Residential or commercial property assessed tidy energy (PACE) is a funding tool that enables residential or commercial property owners to finance the in advance expense for qualified energy, water, strength, and public benefit tasks with funding through a voluntary assessment on the residential or commercial property tax expense. Commercial PACE (C-PACE) programs are the most widespread type of PACE policy and program in the United States and are the focus of this profile.

Green banks and third-party investors generally provide the capital for PACE tasks. Regardless of the financier, the regional federal government typically functions as the payment collector and remitter1. Utility cost savings or profits from eco-friendly energy might help the owner cover the cost of the evaluation, and a residential or commercial property lien secures the investment if there is a foreclosure. Like other evaluations collected as residential or commercial property tax, in the event of foreclosure, any unpaid payments associated with the PACE lien take priority over the mortgage and other loans. States and regional federal governments develop the legal, regulatory, and procedural structure for PACE and work with specialized program administrators and finance suppliers to execute PACE programs, with utilities assisting to promote this funding technique to their consumers.

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 strength upgrade. The investments are then repaid over the helpful life of the installed devices. The longer repayment duration - and lower annual or semi-annual payments - can make upgrades more cost effective for residential or commercial property owners. The evaluation sticks with the residential or commercial property in the occasion of a sale (assuming the purchaser agrees to the transfer).2 Therefore, if the residential or commercial property is offered, the buyer can presume the PACE payments and the gain from the upgrades. If the purchaser does not agree to a transfer, the seller might need to settle the impressive quantity of the PACE evaluation. Because residential or commercial property taxes have high rates of payment, there may be lower rate of interest, longer loan terms, or a combination of the two. PACE rate of interest are normally in between 5% and 10% of the total financed amount and permit versatile payback regards to approximately twenty years.3

C-PACE programs may offer financing for industrial projects such as multifamily homes, industrial residential or commercial properties, industrial buildings, or nonprofit residential or commercial properties. Programs may differ based upon the governmental sponsor (statewide vs. local programs), funding structures, and qualified procedures.4 As of 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 commercial tasks as of November 2022.6

Some concerns or barriers that regional federal governments have dealt with relating to C-PACE programs include uncertainty about the possibility of residential or commercial property tax foreclosures and unpredictability about the personnel labor commitment for program administration. A resource by the Lawrence Berkeley National Laboratory (LBNL) supplies info for local governments on these barriers.7 For example, they find that defaults and tax foreclosures have actually happened very rarely to date, but that delinquencies (i.e., late payments) do occur. The LBNL resource also suggests that the uncertainty regarding the quantity of personnel labor required to examine and examine task propositions can be another barrier to the execution of C-PACE programs.8

Just a few states have Residential PACE (R-PACE) since 2022, including California, Florida, Missouri, and Ohio. Most R-PACE programs, which usually cover single-family homes, are administered by non-governmental, 3rd celebrations that supply private capital to money the property owners' energy and strength enhancements.9 State and city governments may also administer a range of assessment-based funding programs that are very similar to R-PACE programs, although the eligible enhancements are normally limited to drinking water and septic tanks.10 Consumer advocates have expressed a series of concerns over R-PACE consisting of high tax costs and the danger of foreclosure, concerns with refinancing or selling, and concerns with deceptive or high-pressure sales techniques by professionals.11

C-PACE financing normally shares the following key features:

- They offer upfront financing for tidy energy projects for constructing residential or commercial property owners normally in the business, multifamily, and not-for-profit sectors.

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

- They permit transferability of the assessment upon sale of the residential or commercial property.


C-PACE financing may be administered by the following entities:

State governments need to adopt making it possible for legislation permitting PACE programs within the state to authorize PACE programs at the local level. In addition, states may administer a statewide PACE financing program (e.g., MinnPACE).12.

Local federal governments need to adopt legislation authorizing legislation to produce a local PACE program following the adoption of statewide enabling legislation. Local governments might also administer their own PACE programs, however they typically function as the payment collector, as the repayments are made through residential or commercial property taxes.

Third-party administrators might engage in a contract with a federal government to handle the program. In these instances, the administrator assists in the issuance and collection of funds.


Examples from the Field

Milwaukee's C-PACE Financing Program

- The program assists business residential or commercial property owners finance energy performance, water performance, and renewable resource upgrades to their structures.

- The Milwaukee C-PACE program leverages personal capital to provide in advance funding for the improvements and gathers payments through unique charges included to residential or commercial property tax expenses, which permits funding to be repaid over time.


Minnesota PACE (MinnPACE) Program

- The Minnesota C-PACE program funds energy improvements on industrial buildings, multifamily residential or commercial properties with five or more units, and nonprofit buildings. The Saint Paul Port Authority is the primary company of C-PACE financing in Minnesota.

- Program funds can be used to acquire qualified equipment, that includes sustainable energy systems (e.g., solar, wind, geothermal), along with energy efficiency upgrades to heating, ventilation, and a/c (HVAC) systems, lighting, building envelopes, and energy management systems.

- The MinnPACE program provides repayment periods approximately 20 years at set rate of interest. Financing is restricted to 20% of the evaluated residential or commercial property worth.


