The City and County of Denver are making strides to address climate change through the new Energize Denver building ordinances. Buildings must meet interim and final energy use intensity (EUI) targets by 2024, 2027, and 2030. As heating systems are replaced, Denver will also require building owners to electrify their equipment, phasing out natural gas as a fuel. Owners failing to meet Denver’s EUI targets will face fines and penalties.
You may be wondering, how am I going to pay for these improvements? The good news is this: you’re not alone, and you have options. U.S. Engineering Construction teams have been monitoring Energize Denver’s development and preparing to help our customers and partners adapt.
In the recently passed Inflation Reduction Act, the Department of Energy made the Energy Efficient Commercial Buildings Deduction permanent, at $1.80 per square foot, indexed to inflation. Energy efficiency projects placed in service between 2023 and 2032 can receive up to $5.00 per square foot. Meanwhile, Colorado has set aside $10M in grants for implementing building system electrification measures and infrastructure upgrades between July 1, 2022, and June 30, 2027.
Many electrification and energy efficiency updates take longer to generate cost savings that result in a return on investment (i.e., over 20 years). Additionally, major equipment such as air handling units, boilers and chillers have longer replacement cycles of 15 to 30 years. Commercial Property Assessed Clean Energy (C-PACE) financing allows building owners to borrow money for energy efficiency enhancements that lower EUI and decarbonizing upgrades that eliminate on-site natural gas use.
In Colorado, the C-PACE program offers long-term financing that enables owners to generate immediate cash flow to pay for improvements. Property owners repay borrowed funds over time with higher assessed property taxes based on increased building value. Interest rates have been increasing, but C-PACE provides discounted rates compared to conventional debt because of the investment in energy efficiency and renewable energy measures. Owners can also deduct C-PACE interest from their income tax liability. With extended payment terms, C-PACE funding overcomes obstacles such as short-term payback requirements and the valid concern that if larger equipment is still functioning, why replace it?
You have more questions, and we have answers. Reach out to U.S. Engineering Construction for cost and system evaluations before your next energy efficiency or electrification project!