U.S. Department of Energy Energy Efficiency and Renewable Energy

Choose Eligible Property Types for Property-Assessed Clean Energy Financing Program

The fifth step to launch a property-assessed clean energy (PACE) financing program involves selecting the commercial property types eligible for the program.

A commercial PACE program can cover a wide variety of property types, including office, retail, industrial, warehouse, agricultural, and multifamily (more than 4 units). A related subcategory of multifamily is affordable housing. And within each one of those broad property categories, there is wide variation in property subtypes. For example, retail includes the corner mom-and-pop store, big-box chain stores, and grocery stores. Multifamily includes a 2-story, 8-unit apartment building and a 30-story, 600-unit condo high-rise.

The mix of property types and sizes has an impact on a number of PACE program features, including:

  • Project size, complexity, and timeline
  • Amount of financing needed
  • Type of qualifying project measures relevant to the property type
  • Owner permission (e.g., multifamily may involve getting permission of some or all tenants, the homeowner association, etc.)
  • Skills and experience required to conduct an energy audit
  • Contractor requirements (e.g., licenses, certifications)
  • Software modeling and other tools used by contractors.

That mix affects how much time and effort the local government must spend designing and launching a program that addresses all of those features.

The typical commercial energy auditor and contractors will be able to handle office buildings, retail, and warehouses because they commonly encounter those building types. Larger projects, over 100,000 square feet, will appeal to energy service companies (ESCOs) that specialize in larger undertakings. ESCOs may also offer a performance guarantee to their client, which means that if the energy savings fall below the agreed-upon thresholds, the ESCO makes up the shortfall to the customer, thus reducing risk. The industrial, agricultural, and multifamily properties, however, typically require more specialized auditing and construction knowledge and experience. Therefore, it can be harder to design and launch a PACE program that adequately addresses their characteristics.

Each local government must carefully consider which types of properties are important to include in the program at two different points in the process: (1) at program launch and (2) in the long term. This decision will determine how much program design time needs to be spent and on which properties now and what can wait until a future date. Launching a commercial PACE program that initially addresses only the simpler property types and then adding the more complex ones in a later phase is a wise way to proceed if the local government is unable to handle all property types from the outset.