Property Assessed Clean Energy (PACE): How It Works for Commercial Property Owners
Updated: Mar 28, 2019
PACE Financing with Andy Holzhauser
Donovan Energy takes pride in being ahead of the curve in their ability to bring the best in technology and financing solutions to Cincinnati. In Donovan Energy’s newest video series, members of the senior leadership team discuss their areas of expertise and explain how the innovative energy solutions they offer benefit businesses in Cincinnati and beyond.
In this month’s episode, Donovan Energy Partner and Chief Financial Officer, Andy Holzhauser, explains Property Assessed Clean Energy (PACE) financing. Donovan Energy is the only Cincinnati-based company to directly deliver PACE financing within the Cincinnati area, which has been around for over a decade and done over $5 Billion in deals nation-wide. Below, Andy offers insights on what PACE is, how it works, and who it benefits.
What Is PACE?
PACE (Property Assessed Clean Energy) financing is private capital invested into private buildings to finance energy efficient updates and renewable energy installations, saving commercial property owners money on their monthly energy expenses. It is not treated as debt and is different than traditional financing from banks; PACE is repaid through voluntary increases in property tax, is non-recourse, and give building owners access to capital so they may re-invest in their business.
Who Does It Benefit?
Since PACE financing helps reduce operating expenses, it can be highly beneficial for building owners looking to free up capital to re-invest back into their organizations. We understand that hiring the top talent, opening new offices, and otherwise growing your business is your priority, as it should be; energy efficiency and the associated cost savings are our priority as an energy partner.
How Does It Work?
To explain it simply, PACE works similarly to a car lease. Instead of a hefty down payment on a new car, leasing provides people with the opportunity to have their transportation needs met, but with less maintenance and cost worries. PACE offers a similar benefit for building owners, who have the ability to accept capital from a third party to handle energy updates and free up their own capital.
Similar to how car maintenance can be complex for those who aren’t mechanics, energy is a vast industry with a lot of complexities. At Donovan Energy, we are engrossed in the industry every day, so we know what changes to make to reduce monthly spending on gas and electric bills, and which vendors to go to for energy upgrades. We consider ourselves an extension of your team, and we are dedicated to saving you money and developing cost effective energy upgrades to your building.
What Can It Do for Your Building?
Whether you’re constructing a new building or upgrading an older one, PACE financing is available to make the necessary energy efficiency enhancements. PACE covers a wide variety of upgrades including lighting, heating and cooling systems, elevator repair or replacements, solar and geothermal opportunities, the envelope of a building (which includes the windows, roof, and insulation), and even electric vehicle charging stations.
What Makes PACE Financing Different From other Options?
While PACE provides property owners with funds to make clean energy upgrades to their property, it is different from a standard business loan or construction financing. Here are a few main differences and advantages:
When you make an energy upgrade like installing solar panels or LED light bulbs, the business immediately receives the financial benefits without having to pay anything upfront. The savings in electric and maintenance throughout the year is often greater than the annual increase in property taxes. Therefore, you will benefit from the net gains of the investment.
PACE financing is non-recourse capital, thus the building owner(s) are not asked to make personal guarantees or assign other assets to back up the PACE investment.
Property owners pay the PACE funds back once a year for a fixed term through an assessment that is added to the property tax bill which means that the repayments can be passed through tenants as they are often the beneficiaries of energy upgrades.
PACE financing is attached to the property, so if you sell the property before the energy upgrade is paid off, the rest of the money owed transfer to the new property owner.
Why Do We Support PACE?
Donovan Energy is proud to be the only locally based business in Cincinnati to directly offer PACE financing. It isn’t always easy to be at the forefront of energy solutions, but we have a commitment to push the envelope and add value to our clients, and are excited for PACE to benefit more buildings in the area and beyond.
Andy has been working with PACE Financing for the past decade, almost since its inception. In addition to his role at Donovan, Andy serves on the Board of Directors of PACENation, the national trade association focused on developing the Property Assessed Clean Energy (PACE) financing marketplace. He is the Board President of Green Umbrella and an alumnus of the Cincinnati USA Regional Chamber’s C-Change and Leadership Cincinnati programs.