assessment on the residential or commercial property tax costs. Commercial PACE (C-PACE) programs are the most prevalent type of PACE policy and program in the United States and are the focus of this profile.

Green banks and third-party investors typically offer the capital for PACE projects. Regardless of the financier, the city government generally serves as the payment collector and remitter1. Utility expense savings or earnings from renewable resource might help the owner cover the cost of the evaluation, and a residential or commercial property lien protects the financial investment if there is a foreclosure. Like other assessments collected as residential or commercial property tax, in case of foreclosure, any past due payments associated with the PACE lien take concern over the mortgage and other loans. States and local federal governments develop the legal, regulative, and procedural framework for PACE and deal with specialized program administrators and financing companies to execute PACE programs, with energies assisting to advertise this funding technique to their clients.

One of the main advantages of PACE for residential or commercial property owners is that it can be utilized to cover 100% of the upfront cost of an energy or resilience upgrade. The investments are then repaid over the useful life of the installed devices. The longer payback period - and lower annual or semi-annual payments - can make upgrades more economical for residential or commercial property owners. The evaluation stays with the residential or commercial property in case of a sale (presuming the purchaser concurs to the transfer).2 Therefore, if the residential or commercial property is sold, the buyer can presume the PACE payments and the advantages from the upgrades. If the buyer does not accept a transfer, the seller may have to settle the outstanding amount of the PACE evaluation. Because residential or commercial property taxes have high rates of payment, there may be lower interest rates, longer loan terms, or a mix of the two. PACE rate of interest are usually in between 5% and 10% of the total financed amount and permit for flexible repayment terms of up to twenty years.3

C-PACE programs might provide financing for commercial projects such as multifamily domestic properties, industrial residential or commercial properties, industrial structures, or nonprofit residential or commercial properties. Programs might vary based upon the governmental sponsor (statewide vs. regional programs), financing structures, and qualified steps.4 Since 2022, more than 38 states plus the District of Columbia have C-PACE-enabling legislation and 30 states plus the District of Columbia have active programs.5 There has been more than $4 billion in investment in over 2,900 business jobs since November 2022.6

Some issues or barriers that city governments have dealt with relating to C-PACE programs include unpredictability about the probability of residential or commercial property tax foreclosures and uncertainty about the staff labor commitment for program administration. A resource by the Lawrence Berkeley National Laboratory (LBNL) supplies details for local governments on these barriers.7 For instance, they find that defaults and tax foreclosures have occurred really hardly ever to date, however that delinquencies (i.e., late payments) do take place. The LBNL resource also suggests that the unpredictability concerning the amount of personnel labor required to assess and examine task propositions can be another barrier to the execution of C-PACE programs.8

Only a couple of states have Residential PACE (R-PACE) since 2022, including California, Florida, Missouri, and Ohio. Most R-PACE programs, which normally cover single-family homes, are administered by non-governmental, 3rd parties that supply private capital to fund the homeowners' energy and resilience enhancements.9 State and regional governments might also administer a variety of assessment-based financing programs that are really comparable to R-PACE programs, although the eligible improvements are generally restricted to drinking water and septic systems.10 Consumer advocates have expressed a series of concerns over R-PACE consisting of high tax costs and the threat of foreclosure, concerns with refinancing or selling, and problems with misleading or high-pressure sales tactics by contractors.11

C-PACE funding usually shares the following secret functions:

- They provide in advance funding for clean energy jobs for building residential or commercial property owners normally in the commercial, multifamily, and not-for-profit sectors.

- They use residential or commercial property liens to permit consumers to pay back the financing on their residential or commercial property taxes over the long term.

- They allow transferability of the evaluation upon sale of the residential or commercial property.


C-PACE funding might be administered by the following entities:

State federal governments must embrace enabling legislation permitting PACE programs within the state to authorize PACE programs at the local level. In addition, states might administer a statewide PACE funding program (e.g., MinnPACE).12.

City governments must embrace legislation authorizing legislation to create a local PACE program following the adoption of statewide enabling legislation. Local governments may likewise administer their own PACE programs, however they often function as the payment collector, as the repayments are made through residential or commercial property taxes.

Third-party administrators may participate in a contract with a federal government to manage the program. In these instances, the administrator helps with the issuance and collection of funds.


