Property Assessed Clean Energy (PACE)
Property Assessed Clean Energy (PACE) for commercial buildings is a new mechanism to finance energy improvements, such as energy-efficiency projects, renewables, and gas line extensions, on commercial and industrial properties in Massachusetts. To finance improvements, a property owner agrees to a betterment assessment on their property, which repays the financing. This approach enables owners to undertake more comprehensive energy upgrades with longer payback periods of up to 20 years. At property sale, the lien stays with the property and is transferred to subsequent property owners.
PACE in Massachusetts
Commercial Property Assessed Clean Energy was passed as part of the energy legislation signed by Governor Baker in August 2016. MassDevelopment and the Massachusetts Department of Energy Resources (DOER) will administer the PACE program. PACE program guidelines are currently in development and financing is expected to be available in 2019.
PACE Process and Eligibility
- Individual municipalities may opt into PACE by a majority vote of the city or town council or the board of selectmen, as appropriate.
- Properties eligible for financing through PACE include:
- Commercial buildings
- Industrial buildings
- Multi-family buildings with five or more units
- Improvements eligible for financing through PACE must be permanently fixed to the property. Eligible improvements include:
- Energy efficiency upgrades
- Renewable energy
- Extension of existing natural gas distribution to a property
Benefits of PACE
- Property owners: Advantageous, non-recourse, upfront, long term, potentially off balance sheet financing that remains with the property if sold. Capital improvements could reduce operating costs and increase property values.
- Municipalities: Job creation, business growth, and environmental benefits associated with reducing energy consumption.
- Lenders/Mortgage holders: Improved cash flow and reduced credit risk from lower operating costs via financing that cannot be accelerated. Capital improvements could also increase collateral property value.