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California Bond Program 'Sets the PACE' for Green Retrofits to Commercial Sites
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September 20, 2012

California Bond Program 'Sets the PACE' for Green Retrofits to Commercial Sites

By Cheryl Kaften
TMCnet Contributor

California is launching the nation’s largest PACE (Property Assessed Clean Energy (News - Alert)) municipal bond financing program – with participation from 14 counties and 126 cities in the Golden State. Called CaliforniaFIRST, the initiative will enable commercial property owners to retrofit their facilities to make renewable energy upgrades and to enhance the efficiency of their energy and water systems.

 Under the new PACE program, commercial property owners would borrow money from the government to pay for structural improvements. They would then repay the loan over 15 to 20 years through a special assessment added to their annual property-tax bills.

Local governments would get the funding by selling municipal bonds to private investors.CaliforniaFIRST, a program of the California Statewide Communities Development Authority (CSCDA), will be administered by Oakland-based Renewable Funding, which first piloted a similar plan in 2008 for homeowners living in Berkeley.  Although the promising residential experiment ran into regulatory headwinds in 2010, commercial PACE programs have since been launched in such diverse local jurisdictions as San Francisco, Los Angeles County and Washington, D.C.

The CaliforniaFIRST program is the first multi-jurisdictional program of its kind to be essentially statewide in scale.

According to program managers, there is huge potential for energy and cost savings in the commercial building market. U.S. Department of Energy researchers estimate that if all U.S. businesses and institutions conducted cost-effective upgrades, they could reduce their average energy use by 25 percent.

The total cost of this work would be more than $100 billion – which would be offset as a result of lower energy bills.

“I’d like to thank CaliforniaFIRST for making this new financing tool available to San Jose commercial property owners,” said San Jose Mayor Chuck Reed. “By encouraging energy efficiency upgrades, this program will help lower owners’ utility bills, support green jobs, and reduce greenhouse gas emissions.” 

Image via Shutterstock

 “CaliforniaFIRST’s approach has potential to promote energy efficiency retrofits of commercial properties and maintain lien security for mortgage lenders,” said Wayne Seaton, managing director of Wells Fargo’s (News - Alert) Sustainable Public Infrastructure group. “Wells Fargo’s environmental is cultivated in part from an appreciation of the ways in which we can help our clients and our communities achieve environmental goals.”

Numerous studies, including the Johnson Controls annual Energy Efficiency Indicator, have pointed to the lack of attractive financing options as one of the key barriers that prevent owners from making deep energy efficiency upgrades to their buildings. With the CaliforniaFIRST program, many people view the state of California as the area with the greatest potential to unlock the promising energy efficiency market.

“Building owners are very interested in saving money and energy,” said Beau Engman, vice president of Commercial Energy Solutions at Milwaukee-based Johnson Controls. “What has been lacking up until now was affordable upfront capital to do the work.

We see PACE as a promising means of financing deep commercial energy efficiency upgrades.”

In addition to traditional banks such as Wells Fargo, a number of innovative financial institutions are active in the PACE market. San Rafael-based Clean Fund, for example, has financed PACE retrofits in California and Minnesota.

“PACE financing has the potential not only to save energy and money, but to create nearly 25,000 jobs in California,” said Clean Fund CEO John Kinney. “Clean Fund is excited to work in partnership with local governments throughout the state to offer low-cost capital to help commercial property owners finance clean energy upgrades on their buildings.”

“Commercial PACE gives businesses a great option for pursuing energy efficiency projects that may have previously been out of reach,” said San Diego County Supervisor Dianne Jacob. “The county’s partnership with CaliforniaFIRST provides a mechanism for participants to start spending less money on energy bills and more back into the business.” 

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Edited by Braden Becker

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