Property Assessed Clean Energy (PACE)
PACE is a voluntary special tax assessment on a building owner’s property – this tax assessment is treated like all other tax assessments and is paid when property taxes are paid.
PACE is a useful tool in markets that have it as it gives the ability to focus on large, long term investments and transferring the expenses from upfront costs into operating costs – offering strong security and deep energy savings. PACE allows lenders to offer lower interest rates and longer terms compared to conventional loans.
In states with enabling legislation, local governments can establish a PACE financing district and a program to coordinate the implementation of that financing. The majority of states have PACE programs – many resources are available to have been established across the U.S., and more are in development.
Broadly, there are two models for how PACE programs can provide project financing:
Open Market: Allows multiple private financiers to compete in providing financing, with municipalities responsible for collecting PACE assessment payments, and remitting these funds to the financier.
Closed Market: Involve the program either securing a line of credit or using public funds to provide project financing.
In either model, local governments and/or financing authorities can issue bonds to finance projects.