Examples from the Field

Milwaukee's C-PACE Financing Program

- The program helps industrial residential or commercial property owners financing energy performance, water efficiency, and renewable resource upgrades to their structures.

- The Milwaukee C-PACE program leverages private capital to offer in advance financing for the improvements and collects payments through unique charges contributed to residential or commercial property tax expenses, which enables financing to be repaid in time.


Minnesota PACE (MinnPACE) Program

- The Minnesota C-PACE program funds energy enhancements on business buildings, multifamily residential or commercial properties with 5 or more systems, and not-for-profit structures. The Saint Paul Port Authority is the main service provider of C-PACE financing in Minnesota.

- Program funds can be utilized to buy eligible devices, which consists of renewable resource systems (e.g., solar, wind, geothermal), in addition to energy efficiency upgrades to heating, ventilation, and a/c (HVAC) systems, lighting, constructing envelopes, and energy management systems.

- The MinnPACE program supplies payback durations approximately twenty years at fixed rates of interest. Financing is restricted to 20% of the evaluated residential or commercial property value.


CT Green Bank C-PACE Program

- The Connecticut (CT) Green Bank administers a C-PACE program that uses 100% financing for energy improvements for non-residential buildings.

- Funds can be utilized for projects such as enhanced lighting, cooling and heating, insulation, adding photovoltaic panels, and other upgrades.

- The CT Green Bank offers payment periods up to 25 years.


Program Characteristics

Here are the common attributes of PACE financing.

Reaching Communities and Addressing Consumer Protections

When developing a financing program, considering the needs of neighborhoods early at the same time can help decisionmakers create an extensive funding program and integrate customer protections. Decisionmakers can examine how and to what degree neighborhoods have been consisted of in the policymaking process for establishing a funding program by considering the following questions:

- Have neighborhoods got involved meaningfully in the policymaking process?

- Does the policy help attend to the effects of inequality, or does it broaden existing variations?

- How will the policy increase or decrease economic, social, and health advantages for communities?

- Does the policy make energy more accessible and economical to communities?


C-PACE can supply financing for improving the energy efficiency of multifamily housing, which can assist low- and moderate-income (LMI) families, particularly those in budget-friendly housing. Uptake of C-PACE has been slow for multifamily buildings, with the majority of the C-PACE funding approaching offices and other non-multifamily commercial buildings.13 State legislators and C-PACE administrators can employ finest practices to increase making use of C-PACE in affordable housing tasks such as concentrating on housing tasks without federal aids, which will minimize barriers to financing. State legislators can also think about offering C-PACE funding through the Rental Assistance Demonstration pilot, where public housing is transformed to privately owned assisted living units.14

This profile does not focus on R-PACE, but some states have actually adopted more detailed customer protections for R-PACE programs. In California, a union of stakeholders reached agreement on a consumer protection and regulatory structure for R-PACE15,16,17,18 and recent Missouri legislation likewise seeks to reinforce consumer defenses.19,20,21,22 The mortgage banking market has usually opposed R-PACE since of its senior-lien status. For example, the Federal Housing Administration (FHA) does not offer FHA-insured mortgages to homes with PACE liens.23,24

Many of the financing programs covered in this Clean Energy Financing Toolkit for Decisionmakers resource can offer specific advantages to neighborhoods by increasing access to tidy energy (e.g., lower energy bills, upgraded equipment, improved convenience). However, financing programs that put additional debt on customers could put LMI families at an increased danger if adequate consumer defenses are not in location. For instance, customers might face charges for failing to pay back program funds, consisting of having their power turned off, negative credit ratings, and in some circumstances losing their homes. Decisionmakers can execute consumer defense frameworks to address these issues, including increasing awareness, analyzing the candidate's capability to pay, and requiring disclosure of financing costs. Considerations for consumer securities are particular to each program.

Roles and Responsibilities

State and local governments can authorize, fund, carry out, and operate C-PACE financing programs. State and city governments may be accountable for identifying a program administrator if the government is not supervising everyday operations. In addition, in some instances city governments can play a crucial function as the payment collector for PACE funding, as financing is paid back through the customer's residential or commercial property taxes.25 Utilities do not play a substantial role in C-PACE financing. Other 3rd parties might offer program funding or could work as C-PACE administrators

State and city governments should think about these steps and best practices during the style, approval, and management of a C-PACE program:

- Determine legal requirements for developing the program, consisting of resolutions, regulations, community bonding, public approval, and legislation.

