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Quickening PACE of Commercial Energy Upgrades

Posted By Eric Paul, Thursday, May 27, 2010
Updated: Tuesday, June 1, 2010

Commercial uptake of Property Assessed Clean Energy (PACE) financing is set for dramatic growth. A Johnson Controls study estimates that today's nascent U.S. commercial PACE market could represent around $18 billion each year. 

The idea behind PACE is simple: financing energy improvements that save money by recognizing that they save money and are part of the property they improve. PACE programs provide real estate owners a loan for energy upgrades which is paid back through property taxes over a five to twenty year period.

The idea got its start in United States municipalities in Colorado and California, has spread to other locales and now has the support of about 20 states, in part with the help of a statement issued last fall by the White House. Starting with residential energy efficiency retrofits, the market is expanding to include other technologies, including solar power, and commercial real estate, including large projects. How far the model will spread to other countries and how deeply it will affect the business marketplace is today an open question.

That was one of the conclusions of a lively webcast teleconference we held recently called "PACE Funding: Energy Market Breakthrough?” Attendees came from government, finance, manufacturing and energy project development, dialing in from three continents and several U.S. states.

The main speaker was Cisco DeVries, who helped develop the first program in California and is now President of Renewable Funding, which is working with organizations around the U.S. to implement programs. David Gralnik, Senior Vice President of Renewable Energy at Jones Lang LaSalle, provided a perspective on opportunities and barriers for PACE financing in commercial real estate—including commentary on a controversial stance taken by the mortgage organizations Fannie Mae and Freddie Mac.

Dave Gralink touched briefly on a PACE-funded large commercial energy retrofit at a luxury hotel in San Francisco. We’re seeing other commercial projects take place in locations where PACE programs have been in place for some time. For example, just north of San Francisco, a 1,000‐square‐foot solar thermal system was financed by the PACE-style Sonoma County Energy Efficiency Program at a winery. It is expected to save the business $95,000 in natural gas costs each year. Solar thermal can have a simple payback in just a few years, but financing the initial cost means that the return on investment is immediate.

Further information and full access to the discussion and presentation audio, visual and presentation files are available online at:

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