PACE Commercial Consortium: U.S. companies team up to bring energy upgrades to commercial properties

commercial properties, energy upgrades, retrofitsAs reported in a previous post, the non-profit Carbon War Room recently launched the PACE Commercial Consortium (PCC), a coalition of private enterprises investing in commercial PACE (Property Assessed Clean Energy) projects in the U.S.

The PCC plans to undertake a $650 million retrofit project that will offer money-saving energy efficient upgrades to commercial properties in the Miami and Sacremento areas. With residential PACE programs largely inoperative, the PCC is offering a viable solution to businesses owners hoping to take advantage of the program.

PACE in the private sector: how the PCC works

According to a recent article in the New York Times, the members of the PCC will have the exclusive right to offer energy upgrades to businesses in the targeted areas for five years, installed primarily by Ygrene Energy Fund and engineering giant Lockheed Martin. The retrofits, to include solar panels, improved insulation and energy efficient machinery, are expected to reduce energy consumption and utility bills by one third.

Barclays bank will cover the initial costs of projects through short-term loans, and insurance companies like Energi and Hannover Re will provide energy savings warranties and insurance for the retrofits.

Once the retrofits are installed, Barclays will transform the loans into long-term bonds with interest rates at 7% and sell them to private investors. Property owners will in return reimburse the cost of the upgrades through increased property taxes over five to twenty years.

Overcoming the challenges of traditional PACE programs

The PCC possesses a distinct advantage over traditional PACE programs: it only undertakes retrofit projects for commercial properties.

Until the PCC, PACE focused on private homeowners, an approach that alarmed the Federal Housing Financing Agency, the government-sponsored overseer of financial institutions like Freddie Mac and Fannie Mae. Their claim that PACE infringed on their mortgage lending practices brought most programs to a screeching halt.

With the barriers of previous PACE programs potentially removed, the PCC has the opportunity to create a real market for energy retrofits and encourage the participation of other like-minded companies. In addition to its far-reaching economic benefits, the PCC could also address the pressing need to reduce energy consumption in America’s buildings without government dollars, which may become a necessary solution if the nation fails to get its deficit under control.

Though the PCC is still finalizing contracts with Miami and Sacramento, plans for other cities, including Los Angeles and San Diego, are in the works, according to Ygrene Chairman Dennis Hunter.

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