San Francisco, CA, is launching a financing program to help its commercial buildings become among the country's most efficient.
In an effort to reduce energy use, San Francisco, CA, is launching a green financing program to help its estimated 226 million square feet of large commercial buildings become among the country's most energy and water efficient. Buildings consume 40% of our nation's energy use, according to the U.S. Department of Energy.
The Port of San Francisco's historic property at Pier 1, the corporate headquarters of Prologis Inc., will be the first energy efficiency upgrade funded through the city's GreenFinanceSF program that uses Property-Assessed Clean Energy (PACE) bond financing. Johnson Controls will design and implement the project.
PACE financing helps building owners access capital for a wide range of energy upgrades that can pay for themselves with reduced operating costs. San Francisco established its PACE district in 2010 and was one of the first U.S. cities to launch an "open market" PACE program last year, making $100 million in bonding capacity available to the city's commercial property owners. The city recently joined a new statewide alliance among 14 California counties and 126 cities to help attract owners and lenders to take advantage of the benefits PACE brings.
"Since buildings contribute 53% of greenhouse gas emissions in San Francisco, it is essential that we address inefficiencies in the built environment. Projects like this exemplify the successful combination of our policies and programs to both reduce emissions and help save businesses money. As more businesses take similar action, we'll continue to grow our economy while decreasing carbon emissions to help ward off the worst effects of climate change," says Melanie Nutter, director of the San Francisco Department of the Environment.
Johnson Controls expects the retrofit project at Pier 1 to reduce annual energy costs by over $98,000 and reduce purchased energy by 32%. Upgrades include retrofits for 1,500 lighting fixtures, a 200kW rooftop solar array and improvements to the building's heating, ventilation and air conditioning systems. During its construction phase, the project is expected to create nearly 30 local jobs and $3.7 million in additional economic development in California, based on multipliers developed by the U.S. Department of Commerce.
"San Francisco has a whole new claim to fame – in addition to the Bay and the bridges, it will be known for better buildings, with the help of PACE," says Chuck McGinnis, director commercial energy solutions, Building Efficiency, Johnson Controls. "Billions of square feet of office space could be transformed into more valuable property to save money, create jobs and reduce greenhouse gas emissions and it's all beginning at Pier 1."
The project cost is approximately $1.6 million, of which 90% is being funded by PACE bonds. The 20-year, low-interest bond was purchased by Clean Fund of San Rafael, CA,, a specialty PACE finance provider and will be paid off through a special property tax assessment. With PACE, if the ownership of the building changes, payments get transferred to the new owner.
Prologis has long been committed to sustainable development at Pier 1. The facility was designed in the late 1990s with many sustainable features, including preservation of the pier's existing warehouse, which launched a waterfront redevelopment plan in San Francisco that continues today. Participation in PACE is an extension of this commitment and Prologis hopes it will provide a catalyst for the program to gain traction and encourage other companies in San Francisco to make similar cost-effective and environmentally-beneficial improvements.
Increasing energy efficiency financing represents one of the largest opportunities for the U.S. to expand economic growth and create jobs. For building owners, energy efficiency lowers operating costs, increases occupancy, enhances building value, and increases financial returns. The PACE finance structure provides long-term, upfront financing that allows many energy efficiency projects to generate positive returns from the start. PACE also overcomes common project barriers such as insufficient credit and split incentives where tenants pay the utility bills and buildings owners might not see immediate incentives for major energy investments. Additionally, if building ownership changes, PACE payments get transferred to the new owner.