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Retrofitting a commercial building is expensive. Swapping out an aging gas furnace for a heat pump, upgrading electrical service, adding battery storage, or flood-proofing a basement can cost tens or hundreds of thousands of dollars – costs that may be out of reach for many building owners.
That’s the problem a financing tool called Commercial Property Assessed Clean Energy (C-PACE) is designed to solve. The Ontario government is considering whether to enable a province-wide C-PACE program, and asked for public feedback on its proposal. OCAF submitted formal comments, and this post shares a summary of our recommendations and the reasoning behind them.
What is C-PACE?
With C-PACE, instead of taking out a conventional loan, a building owner finances an energy retrofit and repays it gradually through a charge added to their property tax bill. This repayment period often runs 15 to 25 years, roughly matching how long the upgrade will actually last.
Because the debt for this retrofit is attached to the property rather than the owner, repayment terms can stretch out much longer than a typical loan, the obligation can transfer to the next owner if the building is sold, and lenders tend to see the financing as lower risk – all of which usually means better financing terms for building owners. Unfortunately, this type of innovative retrofit financing doesn’t currently exist for commercial buildings in Ontario.
OCAF’s recommendations
Cover whole-building retrofits, not narrow categories
Ontario’s draft proposes that projects eligible for financing would only include energy efficiency, renewable energy, and water conservation upgrade projects. OCAF recommended that the program should expand to cover energy storage, EV charging, and electrical service upgrades – often essential pieces of the same retrofit – plus climate adaptation measures like cooling systems and flood protection. OCAF also asked that C-PACE be made available for new construction, since building high-performing buildings from the start is cheaper than retrofitting them later.
Let qualified third-party administrators run the program
C-PACE needs a well-run administrative system, and no single municipality should have to build that from scratch. OCAF recommended that Ontario let municipalities appoint third-party administrators, rather than building their own systems individually.
Set a consistent provincial framework, with room for local flexibility
Although having a provincial framework to follow would help in the early stages of program implementation, municipalities should be able to layer in local priorities. OCAF recommended that the province allow for flexibility, allowing municipalities to make changes that will best serve their communities.
Make repayment clear and predictable
OCAF recommended that unpaid C-PACE charges be collected the same way as unpaid property taxes, and that a missed payment shouldn’t trigger the entire balance coming due at once. Predictable rules like this are what give lenders confidence to offer competitive rates and give building owners the confidence to use this financing in the first place.
The bottom line
C-PACE has worked well elsewhere because it matches financing to how long a retrofit actually pays for itself. Ontario has an opportunity to build a program that does the same, which will be critical for commercial building owners’ ability to retrofit their buildings and for our ability as a society to reach net-zero.
OCAF is glad to see the province taking commercial building retrofits seriously, and will keep engaging as the framework develops.
If you’re interested in learning more, you can read OCAF’s full submission to the Environmental Registry of Ontario here.