Solution

PowerGreen channels affordable private capital to building owners to undertake clean energy investments, through a program called C-PACE.  C-PACE makes sustainability investments affordable.

When the financing is affordable, and the project is financially beneficial, property owners are generally rational and will do them.  Well-designed sustainability investments make for better buildings, and  

• Better buildings save money
• Better buildings win more tenants
• Better buildings support a more productive workforce
• Better buildings are more valuable.

Once a building owner understands the financial benefits of the project and the benefits of C-PACE financing, the final hurdle is usually uncertainty: lack of technical understanding or resources, and fear of the inherent project risk.

We bring our commercial partners to bear for our clients in a “whole building” solution to assist with energy studies, building system repair or replacement (building envelope, HVAC, lighting) and "behind the meter" renewable energy installations (solar, energy storage, geothermal), energy procurement and management services, and expert project risk management. 

In this regard PowerGreen is much more than just a source of capital for building owners. We collaborate with building owners and a network of technical experts as necessary to overcome uncertainty and make their project a reality.

Product / service

C-PACE (Commercial Property Assessed Clean Energy) is an innovative public-private financing mechanism that allows commercial property owners to access private capital for energy efficiency upgrades and renewable energy projects.  These improvements are financed through long-term, fixed-rate assessments that are repaid via the property tax bill.  This form of security makes it a relatively low-risk investment for the capital provider, resulting in a lower rate for the property owner. The long term of the assessment results in lower annual paymets -- often less than the annual energy cost savings from the project, making the project cash flow positive. 

Because C-PACE was designed specifically with a policy goal in mind -- to drive sustainability investments in commercial buildings – it has several key "borrower-friendly" characteristics:

• C-PACE is not recourse
• C-PACE is long-term, fixed-rate financing
• C-PACE is cheaper than equity, a traditional bank loan (other than a first mortgage), mezzanine financing, or manufacturer financing
• C-PACE requires no out-of-pocket upfront costs
• C-PACE repayment is funded through future energy savings
• C-PACE involves no restrictive covenants; it is long-term "quiet capital"
• The C-PACE lien "rides with the land" - i.e., it attaches to the building, not the borrower, which facilitates a sale becuase the borrow does not need to pay off the C-PACE assessment to sell the property

Investments in building efficiency and renewable energy will save energy costs and make the property more sustainable and more valuable.  

Projected impact

All of our projects involve energy efficiency for greener buildings and/or distributed energy generation and storage. Moreover, we embrace the notion that economic justice can only be achieved with environmental justice. Over 60% of the buildings we are targeting are located in LIDAC communities. 

Theory of change

The greenest building is not a new building constructed to meet the highest green standards. It's an older, existing building that has been upgraded and decarbonized. Each time a building owner undertakes a sustainability project and improves the energy efficiency of their property through C-PACE financing, it makes a meaningful and measurable contribution toward a more sustainable Philadelphia region.

Beneficiaries

By helping the underserved sector of middle-market commercial and non-profit building owners to access affordable financing to decarbonize their buildings, the entire Philadelphia region stands to benefit. Cleaner and greener buildings mean healthier tenants and more productive employees, and cleaner air for the region.

Traction

In our initial outreach efforts in southeastern Pennsylvania, we have successfully identified and engaged with over 2,000 commercial building owners, including community / non-profit organizations such as independent and charter schools, religious organizations, museums, theaters, community centers, senior centers, and more.

We have conducted training seminars on energy-efficient project financing in collaboration with various community service organizations, including local Chambers of Commerce, the Philadelphia Energy Authority (PEA), and the Chester County Economic Development Council (CCEDC) Smart Energy Initiative of Southeastern Pennsylvania (SEI), where PowerGreen is a board member. We have co-sponsored and co-organized events with PEA such as “Financing Energy and Sustainability Investments” at Drexel’s Lebow College of Business and “Philadelphia’s Black Development Community Goes Green.” These initiatives have helped us build strong relationships and generate awareness about the benefits - and now, the affordability - of sustainable building upgrades.

