Businesses in Arlington County will soon have a new way to finance energy upgrades, like installing solar panels. The financing mechanism is known as Property Assessed Clean Energy financing (PACE). California launched the first PACE financing program in 2008. Since then, it has radiated to other states. Virginia enabled PACE financing in 2015, opening the door for an exciting new wave of renewable energy projects in Virginia.
The PACE model is designed to expand the accessibility of energy upgrades by creating access to low cost, long-term project financing. PACE-financed projects can include energy efficiency improvements, renewable energy systems, or a combination of the two. Water efficiency projects can also get funded through PACE. PACE financing works in the following way: a commercial building owner seeking to increase the value of their building through energy upgrades contacts their local PACE administrator, who secures financing for the project. The building owner then repays that financing over a period of multiple years through a special assessment on the owner’s property tax bill or utility bill.
The benefits of PACE are found is its long-term repayment structure, its ability to cover 100% of project costs, and the ease of payment. Whereas other forms of project financing require multiple payments to multiple parties, PACE financing recipients need only pay their existing tax or utility bill. And because PACE repayment are simply special assessments tied to the property, PACE-funded projects – and payments – are easily transferable when property ownership changes hands.
The power of PACE financing is so significant for expanding renewable energy and energy efficiency that Virginia first laid the groundwork for PACE in 2009. Original legislation enabled Virginia’s municipalities to pursue their own PACE programs. Unfortunately, holes in the legislation hampered local programs from developing for more than eight years. Finally, in 2015, legislative improvements were made, leaving cities and counties free to design and implement PACE at the local level. Fast forward to 2017, and Arlington County is poised to roll out the state’s first official PACE program.
As it currently stands, Arlington’s PACE financing will be available to any new or existing commercial building. Under the present enabling legislation, traditional commercial properties, e.g., office buildings, retail, hotels, multi-family buildings of five or more units (note: no condominiums), and non-profit properties are eligible for PACE financing.
PACE applicants will be able to specify what type of energy upgrade they want, and the Arlington PACE administrator can connect them with the necessary contractor(s) and capital providers, as needed.
Noting the difficulty of PACE administration, the County has chosen to work with a professional PACE administrator to implement their program. In 2016, Arlington ran a public bidding process The County selected Sustainable Real Estate Solutions (SRS) as its PACE administrator. Among other things, SRS will be tasked with Working together with contractors, property owners, and capital providers to arrive at viable PACE projects. The County will repayment process for all funded projects and SRS will distribute those funds to the corresponding PACE financiers.
According to Richard Dooley, Arlington’s Community Energy Coordinator, the County’s program is just a few months shy of accepting its first PACE applicants. Virginia law requires municipalities to pass a local PACE ordinance prior to launching their program. The county is in the process of arranging this ordinance, which Dooley notes is likely to be voted on late Spring/early Summer. If all goes according to plan, applicants will be able to apply for PACE financing shortly thereafter.
While some PACE programs are funded through public funds in the form of municipal bonds, Arlington’s program will be funded entirely through private money. Projects – from energy efficiency retrofits to rooftop solar – will be financed on the open capital market, drawing from private sector money, equity investors, and local and state banks. In addition to gathering and registering project contractors for the program (local solar installers, for example), Sustainable Real Estate Solutions will be also be tasked with setting the participation criteria for financiers (known as qualified capital providers, or QCPs) and bringing them on board.
As the program gets up and running later this spring, the County plans to host a series of free workshops for both contractors and QCPs interested in working on its PACE projects. Arlington aims to make its PACE program as inclusive as possible for all local contractors and QCPs by hosting these public workshops. When the dates of those meetings are made public, VA SUN will be sure to share them with our network.