Commercial property owners in Kent and Sussex get new option for financing energy projects
Any commercial or industrial business in the state can now access a new way to finance energy projects— thanks to a recent expansion of the D-PACE program.
The Delaware Property Assessed Clean Energy (D-PACE) program helps commercial or industrial property owners finance energy efficiency or clean energy projects with loans tied to the property, rather than the borrower. States across the country— including Maryland and Pennsylvania — have similar PACE programs.
New Castle County was the first to activate Delaware’s PACE program in 2019, one year after it was approved by the Governor. Now Kent and Sussex counties have followed suit, opening up the program to property owners statewide.
The loans are from private lenders, not taxpayers. But the counties act as loan servicers, by collecting payments on property tax bills. Proponents of the program say it helps businesses get longer-term loans, sometimes with no money down, and offers lenders more security.
The PACE loan term is based on the useful life of the project. The loan is secured with an assessment against the property, and can stay with the property even if the owner sells it.
“That loan can go up to 25 years under the legislation,”said Tony DePrima, executive director of Energize Delaware, an initiative of the state-created non-profit Sustainable Energy Utility (DESEU) which administers the D-PACE program. “It can transfer from owner to owner. That long term and that transferability is not common to standard commercial loans.”
D-PACE can be used to finance energy efficiency projects, such as water-saving toilets or new furnaces. It can also be used for clean energy projects, like solar arrays or small wind energy systems. The projects should reduce energy costs for the property, and the savings are meant to cover the loan payments.
Commercial, industrial, agricultural, non-profit and multifamily properties with five or more units are eligible to apply for loans. Energize Delaware maintains a directory of enrolled lenders.
The Dupont building in Wilmington is the only property to utilize the D-PACE program so far, DePrima says. The property received a 25-year, $3.9 million loan through the program, which helped finance energy efficiency projects including a chiller plant replacement, boiler replacement and cooling tower refurbishment.
“All of these are very, very large, expensive projects,” DePrima said.
The improvements to the Dupont building are expected to produce millions in energy savings over their useful lives.
DePrima blames the minimal participation in the D-PACE program so far on the short time it’s been available, as well as the pandemic. He notes interest rates on D-PACE loans are market-rate, and PACE financing is often used as one loan in a capital “stack.”
“This has not been a great year for commercial lending, with COVID and lots of empty offices,” DePrima said. “Plus, I was short two counties up until now.”
Sussex County signed on to the program last week, and Kent County did so in January. DePrima says four property owners in Sussex and one in Kent have already expressed interest in the program.