Funding Your Decarbonization Project

Decarbonization requires considerable planning, with available funding playing a key role in determining the feasibility and prioritization of investments. While there’s no one size fits all approach, businesses and property owners will likely leverage a combination of upfront incentives, financing, and tax credits to achieve their decarbonization goals.

While decarbonizing buildings with energy efficiency upgrades, renewable energy, and all-electric equipment can deliver long-term savings for commercial and multifamily buildings, the upfront cost remains a barrier for implementation.

The good news is that there are multiple avenues for commercial, industrial, and multifamily decision-makers to fund their decarbonization projects. New York State and utility incentives – in combination with financing geared toward clean energy and energy efficiency – can help defray upfront costs and deliver capital to start working toward a decarbonized future.

Small Business Financing

Commercial buildings of all sizes and uses can add value through decarbonization. Small businesses and multifamily buildings pursuing smaller-scale decarbonization projects can access commercial financing for energy efficiency and renewable energy upgrades.

NY Green Bank Financing

NY Green Bank offers loan products to support sustainable infrastructure projects that advance New York’s clean energy transition. Investment opportunities cover a wide range of technologies and market segments, including renewable energy generation, clean transportation, energy storage, affordable housing, and building decarbonization.

Housing developer, e2i [PDF], borrowed from NY Green Bank against State and utility energy efficiency incentives to secure $8 million in financing to build and retrofit all-electric and affordable multifamily homes. The housing projects will be equipped with efficient and electric HVAC and hot water systems, electric vehicle charging, and high-performance building envelopes.

Launched in 2023, the Community Decarbonization Fund is directing $250 million in NY Green Bank capital into clean energy projects, building decarbonization, and related small business that benefit disadvantaged communities. Community development financial institutions and nonprofits that perform lending activities are eligible to apply. With this flexible concessionary financing, these mission-driven lenders can expand clean energy financing opportunities, especially for smaller projects, in communities across New York.

Commercial Property Assessed Clean Energy (C-PACE)

Commercial Property Assessed Clean Energy, or C-PACE, provides long-term financing to fund up to 100% of renewable energy and energy efficiency improvements in commercial and multifamily buildings. Unlike traditional financing, the capital is repaid over time through a special assessment on the annual property tax bill. This means that the assessment transfers with the sale of the property as well.

C-PACE financing has a proven track record for funding energy improvements in the U.S., with nearly $7.2 billion in loans originated nationally in 2023, according to PACE Nation. Around 55% of C-PACE investment in 2023 funded energy efficiency improvements – a key first step in building decarbonization.

On-site renewable energy generation, all-electric building systems like cold-climate heat pumps, and resiliency upgrades (if identified in an assessment and in combination with renewables or electrification) are also eligible improvements with C-PACE. Payback on building decarbonization investments is aided by the fact that the loan term can be structured to reflect the expected life of the improvement – typically 20-30 years.

Project cost-effectiveness plays a role in eligibility, too. The cost-benefit ratio (CBR) [PDF], which measures the projected energy savings and societal benefits from emissions reduction divided by the financed construction and pre-development costs, must be at least 1 for a project to be eligible – with one notable exception. The CBR requirement is waived if a building is designed to be fully electrified and in compliance with local code.

Local municipalities are responsible for authorizing C-PACE financing for property owners, though the program is managed by third-party, non-profit administrators. New York City and 76 municipalities across the rest of the state have authorized C-PACE as of February 2024.

Since becoming State law in 2009 and launching in New York City in 2019 with the passage of the Climate Mobilization Act, C-PACE has been used to finance efficiency improvements and clean energy across a range of commercial building types. Completed projects range from hotels to warehouses and multifamily housing to industrial facilities.

The New York State General Municipal Law 5L Guidance Document [PDF], which was recently updated in June 2024, outlines the current requirements for energy audits, energy efficiency improvements, and renewable energy systems in detail.

The revised guidance is expected to spur greater C-PACE participation in 2024 and beyond, due in part to an expanded prequalified upgrades list, applicability to new construction, alignment with codes and standards, and more flexible cost-benefit determination for projects. In New York City, C-PACE represents a key opportunity for buildings larger than 25,000 square feet that need to lower their emissions to comply with the 2030 requirements under Local Law 97.

Developing Your Funding Strategy

Combined, tax credits, State and utility incentives, and financing opportunities can help plug gaps in the capital needed for decarbonization projects – both retrofits and new construction.

Decarbonization of existing commercial and multifamily buildings calls for a phased approach – a strategy that aligns with maximizing tax credits and incentives over multiple years. Similarly, flexible financing options are available that reflect the useful life of clean energy equipment or payback period for efficiency upgrades.

Incorporating these various funding opportunities into the decarbonization planning process is essential to inform and identify the most cost-effective path to a more sustainable future.

The New York State Energy Research and Development Authority (NYSERDA) can connect commercial and industrial leaders with technical experts and resources to take the guesswork out of decarbonization.