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After 31 years of serving up ribs, pulled chicken and collard greens, Rocklands Barbeque and Grilling Company is adding a dash of solar to its menu.
Owner John Snedden is thrilled that the 44-kilowatt rooftop system to be installed by autumn will allow for the usual benefits — cutting utility bills at his northern Virginia restaurant and curbing emissions of heat-trapping gases.
What’s unique about this array is that it puts Arlington County on the map as the first in the state to deploy innovative financing designed for businesses and nonprofits to quicken affordable upgrades to greener energy. It’s an initiative known as C-PACE, short for commercial property assessed clean energy, which is slowly catching on statewide.
The bonus for owners is the ability to improve a building’s value without being burdened by out-of-pocket expenses. Plus, participants reap the benefit of an immediate payback — lower electric bills — coupled with a payment period of up to 25 years.
“It’s very rewarding to have one come to a close,” said Scott Dicke, director of the county’s C-PACE program at Sustainable Real Estate Solutions. “The relief is palpable.”
Perhaps it’s fitting that Arlington landed the initial project as it also led Virginia in passing a local C-PACE ordinance. The program got off the ground in 2018 under the Arlington Initiative to Rethink Energy.
To drum up business, part of Dicke’s job is to recruit and educate private lenders as well as contractors with expertise in solar, energy efficiency and other sustainability solutions.
Among those schooled was Ipsun Solar, a 5-year-old developer serving the Washington, D.C., region. Company Vice President Joe Marhamati tuned Snedden into C-PACE when the restaurant owner inquired about expanding his solar portfolio. Years ago, Ipsun had solarized Snedden’s home and another of his commercial properties.
Dicke fielded Snedden’s phone call queries about C-PACE last November while on a pandemic beach getaway with his family.
“An eight-month gestation period for a commercial deal — that’s about average,” Dicke said about negotiations that lasted through June. “Everyone wants to see success, but that’s hard when every opportunity takes at least six months and the vast majority don’t go to closure.”
This project involves roof upgrades and solar panel installations on Rocklands and an adjacent building that Snedden owns and leases to two tenants.
An Ipsun analysis shows the savings over 25 years from lower electric bills and federal tax credits totaling $280,000, which is more than double the cost of Snedden’s “loan.”
Arlington Community Federal Credit Union provided $125,000 in C-PACE financing to Snedden, which isn’t quite 100% of his investment.
“They’re a capital provider that is mission-driven,” Dicke said. “When they heard from John, they had a game plan ready because this project just exudes community.”
Rocklands, an institution in the region, also has locations in Alexandria and Georgetown, as well as food trucks and kiosks at sports venues.
What’s appealing to Snedden is not having to use cash on hand to cover capital costs for environmental enhancements to his business. C-PACE financing allows him to directly repay the credit union.
Technically, C-PACE financing is configured not as a loan but as a special assessment, meaning participants could make payments via their property tax bill. Arlington, however, has delegated billing authority to C-PACE lenders.
Marhamati, who co-founded Ipsun with a colleague after almost a decade at the U.S. Department of Energy, said not enough business owners are aware of C-PACE yet.
“We recommend it to customers because we think it’s the best deal around,” he said. “There’s no volatility as long as the sun rises every morning. It’s an absolute no-brainer.”
Bolstering C-PACE at the state level
PACE, which has roots in Berkeley, California, was conceived to spur clean energy technology while also squeezing the carbon footprint of buildings. That sector accounts for roughly 29% of U.S. greenhouse gas emissions, according to the Center for Climate and Energy Solutions.
Virginia and neighboring Maryland are two of 37 states, plus the District of Columbia, to pass C-PACE-enabling legislation.
In 2015, the Virginia General Assembly amended a complex and unworkable C-PACE law it initially passed in 2009. Since then, program advocates have been tweaking flaws in the legislation.
Most recently, the General Assembly sweetened the state’s C-PACE pot in 2019 by amending the original statute to add shoreline resiliency and stormwater management to the list of projects eligible for financing.
And a measure passed last year, HB 654, is designed to break up more logjams at the city and county level. It allows jurisdictions to tap into an existing statewide C-PACE program so initiatives aren’t concentrated solely in larger and wealthier communities with the resources to craft individual ordinances.
The state Department of Mines, Minerals and Energy is in the midst of seeking bids for an organization to design, develop and administer the program. Dicke’s Trumbull, Connecticut-based company and the Virginia PACE Authority likely will be among the bidders.
Abby Johnson, the founder of a Williamsburg, Virginia-based real estate advisory firm that specializes in financing the greening of commercial buildings, heads up the Virginia PACE Authority. Johnson’s authority administers the C-PACE program in Fairfax County, next door to Arlington.
For the past seven years, Johnson has specialized in ramping up PACE financing in markets across the country.
The request for proposals closes on Aug. 10.
Bettina Bergöö — the Department of Mines, Minerals and Energy’s energy efficiency and financing programs manager — said she expects the voluntary program to be unveiled by the end of the year. She is aware that some localities are holding off on establishing their own program because they’re interested in one that will incorporate “best practices” from the full spread of existing ordinances.
“We want to standardize documents and processes,” she said. “If you’re a contractor or a lender, you don’t want to have to deal with a different program in each city or county. It just makes your life easier if you know the guidelines.”
Municipalities can keep their current program or tap into the model that evolves at the state level.
Arlington’s is one of 14 C-PACE programs that is either active or at some stage of development in Virginia. That hodgepodge of a list also includes Fairfax, Loudoun and Louisa counties; the town of Dumfries; and the cities of Alexandria, Fredericksburg, Lynchburg, Petersburg, Richmond, Roanoke and Winchester, according to the Virginia Energy Efficiency Council.
That number aligns approximately with the 2018 Virginia Energy Plan released by Democratic Gov. Ralph Northam. Its goals included expanding the reach of C-PACE programs to at least 12 local governments within three years.
‘It has not been an easy run’
Dicke is elated that Arlington was able to ink a historic C-PACE first by meeting the needs of a traditionally underserved sector: small- and medium-sized businesses. However, he’s disappointed to seal just one deal during three years of existence.
“It’s taken a little while to get the market educated and aware,” he said. “We see opportunities come into the pipeline. Some make it all the way through to the end and some don’t.”
Though he said he couldn’t elaborate further, he suggested that Arlington’s ordinance could use some bolstering to help ease lenders’ concerns. For instance, some of the 20 or so capital providers have expressed doubts about the program’s legal foundation.
“In Arlington County, there have been lots of lessons learned,” he said. “It has not been an easy run.”
Dicke is optimistic that setting up a statewide program will open the floodgates for projects from northern Virginia to Appalachia to Hampton Roads.
“This is pulling our finger out of the dam,” he said about Arlington being first when so many communities have taken a wait-and-see attitude. “These programs need scale.
“It’s been a crippling blow that they’ve been so slow to open up. I’m hoping for a steady and exponential increase.”
Joe Marhamati of Ipsun Solar said that while C-PACE was created with the best of intentions, it’s in need of some streamlining.
“I’m not super surprised it hasn’t taken off because administratively it’s very cumbersome,” he said. “It’s kind of like going to the DMV to get your loan.”