Commercial PACE Project Origination: Leverage Points for Growing the Project Pipeline

Greater use of Commercial Property Assessed Clean Energy (C-PACE) financing within communities where it is enabled will increase energy savings, drive economic development, and result in additional public benefits. Some states with active C-PACE programs have ramped up activity significantly while others have not achieved and sustained a high volume of transactions. This brief details C-PACE project origination trends, barriers, and market practices for state and local government C-PACE program sponsors looking to grow their C-PACE project pipeline.

Based on the results of a questionnaire of C-PACE stakeholders, this brief provides new information on project origination trends and strategies for how state and local governments and third-party partners can increase the volume of projects leveraging C-PACE financing. The questionnaire results support the following observations about the C-PACE financing market:

• Marketing and education: Program administrators and capital providers agree that direct outreach to property owners (e.g., one-on-one or in small groups) to explain the benefits of C-PACE financing is the most effective strategy to originate projects.
• C-PACE capital providers: Specialty C-PACE capital providers—private lenders with deep knowledge of and a significant focus on C-PACE financing—are the primary source of capital for most C-PACE programs according to program administrator respondents. The share of capital provided by specialty C-PACE providers grew from 2019 to 2020. However, some C-PACE programs (two in this study) are structured so that they use exclusively public capital.
• C-PACE project entry point into a program: Most program administrators report that over 75% of financing volume comes from projects with pre-selected capital providers, meaning that property owners have connected with capital providers before making contact with the C-PACE program. Transaction sizes for these projects grew from 2019 to 2020 (most are now over $1 million), helping to drive industry growth.
• Smaller C-PACE projects: Small and medium projects often do not have a pre-selected capital provider and may need additional support from a program administrator to navigate the transaction process. This is significant given that some programs have goals to serve small- and medium-sized businesses.
• Messaging to property owners: The features property owners find most attractive about C-PACE financing are the long repayment period and the fact that it does not require a personal guarantee.