Understanding the Benefits of C-PACE

8/2/2023

Commercial Property Assessed Clean Energy (C-PACE) is an alternative financing mechanism that enables property owners to access low-cost, long-term, fixed-rate capital to make energy related deferred maintenance upgrades in their existing buildings, support new construction costs, and make renewable energy accessible and cost-effective.  

C-PACE is a public-private financing program enabled by state legislation, which classifies clean energy upgrades as a public benefit – the same way in which other public benefits, such as new roads, streetlights, and water mains are paid – allowing these measures to be financed with no money down and then repaid as a benefit assessment on the property tax bill. The term and amortization of the financing match the expected useful life of the improvements, or new construction infrastructure, which is typically around 20 to 30 years. The assessment transfers upon the sale of the property, and the tax assessment structure may allow pass-through on triple-net (NNN) leases and room surcharges.  

While facilitating sustainability efforts, and enabling facilities managers to ensure compliance with BPS (Building Performance Standards), the program reduces property owners’ annual costs and provides significantly better financing terms than the available alternatives to fund construction projects. C-PACE can be used to preserve capital expenditure to replace aging equipment - saving energy, which results in lower operating expenses, thereby increasing net operating income (NOI) and the value of the property. 

Accessing attractive financing is a hurdle facilities managers face when considering clean energy projects. Energy efficiency measures can come with a large upfront cost, but C-PACE removes the need for these measures to be value-engineered out and makes them financially feasible because of its upfront, low-cost financing with fixed rates and long terms. 

Eligible Measures  

C-PACE financing is a flexible financing tool that can be used toward almost any measure that impacts the energy or water performance of a property. This includes hard, soft, and any associated costs connected to mechanical, electrical, plumbing, building envelope improvements and renewable energy sources. Examples of C-PACE-eligible measures include solar panels, HVAC, LED lighting, facility controls, heat pumps, low flow water fixtures, building envelope - insulation, roofing, windows, doors and much more – all of which improve the overall functioning and efficiency of a building. 

By providing owners and developers access to one of the least expensive forms of capital to finance these key measures, the C-PACE program is enabling more commercial buildings to employ energy efficiency – which is of tremendous benefit for the facilities teams responsible for a commercial property. 

Energy-efficient measures, in particular the HVAC systems, also provide improved air circulation, which provides a healthier environment for tenants and staff. Energy efficient lighting is also known to improve productivity and provide mood benefits.  

Project eligibility 

In most states, C-PACE capital can be used for any non-residential property – this includes commercial office, industrial, retail, hotels, private schools, health care and senior living facilities, agriculture, nonprofits, and multifamily properties that consist of five or more units. 

Facilities managers play a critical role in ensuring the smooth and efficient operation of commercial properties – from overseeing maintenance and repairs to managing a building’s energy consumption. C-PACE has the potential to be a groundbreaking solution that can alleviate the challenges faced by facilities managers, while simultaneously achieving sustainability goals. 

Jessica Bailey is President & CEO of Nuveen Green Capital. She is known as one of the architects of the nation’s first successful C-PACE programs. Bailey is co-founder of startup Greenworks Lending, helping grow C-PACE into a national lending platform, fueled by the mission to reduce carbon in the built environment. In 2021, Jessica oversaw her firm’s acquisition by Nuveen and subsequent rebrand to Nuveen Green Capital.