Property Assessed Clean Energy (PACE) got its start in California as a way to solve a discrete challenge– homeowners wanted to put solar systems on their roofs and didn’t have a financing option. A city employee in Berkeley, Cisco DeVries, had the idea to use a public benefit assessment mechanism that financed garbage collection in his town to offer financing options to his neighbors who wanted solar systems. It was this small, local problem that led to the creation of the initial PACE program. The year was 2007.
PACE to C-PACE
One of the benefits of being in the same industry for over a decade is that I’ve had the opportunity to track its evolution, and, in the case of PACE, it’s been remarkable. In the 15 years since that initial pilot program, the PACE industry has changed in some significant ways. Starting as a tool for homeowners to finance solar, by 2010, the industry expanded into to the commercial sector, with the state of Connecticut leading the way in developing the first successful commercial PACE program (C-PACE), demonstrating how this powerful finance structure could be used to renovate the old, energy inefficient buildings sprinkled throughout the small New England state. Boiler swap outs, installation of building management systems, and replacing windows were the projects that characterized the early days of the C-PACE industry.
Soon, real estate developers realized that C-PACE was a powerful financing tool to help them build new construction without having to value-engineer out the long-term, sustainable designs that came with a higher price tag upfront. C-PACE for new construction dramatically changed the industry and has enabled developers across the country to build highly efficient buildings, while lowering their cost of finance by replacing more expensive gap financing options, like mezzanine, with C-PACE. C-PACE for new construction dramatically changed the industry and has enabled developers across the country to build highly efficient buildings, while lowering their financing costs through C-PACE.
C-PACE across the Nation
As the policy that enabled C-PACE continued to advance across the country, legislators realized its power to help address local issues facing their communities and constituents. For example, in California, we now see C-PACE being used to harden buildings for earthquake protection; in Florida, with the impacts of climate change being felt with more severe storms and hurricanes, we see C-PACE as a tool for hurricane resiliency.
So, what’s next?
Our firm has been active in the C-PACE industry since its earliest days, and we’ve invested over $1B in states across the country. The “public benefit” roots of C-PACE (which enable its innovative financing structure) lends itself well to thinking about what other needs C-PACE can meet. We see huge potential for C-PACE as a tool to continue to address the evolving needs of society.
As it has become clear that our efforts to combat climate change need to be accelerated, thinking about how C-PACE can support the electrification of the built environment is warranted. Further, as it becomes obvious that our mitigation efforts have fallen short, there is more we must do to acclimate to a changing planet. C-PACE can be a powerful mechanism to help building owners adapt to new shorelines, more serious storms, and resource constraints.
C-PACE – the S in ESG
Finally, as the conversation about a just energy transition continues to advance throughout the United States – a conversation that keeps central the concept that climate change doesn’t affect all communities equally — C-PACE can play a role in ensuring that capital flows to communities that need it most and have been excluded from more traditional sources of financing. The impacts of climate change and the need to adapt buildings in low income communities to be resilient and healthy opens up new possibilities for C-PACE to fulfill its purpose as a source of financing for the public benefit. C-PACE has always been characterized as a type of ESG financing – with a focus on the “E;” but there isn’t any reason that it can’t also be a solution for the significant “S” challenges that our society faces.
The next phase of C-PACE holds great promise for accelerating the transition to both a clean – and equitable energy future. I know that I am excited, and so is our team.
Jessica Bailey is the President and CEO of Nuveen Green Capital. Prior to her role, she co-founded Greenworks Lending, which was acquired by Nuveen in 2021. Highly regarded for her leadership in the clean energy space, Jessica and her team have helped bring C-PACE financing to 30+ states – and counting!
Saving Energy is Smart Business.
To learn more about C-PACE financing, visit: greencapital.nuveen.com/