As a result of direct outreach, event-based outreach and collaboration with our channel partners and allies, we have developed a robust pipeline of projects at various stages of development. With the capital we are raising, we plan to significantly expand our direct outreach activities, allowing us to scale our impact and bring sustainable financing solutions to more property owners and communities.

Business model

PowerGreen generates revenue through three sources:

1. A share of upfront origination fees when a C-PACE project is funded
2. A share of the spread on the C-PACE assessment, monetized and paid at closing
3. A project development fee for projects we develop that enlist a channel partner to execute the project

PowerGreen uses three primary marketing approaches to source projects and C-PACE funding opportunities:

Channel Partner Network: We have developed a robust network of local channel partners and market allies to a) source deals, b) generate referral fee revenue, and c) deliver value to clients. Our local partners are trained to pre-qualify and introduce C-PACE opportunities. We collaborate on proposals from both directions -- In some cases, we engage with building owners early in the process and introduce them to our partners as technical resources. In other cases, our partners present C-PACE to owners and introduce us introduce us for the financing component

Event Participation: We sponsor and attend relevant local, regional, and national events—such as trade association conferences, community development forums, and chambers of commerce events—to prospect for leads and strengthen relationships with channel partners and allies.

Direct Digital Outreach: We have leveraged the CoStar CRE platform to identify Philadelphia-area property owners based on specific marketing criteria and execute targeted email marketing campaigns. Since launching this outreach in February 2024, we have reached over 2,000 building owners in the greater Philadelphia metro area.  Of these, we view direct digital outreach as the key to scalability.

Market & competition

The market for C-PACE financing is enormous. With over 6 million commercial buildings in the U.S. The addressable market related to buildings will reach $1.8 Trillion in annual revenues by 2030 (McKinsey). There are over 1 million buildings in the Mid-Atlantic (15% of the national total) and over 100,000 in PA alone, of the size that we are targeting with our strategy. 

C-PACE is a proven, fast-growing financing mechanism.  There are active C-PACE programs in 40 states and DC.  Over 3,300 C-PACE projects have been funded.  $7.2 Billion has been invested in C-PACE projects.   The market has grown at a 10-year CAGR of 175%

We are still early.  Of the 100,000 or so viable C-PACE projects in Pennsylvania, only 40 have been funded this far. Market penetration of C-PACE is well below 1% in the Mid-Atlantic region, which is also true in most other states in the country.

Competition is not the main challenge. Competition from other C-PACE capital providers is not our primary concern.  In the C-PACE market, the three largest national capital providers have all been acquired by financial institutions (a major asset manager, a major insurance company, and a major PE firm).  Yet despite their significant size these C-PACE businesses all continue to grow at a rapid pace by executing more transactions and especially, much larger transactions. (If anything, our funding relationships with these players present a promising future exit strategy.)

It’s likely that major and regional banks will eventually offer C-PACE products, but community banks, CDFIs, and credit unions probably won’t due to lack of scale, resources, and specialized knowledge.  The middle market will remain underserved for a long time. Our real competitor is not other financial companies but a lack of awareness in the massive market we serve.

Our strategy is to bring a proven product / service to an enormous segment of the CRE market that to date has been largely overlooked and underserved by the competition, which will likely be the case for a long time given the size of the overall market and the dynamics of the financial services industry.

Vision & strategy

We are focused on the middle market in the Mid-Atlantic region, where older building stock is prime for energy retrofit projects.  There are over 1 million commercial buildings in the densely populated Mid-Atlantic region, 15% of all commerical buildings in the U.S.  The middle-market represents a significant share of the overall CRE market by number of buildings, yet the middle market is largely overlooked / underserved by the national C-PACE capital providers who are drawn to larger projects. 

Our multifaceted approach includes direct outreach, mass customization of proposals, and the development of a robust network of channel partners to source deals and generate referral revenue. Our integrated technology platform enhances our ability to reach property owners at scale, automate our business processes, and efficiently manage our growing pipeline.