PACE is not dead

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Posted by:
Joel Quintal
Director of Sustainability, Australia

The PACE model is certainly not dead in Australia and is actually gaining traction through the introduction of financing agreements called Environmental Upgrade Agreements. Although these agreements are still in their infancy in Australia they operate on the principle of cheap finance being offered to building owners with the loans being repaid through the rates paid to local councils/governments. Using the City of Melbourne’s programme as an example (they were the first state to introduce them in Australia through their 1200 Buildings programme), the agreements are proposed to stimulate the retrofitting of commercial buildings in Melbourne through low cost loans being made available to building owners for environmental upgrades. The upgrade works can include improvements to energy, water, or environmental efficiency or sustainability of the building. The focus is on existing buildings as it was felt that there is a gap where industry and legislation has focussed on construction of new buildings whilst the existing stock still has a long way to go in terms of environmental performance. To give a brief overview of the scheme, the way it works is:

  1. A lender (i.e. a financial institution) loans money for the green retrofit of a building;
  2. Council recoups the cost of the upgrade through a levy on the rates notice from the land owner; and
  3. Council repays the recovered charges to the lender.

The creation of these agreements give lenders additional security in that unpaid charges will become a charge on the land that is subject to penalty interest rates and can be recovered, if necessary, through the sale of the land. The agreements are currently being piloted in Melbourne before wider roll out. Click here to view more information on the City of Melbourne’s 1200 Buildings programme.

The NSW Government is going through the process of developing Environmental Upgrade Agreements but has not yet implemented the programme officially. The main difference between the NSW model and the City of Melbourne model is that they will be implemented at a State level in NSW rather than just focussed on one city as is the case for Melbourne.

In Australia, we are seeing a renewed focus on retrofitting buildings for energy efficiency. The focus for retrofit has to be establishing a clear planned approach for the retrofit project and the best one that I have come across is the one outlined in the Low Carbon Retrofit Toolkit developed by the UK’s Better Buildings Partnership. More information on the Better Buildings Partnership can be found here.

Finally, the Australian Green Building Fund is just coming to the end of the 7th round of project funding and it was extended this year for the first time to include additional sectors to commercial office buildings, namely retail centres and hotels. Just to clarify this, during rounds 1-6 funding was limited to improvements to commercial office buildings. Click here to view a wealth of information. The Government is also consulting on the introduction of tax breaks for green buildings that is focused on improving the lower performing end of the property market. Tax breaks will be available for 50% of project costs where an improvement in building performance from <2 Star NABERS Energy rating to >4 Star NABERS Energy rating is achieved. Whilst an improvement of this nature would require a significant capital outlay and rigorous improvements to infrastructure, Government attention on funding improvements to existing buildings is certainly a positive step in significantly enhancing the efficiency of the built environment.

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