Michigan regulators use PACE to ‘set example’ on efficiency

The Michigan Public Service Commission announced this week that it will be the first state energy agency in the country to use Property Assessed Clean Energy financing for efficiency projects at its new headquarters.

The agency will lease the building from a private owner, who has agreed to finance just under $500,000 for LED lighting, a 20 kW solar array and variable speed motors for heating and cooling.

The property owner, Saginaw Plaza Ltd., will receive a 20-year fixed-rate loan that will be paid for through the MPSC’s energy savings. It’s anticipated that the building will save more in reduced energy consumption than the cost of the loan.

“The commission thought it would be a good idea to set an example when it comes to energy efficiency,” MPSC spokeswoman Judy Palnau said.

“Normally you’d have a landlord saying, ‘Forget it,’ because the tenant is paying the utility bill, (landlords) have no incentive to improve it,” she added, referring to what’s called the “split incentive.”

The nearly 200-employee agency plans to move into the retrofitted building by the end of the year. Property records show the 72,484 square-foot building is 26 years old. It is the second PACE-financed project in Michigan, said Andrew Levin, president of Lean & Green Michigan, which oversees the state’s PACE program.

“What’s really significant is that this was initiated by the tenants,” Levin said. “One of the main reasons that commercial buildings are not made more efficient or have renewables added is because the tenants pay the utility bills. What does the owner care if the operating costs are high because they don’t pay for it? PACE really solved that problem.”

“PACE is an innovative way that landlords, tenants and local officials can work together to pursue energy efficiency projects that would not otherwise take place,” MPSC Chairman John Quackenbush said in a statement.

Through the financing agreement, Levin said the property owners, who are based in Texas, will get a retrofitted building “at basically no cost,” as the special property assessment is passed on to the MPSC.

Michigan’s first PACE project — which covered half of the costs of a $1 million retrofit of an office building in metro Detroit — is set for an unveiling next month.

Since the two sluggish years after Michigan’s PACE law was adopted in 2010, the Lean & Green program has added nine counties and three cities to its membership. Levin said that geographic area includes 44 percent of the state’s population.

Last week, the Michigan Land Use Institute profiled a northern Michigan company that sells energy-efficient classroom heaters. While public schools are able to use bonds to pay for the devices, PACE financing could be used by private schools in areas where a PACE district is established.

A statement by Lean & Green says new projects will be announced in the coming weeks and the “pipeline of proposed PACE projects” exceeds $42 million.

“It’s growing very fast,” Levin said of the program.

‘Cereal City’ recognized

Meanwhile, the Michigan Economic Development Corp. recognized the city of Battle Creek earlier this month for efficiency upgrades it made on two large publicly owned facilities.

Through Energy Savings Performance Contracts with Ameresco, a major energy savings company that also consulted on the MPSC project, the city was able to make upgrades at Kellogg Arena Event Center and an 88,000-square-foot recreation center. It has resulted in $84,000 worth of annual energy and maintenance savings.

“The idea is that we can have someone come in, do improvements and we pay back those improvements with energy savings,” said Ted Dearing, who manages both facilities for the city’s Parks and Recreation Department.

Conservation measures include exterior improvements, LED lighting and solar panels for an outdoor pool.

Dearing said preliminary talks have taken place for efficiency projects at additional buildings.

“It didn’t necessarily start that way,” he said. “As we learned more about the process, we’re probably more inclined to look at a broader energy process that includes multiple projects.”

One thought on “Michigan regulators use PACE to ‘set example’ on efficiency

  1. Andy,
    This is great to see interest free program on Energy Efficiency. Please keep up the good work – the return is not quantifiable and result is saving year after year plus the reduced need for additional new generation.
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    God bless, Dawood Latif – Hamilton, New Zealand.