When the Texas Legislature authorized Property Assessed Clean Energy (TX-PACE) financing in 2013, the vision was straightforward: create a financing tool that would help commercial property owners invest in energy and water efficiency improvements without relying on taxpayer funding.

More than a decade later, TX-PACE has evolved into something much larger.

Today, it is a proven source of private capital that helps developers, property owners, lenders, and local communities overcome financing challenges while supporting economic growth across Texas. What began as a conservation initiative has become an increasingly important component of commercial real estate finance.

Meeting Today's Financing Challenges

Commercial real estate developers continue to face rising construction costs, higher interest rates, tighter underwriting standards, and increasing demands for resilient, high-performing buildings. At the same time, Texas continues to experience rapid population growth, placing greater demands on the state's energy and water infrastructure.

These market conditions have increased the value of financing solutions that improve project economics while reducing long-term operating expenses.

TX-PACE helps address both challenges.

By providing long-term, fixed-rate financing for eligible energy and water improvements, TX-PACE allows property owners to preserve equity, improve cash flow, and strengthen the overall capital stack. Because repayment occurs through a voluntary property assessment, financing terms can often be aligned with the useful life of the improvements, making projects more financially sustainable.

A Private Investment with Public Benefits

One of the most unique aspects of TX-PACE is that it delivers meaningful public benefits without requiring public funding.

Participation is entirely voluntary. Local governments choose whether to establish a TX-PACE program, and property owners choose whether to participate. Projects are financed with private capital provided by commercial lenders, not taxpayer dollars.

The result is a financing program that encourages private investment while helping communities conserve valuable energy and water resources, stimulate economic development, and strengthen their commercial property base.

Every successful TX-PACE project creates value beyond the individual building.

Construction activity supports local contractors and suppliers. Modern building systems improve long-term property performance. Lower operating costs strengthen net operating income and asset values. Reduced energy and water consumption eases pressure on critical infrastructure. Together, these benefits contribute to stronger local economies and more resilient communities.

Reduced energy and water use also eases pressure on critical infrastructure. The TX-PACE Energy and Emissions Tracker developed by HARC documents these resource savings and the economic benefits generated by projects across Texas.

The Numbers Tell the Story

Early assessments by the U.S. Department of Energy estimated that qualifying commercial building improvements in Texas represented approximately $18.4 billion in potential capital investment while generating nearly $28.4 billion in utility savings over time. That represents an estimated return of approximately $1.54 in savings for every $1 invested.

Those estimates, however, were based primarily on energy efficiency improvements in existing buildings and did not fully reflect how the Texas program would ultimately evolve.

Texas adopted one of the nation's most flexible commercial PACE programs. In addition to financing energy efficiency improvements, TX-PACE also supports eligible water conservation measures and renewable energy improvements. The program can also be used for qualifying new construction projects, significantly expanding its economic potential.

Actual project experience has demonstrated that the market opportunity extends well beyond the assumptions used in the original DOE analysis.

Real Projects. Real Economic Impact.

Since its inception in 2015, Texas PACE Authority has partnered with local governments across the state to administer one of the nation's most active commercial PACE programs.

Today, TX-PACE financing has supported hundreds of millions of dollars in private investment across a diverse range of commercial property types, including:

• Multifamily housing
• Hotels and hospitality
• Office buildings
• Industrial facilities
• Mixed-use developments
• Healthcare facilities
• Historic rehabilitations
• Adaptive reuse projects
• Commercial new construction

The program has financed projects ranging from modest equipment upgrades to some of the largest commercial real estate transactions completed in Texas.

Perhaps more importantly, TX-PACE has become increasingly integrated into the way sophisticated developers and capital providers structure projects. Rather than serving as a financing option of last resort, it is now frequently incorporated into the capital stack from the earliest stages of project planning.

Creating Better Capital Stacks and Better Projects

The value of TX-PACE extends beyond financing individual improvements.

By replacing a portion of traditional equity or higher-cost capital with long-term financing, TX-PACE can improve project feasibility, strengthen underwriting metrics, and preserve liquidity for other project needs.

For many developments, these improvements can mean the difference between a project that remains on the drawing board and one that moves forward into construction.

For others, TX-PACE creates opportunities to incorporate higher-performing building systems that may have otherwise been eliminated during value engineering. Those investments often continue generating operational savings long after construction is complete.

The result is better-performing buildings, stronger financial outcomes, and investments that create lasting value for owners, tenants, lenders, and communities alike.

Looking Ahead

As awareness of TX-PACE continues to grow, so does its potential economic impact.

Every new community that adopts the program expands access to private capital. Every new project represents additional investment in Texas businesses, jobs, infrastructure, and commercial real estate. And every successful transaction demonstrates that conservation and economic development are not competing priorities, they are complementary objectives.

More than a decade after its authorization, TX-PACE has proven to be far more than an energy financing program. It has become a practical, market-driven financing solution that helps property owners build stronger projects while supporting the long-term economic vitality of Texas communities.

About Texas PACE Authority

Texas PACE Authority (TPA) is a nonprofit organization and the leading administrator of TX-PACE programs serving 114 cities and counties across Texas, at the time this article was written. TPA works with local governments, property owners, and capital providers to facilitate financing for energy and water efficiency, resiliency, and distributed generation improvements in commercial properties. Through its program administration and market leadership, TPA helps ensure that high-performance building solutions are accessible, scalable, and aligned with the long-term needs of Texas communities. 

www.texaspaceauthority.org