Southwest MN businesses make energy upgrades with PACE financing

Property Assessed Clean Energy (PACE) financing is a tool available to commercial, industrial, and agricultural businesses in participating counties across Minnesota to finance clean energy improvements at their facilities to increase energy efficiency. 

In southern Minnesota, the program is available to businesses in member counties of the Rural Minnesota Energy Board. The Southwest Regional Development Commission administers the program led by Robin Weis, SRDC deputy director. "Due to financing through RMEB PACE, we are seeing businesses and agricultural producers move their vision of becoming more energy efficient to reality," Robin shared. "Low-interest and long-term financing has motivated their investments in clean energy in our 18-county service area."

PACE allows businesses to make these fixture improvements without the need for upfront capital or other lines of credit. An energy audit helps the business identify where improvements are needed and then costs for the energy upgrades are paid back through a special assessment on the business’ property taxes. An increase in property taxes is offset by decreases in energy costs.

We spoke with several small business owners across different sectors who participated in the PACE program in recent years to learn more about their motivations and experiences investing in clean energy.

“We appreciated the flexibility of the [RMEB PACE] program and how it was assessed through our real estate taxes. Since we’d just purchased the business, that was really helpful. In terms of the upfront costs and savings we would have over time, it would have been hard for us to justify paying for these upgrades out of pocket, especially since it was such a new business,” she said.

Having a dedicated point-person to assist with the application process and paperwork helped make the process accessible.

“The process went really very smoothly. Robin Weis was a big help with that,” Meyeraan said.

To date, Weis and her team at SRDC have helped 30 businesses finance clean energy projects across southwest Minnesota through the RMEB PACE program.

Despite a successful experience with her earlier projects, Meyeraan admits she is not actively planning any other upgrades at her business. That said, participating in the PACE program and seeing the savings that clean energy provides has encouraged her to consider future opportunities, even for her own home.

“While we’re not immediately pursuing any other energy efficiency projects at our business, I would love to do some clean energy projects on my personal property. I’d like to do something like solar eventually,” Meyeraan said.

Project Snapshot:

• Location: Fulda, MN - Murray County
• Description: Installed an on-demand hot water heater and updated interior lighting to LEDs
• Useful Life: 20 years/15 years respectively
• PACE Loan Term: 10 years
• Project Costs: $11,620
• Savings Per Year: $1,561.68
• Annual Payments:$1,421.28
• Annual Net Savings: $ 140.40/yr for 10 years + $13,332.60 for remainder of life expectancy
• Total Net Savings: $1404 over loan term

Although Raudenbush’s family members including son Jesse now run the business, Bob has remained involved and welcomes opportunities to spread the word to other businesses about his experience with energy efficiency upgrades and financing.

“We don’t have other energy needs ourselves, at this point. But I have referred a couple other local businesses to the [RMEB PACE] program that I thought would be interested. Whenever it comes up, I like to pass along information,” he said, expressing his hope that testimonials like his make a difference. In fact, he initially learned about the program from Larry Potter, owner of Blue Line Travel Center in Worthington, which had also made lighting upgrades using PACE financing.

Raudenbush emphasized a measured approach to making energy efficiency investments but doesn’t discount the positive impact energy conservation measures can have on both operating costs and the environment.

“As long as we don’t go overboard, as long as programs like PACE finance themselves, I’m all for them,” Raudenbush said. “I don’t want to take money out of my pocketbook that I don’t need to spend, but I also can’t turn a blind eye to curbing our energy use and helping the environment either… We try to conserve year-round. The less we use these resources like energy and water, the less it costs.”

Project Snapshot:

• Location: Worthington, MN – Nobles County
• Description: Interior and exterior building energy retrofit with energy efficiency upgrades for lighting, HVAC, freezer, cooler, island case, compressors
• Useful Life of Upgrades:
  • 12 years – Lighting/Signage
  • 15 years – Cooling, Compressor
  • 20 years – Heaters, Condensers
• PACE Loan Term: 15 years
• Project Costs: $76,030
• Annual Energy Savings: 532.88 MMBTU
• Savings Per Year: $6,421 for equipment life
• Annual Payments: $6,789 for 15 years
• Annual Net Savings: $6,420 for 15 years
• Total Net Savings: $96,316* over equipment life

* Total Net Savings is calculated by multiplying the useful life of the improvement by the estimated annual savings, then subtracting the cost for materials, installation, and interest over the term of the assessment.

To fund the roof insulation project, Holt first spoke with Worthington’s First State Bank Southwest and through them connected with SRDC to explore RMEB PACE financing. Financed through the business’ property taxes instead of through a private loan, PACE was a good fit for the $12,680 roof and insulation project.

“There wasn’t a hesitation to get SRDC involved at that point, once we learned about the program. We wanted to make sure we were updating and upgrading without borrowing too much,” he said.

Holt understood the weatherization project would have multiple benefits including aesthetic improvements and cost savings from reduced energy use.

“The biggest thing was the look for us, but obviously the cost savings were also huge. When you get an old building like this, so much of your money is leaking out of the roof or walls because of wasted energy, poor insulation and old lighting,” Holt explained.

Holt didn’t stop investing in energy efficiency at his business after completing the PACE-financed roof project. He has continued working incrementally on lighting upgrades and is considering adding more insulation to further reduce heating bills in the winter.

“Business has been good and we’re saving energy. Little by little and as we can afford them, we’ve been able to utilize the money we’ve saved to reinvest in the business and other upgrades in our building. We’ve done a bunch of interior projects from LED upgrades and showroom lighting, replacing outdated fluorescent and incandescent lights. I want to add even more insulation before it gets too much colder to prevent larger heating costs,” Holt said.

The numerous energy efficiency projects have had a noticeable and positive impact on the Culligan storefront’s energy use and operating costs year-round.

“Just these little things I’ve done with the lighting save energy and the new roof helped curb heating and cooling costs,” Holt said. “In the winter, the old roof leaked water and energy because it wasn’t properly sealed or insulated, and because we went with a white membrane for the new roof, we have been able to dramatically help with summer cooling costs, too.”

Project Snapshot:

• Location: Worthington, MN – Nobles County

• Description: LED Lighting and Installed a new roof membrane and added insulation.

• Useful Life: 15 years/25 yrs respectively

• PACE Loan Term: 15 years

• Project Costs: $12,680

• Annual Energy Savings: 129.09 MMBTU

• Savings Per Year:$1655

• Annual Payments:$1132.32

• Annual Net Savings: $522.68

• Total Net Savings: $19320.20