- Determine the target sectors (e.g., industrial, not-for-profit, multifamily, commercial).

- Create an action strategy with organizational goals, concerns, and restraints for implementing a C-PACE program.

- Engage with key stakeholders to inform the development of the C-PACE program.

- Develop a preliminary budget plan for program administration.

- Develop customer security policies, policies, and resources.

- Establish strong program administration and oversight to ensure individuals and the neighborhood trust the program.

- Identify possible partners for financing, administration, and program management. Develop a relied on network of job financiers and setup service providers to guarantee they use funds and services regularly and according to program rules.

- Weigh the program's prospective financial and ecological advantages versus its expenses. Ensure the program is examined every few years.


Learn More

- Learn more about C-PACE from the Department of Energy.

- Learn more about C-PACE from the National Association of State Energy Officials.


References and Footnotes

1 ACEEE. 2020. "Residential Or Commercial Property Assessed Clean Energy (PACE)."

2 U.S. Department of Energy. n.d. Residential or commercial property Assessed Clean Energy Programs. Website no longer available.

3 ACEEE. 2020. "Residential Or Commercial Property Assessed Clean Energy (PACE)."

4 DOE. n.d. C-PACE.

5 PACE Nation. 2022. PACE Programs.

6 PACE Nation. 2022. PACE Market Data.

7 LBNL. 2019. Commercial PACE Financing and the Special Assessment Process: Understanding Roles and Managing Risks for Local Governments.

8 LBNL. 2019. Commercial PACE Financing and the Special Assessment Process: Understanding Roles and Managing Risks for City Governments.

9 ACEEE. 2020. "Residential Or Commercial Property Assessed Clean Energy (PACE)."

10 Sonoma County Energy Independence Program. 2022. Eligible Improvements.

11 NASEAO. 2018. Residential Residential Or Commercial Property Assessed Clean Energy (R-PACE): Key Considerations for State Energy Officials.

12 MinnPACE. n.d. Minnesota PACE Financing.

13 Energy Efficiency for All. 2018. Commercial PACE for Affordable Multifamily Housing.

14 NRDC. 2018. Can C-PACE work Financing for Multifamily Housing?

15 California Legislative Information. 2016. AB-2693 Financing requirements: residential or commercial property improvements.

16 California Legislative Information. 2008. AB-1284 California Financing Law: Residential Or Commercial Property Assessed Clean Energy Program: program administrators.

17 California Legislative Information. 2017. SB-242 Residential Or Commercial Property Assessed Clean Energy program: program administrator.

18 Assembly Bill 2693 forbids getting involved in the R-PACE program if total amount of yearly residential or commercial property taxes would exceed 5% of the residential or commercial property worth, offers a three-day window to cancel the contract without penalty, needs the disclosure of costs in a disaggregated way. Assembly Bill 1284 needs that the program administrator make an excellent faith effort to identify the ability-to-repay, promotes contractor oversight through increased compliance, and background checks. Senate Bill 242 requires specific files to be supplied to the borrower, consisting of total costs of the lien and the essential terms of the funding.

19 Gerber, C. 2021. Missouri House thinks about PACE reforms

20 Missouri Legislature. HB 814

21 Missouri Legislature. HB 697

22 House Bill 814 would need an appraisal for PACE enhancements. PACE financing would not be permitted to surpass 90% of the assessed value of the residential or commercial property plus the value of the PACE-financed improvements. House Bill 697 would require the Division of Finance to carry out evaluations of local tidy energy advancement boards every 2 years. It would likewise require the disclosure of certain project information to residential or commercial property owners.

23 In 2017, the Federal Housing Administration (FHA), a workplace within the U.S. Department of Housing and Urban Development (HUD), announced that R-PACE locations undue tension on the Mutual Mortgage Insurance Fund and ended its practice of supplying FHA-insured mortgages to homes with PACE liens.

24 U.S. Department of Housing and Urban Development. 2017. Buckley LLp. 2017. "Mortgage Letter 2017-18: Residential Or Commercial Property Assessed Clean Energy (PACE)."

25 Note that while regional federal governments can function as the administrator and play a key role in gathering repayments, there are emerging variations where payments can be made directly to third-party financiers. Learn more from this resource from the Lawrence Berkeley National Laboratory.