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

Choose Energy Audit Requirements for Property-Assessed Clean Energy Financing Program

The seventh step in launching a commercial property-assessed clean energy (PACE) financing program involves deciding the types of energy audits applicants will be required to undergo to assess expected project energy/cost savings.

Commercial PACE programs typically require applicants to have an energy audit of their property conducted by a third-party auditor/contractor or a utility-sponsored energy efficiency program. An energy audit serves a number of purposes:

  • Makes the property owner aware of all energy/cost saving opportunities
  • Makes the property owner aware of the best energy/cost saving opportunities based on return on investment
  • Provides independent analysis to the PACE program of the energy/cost savings of the measures for which the property owner is seeking financing.

The inherent challenge of requiring energy audits is finding the balance between cost and rigor, especially across small, medium, and large projects with differing cost sensitivities. A sensible response to this challenge is for the program to develop tiered audit requirements based on the number and combination of measures being installed, project costs, and existing lender or underwriter requirements. These will likely include some combination of the audits in the table below, which are listed in order of lowest to highest cost.

Energy Audit Types and Descriptions
Audit TypeDescription
Utility Rebate/Incentive AuditA free or low-cost audit that is part of a utility energy efficiency rebate/incentive program (this is often equivalent to an ASHRAE Level I Audit).
Targeted AuditOnly examines the energy use of the system of concern, rather than the energy use of the whole building. This approach is generally used for large, single-system projects.
ASHRAE* Level I Audita.k.a. Walk-through Analysis; A brief review of building systems with primarily qualitative results.
ASHRAE Level II Audita.k.a. Energy Survey and Engineering Analysis; This includes identifying energy efficiency measures with estimates of energy and cost savings for capital projects.
ASHRAE Level III Audita.k.a. Detailed Analysis of Capital-intensive Modifications; This includes more detailed calculations based on monitored end-use data or hourly building simulations. It also includes more detailed project specifications for retrofits.
Investment-Grade Audit (IGA)A very rigorous and expensive audit, typically undertaken to evaluate a potential upgrade to a facility's energy infrastructure, wherein it must compete for capital funding with nonenergy-related investments. The projected operating savings from the implementation of the project must be developed such that they provide a high level of confidence.

* ASHRAE: American Society for Heating, Refrigerating and Air-Conditioning Engineers

The cost of an audit can range from free (utility audit) to tens of thousands of dollars for an investment grade audit. Therefore, composing tiered audit requirements that are appropriate for all potential property/project sizes is critical to ensuring that the related costs do not become an unreasonable hurdle that dissuade property owners from participating.

Grantees should note that multifamily housing is very different from other types of nonresidential buildings, and will likely be subject to different audit protocols and standards than those for office, retail, and warehouse properties. Currently, a broad stakeholder group assembled by the California Home Energy Retrofit Coordinating Committee is nearing completion of recommended protocols and standards for multifamily properties. Private firms are also working on multifamily energy retrofit.

Also see Finding a Qualified Energy Auditor.