Why most PACE projects fail before they start
PACE financing is often described as "free money repaid through savings," and that description is not far from the truth — for projects that are properly prepared. For projects that are not, the process stalls in predictable places: an audit that no capital provider will accept, savings that were never validated, a mortgage holder consent nobody requested early enough, or a program application submitted to a jurisdiction where the property is not covered.
The difference between a closed PACE transaction and an abandoned one is almost always process discipline. Here is the sequence that works, drawn from how Better Buildings US structures its turnkey engagements.
Step 1: Confirm program availability and property eligibility
PACE exists only where state legislation and a local program exist. Before any engineering work begins, three questions must be answered:
- Is there an active C-PACE program covering this address? More than 40 states and D.C. have enabling legislation, but active programs operate locally and rules differ.
- Is the property type eligible? Commercial, industrial, nonprofit, and multifamily (typically five or more units) are standard. Single-family and small multifamily are generally excluded from the commercial program.
- Are the intended measures qualified? HVAC, lighting, envelope, controls, solar, and water efficiency are widely eligible; lists of deferred measures vary by program.
This check takes hours, not weeks, and it prevents the most common wasted effort in the market.
Step 2: Build the investment-grade energy study
Programs do not accept marketing claims. They accept an investment-grade audit or engineering study that documents:
- Existing conditions and baseline energy use.
- Specific measures, equipment specifications, and installed costs.
- Projected savings per measure with calculation methodology.
- The Savings-to-Investment Ratio (SIR) — almost universally required to be greater than 1.0, meaning lifetime savings must exceed total financed cost including fees.
- Equipment useful life, which caps the maximum financing term.
Measures that individually fail the SIR test are usually combined with stronger ones so the package qualifies as a whole. This is a modeling exercise, and it is where an experienced developer earns their fee.
Step 3: Validate the savings
Capital providers fund verified numbers, not projections pulled from a spreadsheet. Savings validation means engineering review of the study, confirmation that assumptions match the actual utility rate structure and operating schedule, and — where required — commissioning plans or measurement-and-verification protocols for post-installation reporting.
Owners who skip this step discover too late that their contractor's savings estimate and the program's accepted savings estimate are two different numbers, and only the second one gets financed.
Step 4: Establish the assessment vehicle (ESID where required)
The assessment has to attach to the parcel through a recognized local mechanism. In jurisdictions that use one, this means setting up an Energy Special Improvement District (ESID) or the program's equivalent assessment structure — the legal instrument that allows the improvement cost to be levied and collected alongside property taxes.
This is municipal work: resolutions, filings, district boundaries, coordination with the county or city. It is also the step most property owners underestimate, because it involves parties outside the transaction entirely.
Step 5: Clear title and secure mortgage holder consent
The PACE lien is senior to private mortgage liens (junior only to municipal tax liens), so every existing mortgage holder on the property must give written consent before closing. Title work and survey are completed in parallel.
Practical guidance: approach the mortgage holder as soon as the project is technically defined, not after the capital is committed. Lender consent is a negotiation — some require a notice period, some review the SIR, some charge a fee — and it routinely becomes the longest lead item in the timeline.
Step 6: Match capital and negotiate terms
With eligibility, engineering, assessment vehicle, and consent in hand, the project goes to capital providers. Terms are negotiated deal by deal:
- Interest rate and payment frequency (annual or semi-annual, aligned to the tax bill cycle)
- Term — up to 20 years in most programs, never exceeding equipment useful life
- 100% financing of project cost, including eligible soft costs
- Pass-through provisions for net-lease or multifamily properties
- Any required reserve, guarantee, or rate-lock mechanism
Because the security is a tax assessment rather than a corporate credit, the underwriting focus stays on the property and the measured savings — which is precisely why owners with thin balance sheets still close these deals.
Step 7: Close, construct, commission
At closing, the assessment is levied, the lien is recorded, and capital funds the project. Construction proceeds under the owner's contract with the chosen contractor; commissioning and controls verification confirm that installed equipment performs as specified.
Step 8: Verify results and certify
The final step converts a completed construction project into documented performance. Post-installation measurement and verification compares actual results against the study, and the project results can be certified through Better Buildings US's Certified Energy Efficient™ program — giving the owner third-party confirmation of performance that travels with the asset through marketing, refinancing, and sale.
Certification matters more than most owners expect. In a sale process, a buyer's underwriter discounts projected savings; certified results do not get discounted the same way.
How long does it take?
Timelines depend heavily on jurisdiction and mortgage holder responsiveness. A realistic planning frame:
- Weeks 1–3: eligibility confirmation, audit scope, data collection
- Weeks 3–8: investment-grade study, measure selection, SIR modeling
- Weeks 6–12: ESID/assessment setup, title, mortgage holder consent
- Weeks 8–14: capital matching, term negotiation, closing
- Post-closing: construction, commissioning, M&V, certification
Projects that front-load consent and assessment work compress this considerably. Projects that sequence it linearly do not.
Common failure points
- Starting with a contractor instead of an audit. Equipment lists are not financing packages.
- Ignoring the mortgage holder until the end. Consent is a gating item, not a formality.
- Assuming all programs are alike. Eligible measures, term caps, and retroactive rules differ by jurisdiction.
- No post-installation verification plan. Unverified savings weaken both certification and future resale.
- Trying to run the process in-house without PACE experience. The work spans engineering, municipal law, title, and capital markets simultaneously.
The turnkey alternative
Better Buildings US runs this entire sequence as a fully turnkey engagement: setting up the Energy Special Improvement District, validating energy savings, bringing lenders to the project, and certifying the final results. National scope — the company can perform anywhere PACE legislation is available in the United States — with a strategic partner network covering the engineering, legal, and capital sides of the transaction.
Owners keep one point of contact instead of five. To scope a PACE project for your property, call (740) 807-4292 or write to info@betterbuildingsus.com.
Checklist before you apply
- Active program confirmed for the address
- Property type and measures eligible
- Investment-grade audit with SIR > 1.0 completed
- Savings validated against actual utility rates
- ESID/assessment mechanism established
- Title work ordered, all mortgage holders identified
- Written consent obtained from every mortgage holder
- Capital terms negotiated with payment schedule matched to the tax cycle
- Commissioning and M&V plan defined
- Certification path (Certified Energy Efficient™) identified