Maine Commercial Building Owners Receive New Tool to Fight Climate Change
Maine is finalizing rules for a program that will soon allow commercial homeowners to pay for clean energy upgrades through their property tax bills.
Loans known as C-PACE – or Commercial Property Rated Clean Energy – eliminate down payments and spread the cost of solar, energy efficiency and other projects over longer terms than loans. conventional bank loans. When a property is sold, the responsibility for repayment is transferred to the buyer, allowing owners to invest without worrying about whether they will own for long enough to fully recoup the savings.
“It’s a financing tool that lowers the upfront cost barrier to renewable energy and energy efficiency measures for commercial properties,” said Robert Wood, director of government relations and climate policy at Nature’s Maine chapter. Conservancy. “He has a clearly successful and growing track record in a number of other states.”
Connecticut became the first state to approve a C-PACE program in 2012. Adoption picked up from there and today more than 20 states and the District of Columbia have active programs in place. Maine passed legislation (LD 340) last year to establish a program administered by Efficiency Maine Trust.
Maine has made an ambitious effort to reduce its greenhouse gas emissions since 2019, when Governor Janet Mills took office and declared climate issues a priority for her administration. In 2020, the state released a comprehensive climate change plan, Maine Won’t Wait, which includes a goal to reduce greenhouse gas emissions by 80% by 2050.
One of the key strategies in the document is to modernize buildings in Maine. Commercial building heating, cooling and lighting are responsible for about 11% of the state’s emissions. C-PACE is seen as a tool to address this segment.
How C-PACE works
The program works by leveraging systems already in place to assess and collect property taxes. A building owner wanting to add solar panels or new insulation borrows the entire amount needed from a private lender, but payments on the loan are rolled into his semi-annual property tax bills. The local tax collector makes the payments to the lender.
The approach offers a few advantages, proponents said. Although there are already lenders who will finance renewable energy or energy efficiency projects, they generally offer loan terms of five to ten years. With C-PACE, however, loan terms can be as long as the expected useful life of the system or financed upgrade. And longer terms mean lower payments.
“If you extend it to 15 or 20 years, that significantly lowers your monthly costs,” said Michael Stoddard, executive director of Efficiency Maine Trust.
At the same time, tying payments to the property tax bill gives lenders more confidence that they will be reimbursed. Legally, property taxes take priority over other debts if a borrower is in financial difficulty. This same priority attaches to the payment of a C-PACE loan. If the building is sold, the loan payment is passed on to the buyer, who ends up with a higher property tax bill, but a more efficient and potentially more valuable building.
“The idea is that you create a secure investment tool by taking advantage of the municipal property tax structure,” Wood said.
In some cases, the financed improvements save so much money that the additional property assessment is less than the savings, providing homeowners with positive cash flow upfront.
Small print is expected soon
Efficiency Maine is nearing the end of the program’s regulatory process. Stoddard expects to publish draft regulations for public comment soon and finalize the regulations by the end of the year. Once this framework is in place, individual cities will need to join the program by passing a municipal ordinance authorizing their participation. Several municipalities, including Portland and South Portland, have already expressed interest in adopting the program.
The money for the loans will come from private lenders who decide it is worth participating in the newly created market. The mix could include local and national banks, as well as niche private lenders that focus on the C-PACE market, Stoddard said.
Some in the banking industry are unconvinced by the program. Although the program is “well-intentioned,” it may not have a significant impact, said Josh Steirman, director of government relations at the Maine Bankers Association.
Before a loan can be granted, the city or town must have opted in to the program, and then the borrower must obtain consent from any other lender who holds a mortgage on the property. These extra steps can hinder adoption, Steirman said.
“We’re curious to see how market adoption of this program evolves,” Steirman said. “However, the use of this program may be somewhat limited, and therefore less impactful than expected.”
Other states with active C-PACE programs have seen a significant impact, however, enabling some $2 billion in private investment, according to the US Department of Energy.
In Connecticut, the program has been a resounding success, said Mackey Dykes, vice president of financing programs at Connecticut Green Bank, the agent that administers the C-PACE program in the state. Since its launch in 2013, the program has funded 370 projects there for a total of $231.7 million. These investments generated $312.6 million in savings and prevented nearly 927,000 tonnes of carbon dioxide from entering the atmosphere, the equivalent of taking 185,000 cars off the road.
The steps involved in the program have not been a deterrent in Connecticut, Dykes said. Each municipality only needs to join the program once, and once banks are familiar with the program, obtaining their consent for an additional loan becomes a quick and easy process.
“Once you’ve completed that initial work and created the ecosystem that includes programs and benefits, you’re set for success,” Dykes said.
This article originally appeared in the Energy Information Network, and has been republished with permission.