To promote growth of renewable energy projects, the New York State Legislature recently passed bill A.7805/S.6523 (the “C-PACE Bill”), which will allow real estate developers and commercial property owners to obtain Property Assessed Clean Energy (“PACE”) financing for new construction projects. PACE programs are thought to be beneficial for cities, promoting energy efficiency, reducing energy costs and promoting local economic development.
Generally, PACE financing is an attractive financing option that allows property owners to obtain funds from pre-qualified private lenders for energy efficient building improvements. PACE programs are administered by state government policies that classify certain clean energy upgrades as public benefits.
New York’s Commercial Property Assessed Clean Energy (“C-PACE”) program is administered by the Energy Improvement Corporation (“EIC”), a state agency, and dates back to 2009. The program was updated in 2019 to allow commercial property owners the ability to access third-party financing on favorable terms. For more information on the C-PACE program as previously administered in New York, refer to our NewsWire update from August 2019.
Prior to the passage of C-PACE Bill, C-PACE financing was available only to finance improvements to already existing buildings. Under the new bill, the C-PACE program has been expanded to allow C-PACE financing for new construction projects. In passing the C-PACE Bill, the New York State Assembly emphasized that commercial real estate developers often fail to use the newest and most energy efficient equipment in new construction projects, because they could not take advantage of C-PACE financing. By saving 0n construction costs, real estate developers have gradually passed costs on to local communities via higher energy costs, emissions and pollution. In updating New York’s C-PACE program, the New York State Legislature hopes that real estate developers will be able to incorporate more energy-efficient equipment in new construction projects and mitigate future direct and indirect costs to local communities.
Industry advocates have widely applauded the New York State Legislature for passing C-PACE Bill. In particular, industry advocates have emphasized that the C-PACE Bill will benefit the New York economy that has been greatly impacted by the COVID-19 pandemic and subsequent economic downturn, and they hope that the C-PACE Bill will lead to an increase in investment and provide more work for construction workers, engineers and architects.
Governor Cuomo is expected to sign the C-PACE Bill in the coming weeks. The text of the C-Pace Bill can be found here. For regular reports on new developments affecting energy efficiency and clean energy, subscribe to the Norton Rose Fulbright Project Finance NewsWire here.