BY SAM EVANS-BROWN
Sam Evans-Brown
After more than a decade of trying, New Hampshire is on the verge of adopting a powerful new tool that will help unlock a wide array of measures that will save energy, save money and reduce carbon emissions. This tool is called Commercial Property Assessed Clean Energy, or C-PACE, and a bill that has the backing of both parties in the New Hampshire State House seems set for the fast-track this legislative session. The bill’s sponsors will include Republican Speaker of the House Sherman Packard and Democratic House Minority Leader Alexis Telerski. It’s a great example of New Hampshire politics at its best, where well-intentioned leaders have come together to solve a hard problem, and hit upon a bipartisan solution that has already been tested in 38 other states around the country.
Many renewable energy projects and energy-efficiency improvements pay for themselves. This has been true for decades but is even more the case today thanks to the plummeting costs of key technologies that are driving the clean energy transition. However, the costs of these improvements are upfront and can take years — sometimes even more than a decade — to pay for themselves. Unless a business owner has a large amount of free capital and is motivated to reduce their emissions, this means that often these cost- and energy-saving improvements fall by the wayside, as businesses put their capital to work in investments that have better returns and faster payback periods.
So how do we get businesses to make decisions that are good for them financially, good for the clean energy industry and good for the environment, but don’t pay for themselves as quickly as they might like? The answer is financing.
I’ve heard it said that the challenge of the clean energy transition is that we are swapping the cost of fuel for the cost of finance. Many of the technologies that will dominate the next century have zero fuel cost but high capital costs. They have relatively predictable returns and easily calculated payback periods. But those returns are not high enough to be attractive to some of the flashier investor classes such as venture capital or private equity. Instead, these slow and steady, stable returns look a lot more like another sizable pool of investors: those who put their money into infrastructure projects.
The trouble is: How do you make an energy-efficiency project look like a road, bridge or airport? The answer is C-PACE.
The core innovation of C-PACE is that the cost of energy-efficiency improvements is paid back through a special added line on their property tax bill. This is attractive, because these improvements are long-lived, and a building owner might want to sell the property before they have fully realized the payback for their efficiency upgrades. The next owner will still reap the benefits of the lower energy spending, and the improvements should result in a higher resale value.
But the complication of needing to pay off an additional loan can spook business owners. With a PACE loan, the loan payment automatically transfers to the new owner as part of the transaction. This reduces risk for the lender, which results in lower financing costs.
It makes energy-efficiency investing look a lot more like infrastructure investing. It will help to attract the class of investors that are looking for stable, predictable returns over decades as an important hedge against the riskier investments in their portfolio. That low-cost capital can help unlock the tremendous potential of New Hampshire’s clean energy future.
New Hampshire has had a C-PACE statute on the books since 2010, but it has never worked. There were two big reasons why.
First, the statute expected cities and towns to administer and enforce the loans that were made, and no New Hampshire town is big enough that it’s going to devote staff to figure out how to administer a commercial lending program.
Secondly, concerns from traditional lenders meant that C-PACE loans were “junior” to other loans on the property, so if there was a bankruptcy, everyone else would get paid back before the C-PACE lender. This meant no lenders were ever interested in taking the risk of giving out a loan that might never get paid back.
There have been multiple attempts to tweak this program and get it working, with bills modifying the statute passing in 2011, 2014, 2015, 2021 and 2023. The most recent bill, championed by representative Latha Mangipudi of Nashua, aimed to fix the issue of the “position of the lien,” which is the order in which the loans get paid back. It allows for C-PACE loans to be co-equal with other loans, if the other lenders on the property agree. The passage of this bill sparked the interest of C-PACE lenders nationwide and business owners seeking sources of low-cost capital to help develop their properties.
The new bill being brought forward this year fixes all the remaining problems with program administration. It designates the Business Finance Authority as the program administrator, so that towns can delegate this task to a trusted, state entity. It cleans up the definitions, clarifies procedures and cuts away unnecessary statutory references. In short, it will at long last create a functioning C-PACE program in New Hampshire.
This bill is a natural fit for New Hampshire’s unique blend of pragmatic politics and entrepreneurial spirit. It empowers private property owners to invest in energy efficiency and renewable energy without state mandates, aligning with the state’s ethos of individual choice and limited government. By fostering local economic growth and reducing energy costs, C-PACE supports New Hampshire’s tradition of innovation and fiscal responsibility.
Sam Evans-Brown is the executive director of Clean Energy New Hampshire. Prior to that, he spent nearly a decade as a journalist with New Hampshire Public Radio.
