Unlocking Capital Dollars for Building Enhancements and Infrastructure Improvements
Across the country, commercial buildings account for one-fifth of the nation’s primary energy consumption. This high usage demands creative solutions as building operations and structural maintenance stretch the budgets of property owners and financing partners while also being costly to communities and their residents in terms of negative health and safety effects. As a financing mechanism, C-PACE (The Commercial Property Assessed Clean Energy Program) projects deliver energy costs savings and improve structural resiliency, while promoting economic development and private investment in commercial properties.
While not capable of addressing the wide range of environmental issues facing communities, the program has proven to deliver positive outcomes on multiple fronts, in reducing carbon emissions, enhancing health and safety conditions, and improving the financial bottom line of commercial property holders and business owners.
Defining C-PACE
C-PACE is a financing mechanism that allows building owners and developers to access the capital they need to make energy related upgrades to their property portfolios. Endorsed by the federal Department of Energy, C-PACE financing has been in use since 2010, when state governments first passed legislation that allows local governing bodies to establish energy improvement districts. At present, 40 states plus the District of Columbia and the United States Virgin Islands, have activated the program within their jurisdictions. Program performance, as shown in the table below, varies considerably across the nation, with hundreds of projects tapping into this financing tool in states from California to Connecticut, similarly activated in the Great Lakes and Mid-Atlantic regions, but more in its emergent stages and ripe for increased activation across much of the South and Southwest.
While the count of unique projects by year has remained relatively flat since 2022, the C-PACE deal size per project has nearly doubled by average dollar amount. In the most recent year for which high level results are available across participating states, it reported that over $2.5 billion in financing was secured for 225 projects across the nation According to C-PACE Alliance, at the 15-year mark, the program had sourced nearly $10 billion in aggregate investment.
A Vast Network of Beneficiaries
C-PACE is structured in such a way that its benefits reach a broad network of stakeholders. Most notably, the innovative program benefits the following four groups:
- Property owners: This group gains access to the private investment needed to advance structural upgrades to their physical assets. In many cases, the favorable terms of the C-PACE program make the difference in keeping the operability of these holdings at profitable margins.
- Local Governments: Municipalities benefit from an enhanced built environment Because C-PACE projects often target older or underused commercial buildings that would not otherwise attract renovation capital, the program can direct construction activity toward properties and neighborhoods that conventional financing tends to overlook.
- Residents: Relatedly, the individuals living within these communities realize improved health and safety outcomes. Better environmental conditions, such as reduced carbon emissions, associated with these structural upgrades support improved health and safety outcomes for those residing in the surrounding area.
- Workforce: This construction activity supports local employment across a range of sectors and occupations, including electricians, engineers, installers, mechanics, and roofers. Moreover, the growth and success of the C-PACE program stimulates demand for these skilled trades, offering career opportunities and economic mobility to a given labor force.
Featured Impact: Quality Jobs and Career Advancement Opportunities
In particular, New Jersey and Pennsylvania have included stipulations within their programmatic guidelines that prioritize workforce development initiatives. Pennsylvania requires that contractors participate in the Class A Apprenticeship program for each trade, or occupational class, employed, directing C-PACE financed project activity toward firms actively training the next generation of skilled tradespeople. New Jersey’s amendment to its C-PACE statute ensures that workers on these projects are paid wage rates consistent with other publicly supported construction work in the state.
These features position C-PACE as a financing tool that can support job creation and contribute to development of in-demand skills in the building trades alongside its energy and resiliency outcomes.
Spotlight on Philadelphia
As a part of its 10-year Energy Campaign, Philadelphia Energy Authority (PEA) has leveraged the C-PACE program since 2020 to channel nearly $1.6 billion in total investment toward commercial retrofits and energy efficiency upgrades. Over the program’s first six years, more than 20 projects have drawn on C-PACE financing, extending its footprint beyond Center City, and its adjacent core, and across the full breadth of Philadelphia’s built environment. The highlighted projects serve as a sample of the program’s impact on the city’s commercial landscape, from adaptive reuse to new development:
- Industrial: Across two phases for the Rhoads Industries project, $47 million in C-PACE financing has driven the large-scale adaptive reuse of the historic manufacturing plant forward. The building efficiency measures implemented are expected to reduce the facility’s lifetime carbon footprint by 11,500 metric tons.
- Mixed-use: As a redevelopment of a shuttered power station located on the Delaware riverfront, the Battery is now activated as a multifunctional facility, outfitted with energy systems estimated to be 29 percent more energy efficient than municipal code requirements.
- Warehouse: The Freezpak Logistics cold storage facility in the city’s Port Richmond neighborhood captures the program’s capacity to drive new construction activity forward. In this instance, a $30 million assessment financed a range of interrelated energy efficient components, including HVAC, insulation, lighting, and water systems.
Less than two decades since its inception, C-PACE has generated a broad set of positive outcomes for property owners and communities, from reduced carbon emissions to new opportunities for the skilled trades. As awareness for the program continues to grow, it can be expected that its adoption will become more widespread, its activation more robust, and its resulting benefits to be more impactful.
Useful links and resources
- CPACE Alliance: Introduction to C-PACE Financing (August 2024)
- CPACE Alliance: Frequently Asked Questions (August 2024)
- U.S. Department of Energy: Commercial Property Assessed Clean Energy
- U.S. Department of Energy: CPACE Toolkit
- U.S. Department of Energy: Factsheet for State and Local Governments
Chris Geraghty, Associate Director | [email protected]
Chris Geraghty, associate director at ESI, is a multi-faceted team leader who instills collaboration and participation among project teams to set goals and achieve material results. An expert in state-based grant and tax credit programs, he helps clients secure pivotal funding in economic development, state and local tax policy, and energy economics. Chris’ project experience includes measuring economic impacts, performing spatial analyses, conducting market feasibility analyses, and supporting funding application processes.
