One of the biggest barriers preventing building owners from committing to comprehensive energy efficiency upgrades or installing clean energy technologies is the high upfront cost. If businesses and other commercial building owners want to finance these projects, they often have difficulty accessing capital or securing a line of credit. And, even when successful, the interest rates may be too high to make the projects viable. To address these problems, the finance experts at the Connecticut Green Bank, a state-created agency, developed a commercial clean energy finance program that is as effective as it is innovative.

Providing Financing to Drive Clean Energy Investments

The Connecticut Green Bank helps qualifying commercial property owners make clean energy improvements by offering the state’s Commercial Property Assessed Clean Energy (C-PACE) program. The program was started in 2013, after legislation was passed enabling its creation and empowering the Green Bank to administer, design, and assist in financing the program. Cities and towns are able to opt in as a C-PACE municipality through an agreement with the Green Bank.

The program allows commercial property owners in participating municipalities to access financing that covers 100 percent of the upfront cost of energy efficiency and clean energy improvements. The properties must be non-residential, with the exception of multi-family dwellings of five units or more. Energy audits, construction costs, and any required verification costs can be wrapped into the C-PACE financing.

One of the key benefits of this program is that it is mandated to be cash-flow positive for the building owner. The estimated energy savings, which are measured and verified according to technical underwriting standards, must be projected to exceed the repayment charges over the term of the loan. Using the money saved by the energy improvements, the building owners repay the C-PACE financing through a “benefit” assessment on their municipal property tax bill. An accompanying lien, spanning up to two decades, is placed on the property.

C-PACE offers other benefits to building owners: as a benefit assessment repaid through the property tax bill, C-PACE is an operating expense. That means owners can finance improvements without tapping into business capital and lines of credit. With solar energy improvements, the building owner can own a PV system outright and benefit from its full value, including any tax credits and renewable energy credits (RECs).

In addition to solar projects, qualifying C-PACE upgrades include high-efficiency lighting; heating, ventilation, and air conditioning improvements and controls; windows; variable-speed drives on motors, fans, and pumps; high-efficiency boilers, chillers, furnaces, and water heating systems; fuel cells, and energy-management systems.

As Genevieve Sherman, the Green Bank’s Acting Director of Commercial and Industrial Programs, proudly observes: “C-PACE is a home run. Building owners pay no money down, realize immediate cash-flow savings, increase asset value, and retain tenants. The ability to spread payments over as many as 20 years allows deeper energy upgrades, involving multiple measures with greater benefits.”

The Program’s Impressive Results


The C-PACE program has already approved over 90 projects and has leveraged its limited public dollars to attract private investment. More than seven megawatts of clean energy have been or are in the process of being installed, and 110 Connecticut cities and towns have signed up to participate. Over 90 percent of the state’s commercial and industrial properties can access C-PACE financing and more than 200 contractors have been trained to provide energy improvements through the program.

The Connecticut Green Bank currently funds the C-PACE program off of its balance sheet, originating projects directly. However, private capital still drives the program: in May 2014, the Green Bank aggregated C-PACE projects from its balance sheet and securitized them into a bond offering. This securitization—the first ever structured for commercial PACE transactions—demonstrated the investment community’s confidence in the C-PACE program as a whole, and specifically in the program’s underwriting standards as supported by the security of the tax lien on each property. Going forward, private capital will play an even more prominent role in the program, as the Green Bank raises a private capital warehouse to use in originating projects, again with the goal of bundling into a future securitization. This strategy will provide yet more confidence to the market that C-PACE is an attractive, growing asset class, which should result in further reductions in the cost of capital and even better pricing for customers.

Bryan Garcia, president of the Connecticut Green Bank, sums things up: “In just two years, we’ve seen the securitization of C-PACE transactions and allocated more than $65 million in capital, enabling property owners to make valuable building improvements and control their energy costs. C-PACE is a sustainable model for financing clean energy upgrades in the commercial and industrial sector.”

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This blog post was originally published in the Clean Energy States Alliance (CESA)’s 2015 report “Clean Energy Champions: The Importance of State Policies and Programs.” This report provides the first-ever comprehensive look at the ways states are advancing clean energy and suggests how to further encourage clean energy growth.

This blog post was also published on Renewable Energy World.