By Chris CaraDonna, The Weidt Group, a Willdan Company
Before Commercial Property Assessed Clean Energy (C-PACE) picked up traction, building owners had little incentive to invest in energy-efficient (EE) measures for their properties—it was a struggle to finance, and the “split incentives” meant that owners wouldn’t directly benefit from EE upgrades. C-PACE eliminates those hurdles.
Colorado C-PACE financing provides building owners opportunities for more valuable, efficient, competitive buildings, including:
- Decreased energy costs/lowered operating costs
- Increased cash flow
- No out-of-pocket expenses
- Underwriting based on the building’s financial health
- Capital budgets that can be utilized for business purposes
- Repayment obligation that does not accelerate and will transfer to a new owner if the property is sold
- Financing for up to 100% of eligible improvements for existing buildings and up to 20% of eligible construction costs for new buildings
As a condition of Colorado C-PACE financing, an energy audit is required that assesses the expected cost savings of the energy efficiency improvements over their useful lives. Typically, an ASHRAE Level 1 audit or better is required. Level 1 audits are sometimes referred to as a screening audit, where analysis of utility bills and a visual inspection of the property occur. Level 1 audits are often performed during the early stages of information gathering as they can help identify areas where energy efficiency improvements can have a significant impact on the building’s energy costs. Initial implementation costs are established along with the expected energy cost savings, which are then used to determine the savings-to-investment ratio (SIR) of proposed improvements in the context of Colorado C-PACE.
This requirement is waived for single-measure projects involving like-for-like equipment replacements, in which the focus of the analysis can be performed solely on the equipment of systems involved in the retrofit (a lighting retrofit, for example) rather than a comprehensive audit of the entire building and its systems.
Navigating Colorado C-PACE
If you’re a building owner or developer planning to utilize this financing tool, where should you begin in regard to energy? The first step is to understand your building’s savings potential and which improvements provide the most value.
A common challenge for owners is not knowing where their building energy use stands in the context of Colorado C-PACE. Typically, we approach these types of assessments with our clients via the following.
- Energy auditing and reporting (existing buildings)
- Energy modeling and reporting to inform design decisions (existing buildings and new construction)
- Rebate/incentive documentation
For existing buildings, owners compare current energy use versus expected energy performance through comprehensive analysis and reporting to find the savings potential. This analysis also demonstrates energy savings for each measure—an important part of Colorado C-PACE. It also demonstrates the SIR. Although the program does not require a demonstration of an SIR greater than one, the District encourages projects with SIRs above one.
After Colorado C-PACE has been incorporated and improvements are made, monthly monitoring and energy modeling to assess future changes can pinpoint the greatest potential for continued energy improvement and maximum ROI. The information gained through these processes makes it easy for building owners to optimize investments and understand what it takes to both achieve and keep their building operations energy-efficient and sustainable.
For new construction, owners evaluate the expected energy performance of their building compared to 2015 International Energy Conservation Code (IECC). Again, this is achieved through comprehensive analysis and reporting to find the building’s energy savings potential. This analysis is important because if the project design meets the energy code, the developer can get financing for 15% of the total eligible construction cost (TECC), and if the project design beats 2015 IECC by 5%+, the developer can get financing for 20% of the TECC.
As you’ve probably gathered by now, energy analysis is an important aspect of Colorado C-PACE and it’s not incredibly straightforward. When starting a C-PACE project, be sure your team is well-versed in these areas and has deep expertise in energy analysis. And remember, depending on the scope of your project, utility incentives are likely available as well.
*This article previously appeared in the Colorado Real Estate Journal.