History of C-PACE: How and Where It Started

History of C-PACE: How and Where It Started

The concept of Property Assessed Clean Energy (PACE) financing began to take shape in the early 2000s, with the inception of C-PACE (Commercial PACE) emerging as a crucial development in the evolution of sustainable financing. This article delves into the origins, legislative advancements, and the pivotal role that C-PACE has played in transforming the commercial real estate landscape in the United States.

The Genesis of PACE

PACE financing was initially conceived by Thomas D. Peterson, founder of the Center for Climate Strategies, and was later developed and implemented by Cisco DeVries, who was serving as the Chief of Staff to the Mayor of Berkeley, California, in 2008*. The program was designed to address the upfront cost barriers of green energy improvements, allowing property owners to finance energy efficiency and renewable energy projects through a property tax assessment that could be repaid over time.

The Transition to Commercial Applications

Recognizing the potential of PACE for commercial properties, the first commercial PACE program was launched in 2009. It aimed at enabling commercial property owners to achieve energy savings while also addressing broader environmental goals. Unlike residential PACE, C-PACE focuses on larger-scale projects within the commercial sector, including office buildings, industrial properties, and multifamily residential buildings larger than four units.

Legislative Milestones

The expansion of C-PACE across the United States has been significantly driven by state-level legislation. One of the pivotal moments was the adaptation of PACE legislation that included commercial properties, starting with California and soon followed by other states. Each state's legislation outlines the guidelines under which municipalities can offer PACE programs, often leading to diverse implementations of C-PACE across different jurisdictions*.

Growth and Adoption Across the States

C-PACE programs have now been authorized in over 36 states plus the District of Columbia. The adaptation rate among states varies, with some like Connecticut, establishing a statewide C-PACE program that has set a benchmark for other states in terms of program management and the scale of financed projects. The adoption of C-PACE has been influenced by factors such as local economic conditions, state-specific environmental priorities, and the presence of supportive legislative frameworks.

Challenges and Evolution

Despite its benefits, the adoption of C-PACE has faced challenges, including regulatory hurdles and the need for greater awareness among property owners and financiers. Furthermore, the variability in program administration across different states has led to a lack of uniformity, potentially complicating multi-state portfolio applications. However, these challenges have also driven innovation within the sector, leading to more streamlined approaches and enhanced program features that better meet the needs of commercial property owners.

The Impact of C-PACE

The impact of C-PACE financing on the commercial real estate market has been profound. It has enabled significant energy efficiency improvements and the adoption of renewable energy across diverse property types. By reducing the energy costs and improving the sustainability profile of properties, C-PACE has also contributed to increasing property values and attracting green-conscious tenants.

Conclusion

C-PACE financing has carved a niche in the landscape of sustainable financing by addressing upfront cost barriers and aligning the benefits of energy savings with repayment schedules. As environmental concerns continue to drive policy and investment decisions, C-PACE is likely to play an even greater role in shaping the future of commercial real estate development.

* Peterson, T. D., & DeVries, C. (2008). "Origin and Implementation of PACE Financing".

* State Legislation for Commercial PACE Programs. (2023).