Savings-to-Investment Ratios (SIR) play a crucial role in determining eligibility for Commercial Property Assessed Clean Energy (C-PACE) financing. Here’s how SIR impacts C-PACE financing:
Understanding SIR
- Definition: The SIR is calculated by dividing the projected lifetime energy cost savings by the total installed cost of the project, including equipment, installation, and financing costs over the finance term.
- Requirement: For most C-PACE programs, a project must have a SIR greater than 1, meaning that the projected energy savings must exceed the total investment, ensuring the project is cash-flow-positive.
Impact on Eligibility
- Cash Flow Positivity: A SIR > 1 ensures that a project will generate more savings than it costs, making it attractive to lenders and more likely to receive consent from mortgage holders.
- Environmental Benefits: A higher SIR implies greater environmental benefits, aligning with the goals of C-PACE programs to promote energy efficiency and clean energy production.
- Funding Approval: Meeting SIR requirements is essential for obtaining funding approval from capital providers. If a project cannot meet these requirements, providers may help optimize energy savings through adjustments in project design.
Program Variations
- State and Local Guidelines: While some states or municipalities may not strictly require a specific SIR ratio, they often encourage projects with a positive cash flow.
- Exemptions: Certain measures, such as EV charging infrastructure, might be exempt from SIR requirements to encourage broad adoption of clean energy technologies.
Overall, a strong SIR is vital for securing C-PACE financing as it demonstrates the financial viability and environmental impact of a project.
Original article by NenPower, If reposted, please credit the source: https://nenpower.com/blog/how-do-savings-to-investment-ratios-impact-c-pace-financing-eligibility/
