Commercial and industrial
building owners in Texas who want to conserve energy (and save money) got a
thumbs-up from the Texas legislature last month when both Houses unanimously passed
a bill that will allow them to obtain low-cost, long-term private sector
financing for water conservation and energy-efficiency improvements. Governor
Perry signed the bill (S.B. 385) into law June 14.
The program, known nationally as Property Assessed Clean Energy (PACE) and spearheaded statewide by Keeping PACE in Texas, allows commercial and industrial owners to access tax exempt, low interest financing for efficiency projects – something that has traditionally only been available to public schools, universities, and state and local governments. It may not seem like such a big deal, but the implications are huge.
Unlike public bodies such as schools and municipalities, commercial and industrial businesses exist to make a profit. As such, they have typically been the early adopters of technologies that save money, because a penny saved is a penny earned. Yet when we look beyond the technologies that have a quick “payback," like certain types of lighting and digital HVAC control, we find that medium and long payback items don’t get done. Why? Because the returns generated by those capital intensive investments aren’t commensurate with the companies’ typical growth investments. In other words, if a company can make more money with their capital doing other things, they will.
Now, with PACE opening up and commercial and industrial business getting access to low interest financing, traditional investment hurdles go away. Major projects like combined heat and power (CHP) plants or replacement of central chilled and hot water systems don’t have to be evaluated by their return on investment (ROI), because no capital dollars are used. As long as the savings generated every year will cover the financing payment, these projects become neutral cash flow propositions.
This type of scenario has been in play for decades in the public sector, with much success, and we applaud the Texas Legislature for making this available to the private sector. The PACE statute will not only will boost the Texas economy, but it will reduce demand on the state's energy and water resources. As a member of Keeping PACE in Texas and one of the fastest growing energy efficiency and conservation design build contractor in Texas, we are once again proud to call the Lone Star State home.
The program, known nationally as Property Assessed Clean Energy (PACE) and spearheaded statewide by Keeping PACE in Texas, allows commercial and industrial owners to access tax exempt, low interest financing for efficiency projects – something that has traditionally only been available to public schools, universities, and state and local governments. It may not seem like such a big deal, but the implications are huge.
Unlike public bodies such as schools and municipalities, commercial and industrial businesses exist to make a profit. As such, they have typically been the early adopters of technologies that save money, because a penny saved is a penny earned. Yet when we look beyond the technologies that have a quick “payback," like certain types of lighting and digital HVAC control, we find that medium and long payback items don’t get done. Why? Because the returns generated by those capital intensive investments aren’t commensurate with the companies’ typical growth investments. In other words, if a company can make more money with their capital doing other things, they will.
Now, with PACE opening up and commercial and industrial business getting access to low interest financing, traditional investment hurdles go away. Major projects like combined heat and power (CHP) plants or replacement of central chilled and hot water systems don’t have to be evaluated by their return on investment (ROI), because no capital dollars are used. As long as the savings generated every year will cover the financing payment, these projects become neutral cash flow propositions.
This type of scenario has been in play for decades in the public sector, with much success, and we applaud the Texas Legislature for making this available to the private sector. The PACE statute will not only will boost the Texas economy, but it will reduce demand on the state's energy and water resources. As a member of Keeping PACE in Texas and one of the fastest growing energy efficiency and conservation design build contractor in Texas, we are once again proud to call the Lone Star State home.
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