CT Green Bank C-PACE Program

- The Connecticut (CT) Green Bank administers a C-PACE program that provides 100% funding for energy improvements for non-residential structures.

- Funds can be used for projects such as improved lighting, heating & cooling, insulation, including photovoltaic panels, and other upgrades.

- The CT Green Bank uses repayment periods approximately 25 years.


Program Characteristics

Here are the typical characteristics of PACE financing.

Reaching Communities and Addressing Consumer Protections

When developing a funding program, thinking about the requirements of neighborhoods early in the process can assist decisionmakers develop a detailed funding program and integrate customer protections. Decisionmakers can assess how and to what extent communities have been consisted of in the policymaking procedure for developing a financing program by thinking about the following questions:

- Have neighborhoods took part meaningfully in the policymaking process?

- Does the policy help address the effects of inequality, or does it broaden existing disparities?

- How will the policy boost or reduce economic, social, and health advantages for neighborhoods?

- Does the policy make energy more accessible and budget friendly to neighborhoods?


C-PACE can provide financing for improving the energy performance of multifamily housing, which can assist low- and moderate-income (LMI) families, particularly those in affordable housing. Uptake of C-PACE has actually been slow for multifamily structures, with most of the C-PACE funding going towards workplaces and other non-multifamily business structures.13 State lawmakers and C-PACE administrators can utilize finest practices to increase the use of C-PACE in inexpensive housing jobs such as focusing on housing jobs without federal aids, which will reduce barriers to financing. State legislators can likewise think about providing C-PACE financing through the Rental Assistance Demonstration pilot, where public housing is converted to privately owned assisted living units.14

This profile does not concentrate on R-PACE, however some states have embraced more comprehensive consumer defenses for R-PACE programs. In California, a coalition of stakeholders reached agreement on a customer security and regulative framework for R-PACE15,16,17,18 and recent Missouri legislation also looks for to strengthen consumer defenses.19,20,21,22 The mortgage banking market has actually generally opposed R-PACE due to the fact that of its senior-lien status. For example, the Federal Housing Administration (FHA) does not provide FHA-insured mortgages to homes with PACE liens.23,24

A lot of the financing programs covered in this Clean Energy Financing Toolkit for Decisionmakers resource can provide specific benefits to communities by increasing access to tidy energy (e.g., lower energy expenses, upgraded equipment, improved comfort). However, funding programs that put additional debt on consumers might place LMI homes at an increased risk if adequate consumer defenses are not in place. For instance, customers could face charges for failing to pay back program funds, including having their power shut off, adverse credit ratings, and in some instances losing their homes. Decisionmakers can carry out customer security structures to address these issues, consisting of increasing awareness, examining the applicant's ability to pay, and requiring disclosure of financing expenses. Considerations for customer protections are particular to each program.

Roles and Responsibilities

State and city governments can authorize, fund, execute, and run C-PACE financing programs. State and city governments may be accountable for determining a program administrator if the federal government is not supervising day-to-day operations. In addition, in some instances local federal governments can play a key function as the payment collector for PACE financing, as financing is repaid through the consumer's residential or commercial property taxes.25 Utilities do not play a considerable role in C-PACE financing. Other 3rd parties may provide program financing or could function as C-PACE administrators

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

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

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

- Create an action strategy with organizational goals, priorities, and constraints for executing a C-PACE program.

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

- Develop a preliminary budget plan for program administration.

- Develop customer defense policies, guidelines, and resources.

- Establish strong program administration and oversight to guarantee individuals and the community trust the program.

- Identify potential partners for funding, administration, and program management. Develop a trusted network of project investors and installation providers to ensure they use funds and services consistently and according to program guidelines.

- Weigh the program's possible economic and environmental advantages against its costs. Ensure the program is assessed every few years.


Find out more

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

- Read 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 readily 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 Local 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 enhancements.

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 restricts taking part in the R-PACE program if overall quantity of yearly residential or commercial property taxes would exceed 5% of the residential or commercial property value, provides a three-day window to cancel the contract without charge, needs the disclosure of expenses in a disaggregated way. Assembly Bill 1284 requires that the program administrator make an excellent faith effort to determine the ability-to-repay, promotes contractor oversight through increased compliance, and background checks. Senate Bill 242 requires specific documents to be provided to the borrower, including overall expenses of the lien and the essential regards to the financing.

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

20 Missouri Legislature. HB 814

21 Missouri House of Representatives. HB 697

22 House Bill 814 would need an appraisal for PACE improvements. PACE financing would not be permitted to go beyond 90% of the appraised worth of the residential or commercial property plus the worth of the PACE-financed enhancements. House Bill 697 would require the Division of Finance to perform evaluations of local clean energy advancement boards every 2 years. It would also require the disclosure of specific job information to residential or commercial property owners.

23 In 2017, the Federal Housing Administration (FHA), an office within the U.S. Department of Housing and Urban Development (HUD), announced that R-PACE locations undue stress on the Mutual Mortgage Insurance Fund and ended its practice of providing 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 city governments can function as the administrator and play a crucial role in gathering repayments, there are emerging variations where payments can be made directly to third-party financiers. Discover more from this resource from the Lawrence Berkeley National Laboratory.