When you’re considering a TX-PACE project, the numbers matter. A TX-PACE independent review provides a qualified third-party check of the projected energy or water savings before the project moves forward.

Before a project moves forward, the projected energy or water savings are reviewed by an independent engineer. For a property owner taking on a long-term assessment, that independent review provides an important check: Are the projected savings reasonable, and does the analysis support the proposed project?

That matters because the projected savings help determine how much of the project can be financed. The expected useful life of the improvements also helps establish the maximum assessment term.

In other words, the technical analysis is an important part of understanding the financing before you make a long-term commitment.

What Does a TX-PACE Independent Reviewer Check?

Every TX-PACE project in Texas requires an energy or water analysis and an independent review.

The analysis establishes a baseline for the property and estimates how energy or water use is expected to change after the proposed improvements are installed. The difference between the baseline and projected future use is used to calculate the anticipated savings.

An Independent Third Party Reviewer (ITPR) then takes a second look at the analysis.

The reviewer evaluates the assumptions, methodology, and calculations supporting the projected savings. The reviewer must be a Texas-licensed Professional Engineer who meets the program’s qualifications and has no financial interest in the project.

The review considers questions such as:

• Is the baseline appropriate?
• Are the projected savings reasonable?
• Does the analysis follow the requirements of the Technical Standards Manual?
• Are there questions or errors that need to be addressed before the analysis can be validated?

The goal is not to redesign the project or replace the work performed by the project team. It is to provide an independent technical check on the analysis supporting the proposed TX-PACE assessment.

Choosing a TX-PACE Independent Reviewer

The property owner selects and pays the independent reviewer. Texas PACE Authority maintains a list of potential reviewers to help property owners identify qualified engineers.

Regardless of who pays for the review, the engineer must meet the program’s independence requirements. An individual with a conflicting role or financial interest in the project cannot perform the independent review.

The technical standards are the same regardless of which qualified engineer is selected.

Typically, the contractor or project team develops the proposed scope of work and supporting analysis. The independent reviewer then evaluates whether that analysis reasonably supports the projected savings.

That distinction is important.

The independent reviewer is not there to tell you whether you should move forward with the project. The review provides an additional level of technical diligence so that you, your capital provider, and the local government have a common, documented basis for evaluating the project.

Why a TX-PACE Independent Review Matters

A TX-PACE assessment is a long-term obligation tied to the property. The assessment payments remain due even if actual utility costs are higher than originally projected.

That makes the assumptions behind the savings analysis important.

An independent review does not eliminate the uncertainty that comes with projecting future energy or water use. It does, however, provide an opportunity to identify questions, assumptions, or errors before the project moves forward.

For a property owner, that is valuable information to have before taking on a long-term assessment.

The TX-PACE Independent Review Doesn’t Stop at Closing

The technical review has an important role both before and after installation.

Before installation, the independent reviewer examines the energy or water assessment report, including the baseline, proposed improvements, and projected savings. This review supports the determination of technical eligibility.

After installation, the reviewer checks the completed work against the assessment report and evaluates whether the improvements are operating as intended.

Both steps matter.

Construction projects can change. Equipment can be installed differently than originally anticipated. Controls may require adjustment. The scope of work may evolve during construction.

The post-installation review provides another check to make sure the completed project aligns with the work and assumptions that supported the original analysis.

How the Technical Analysis Supports the Financing

One of the key measures in a TX-PACE project is the Savings to Investment Ratio, or SIR.

Generally, a TX-PACE project must have an SIR greater than one. In simple terms, the projected savings over the life of the project must exceed the total assessment cost, including financing costs.

The assessment term is also limited by the expected useful life of the improvements.

These requirements are designed to align the financing with the benefits the improvements are expected to provide.

It is important to remember, however, that the analysis is still a projection.

An independent review tests whether the assumptions and calculations are reasonable based on the information available. It does not guarantee future utility rates, utility bills, operating conditions, or annual cash flow.

What This Means for Property Owners

For property owners, the independent review is one more piece of information to consider before moving forward with a TX-PACE project.

You should understand the assumptions behind the projected savings, what the independent engineer reviewed, and how those projections support the proposed assessment.

The review also gives capital providers and local governments a documented technical basis for evaluating the project. Everyone involved can work from an analysis that has been examined by a qualified, independent engineer.

Our recommendation is simple: understand the numbers before you commit to them.

Allow adequate time in your project schedule for the independent review and for any questions that may need to be addressed. Getting those questions resolved early can help keep the project moving later.

Texas PACE Authority can help property owners understand the program requirements and identify potential independent reviewers.

Next in this series: How the Savings to Investment Ratio works—and what it tells a property owner.

Check Your TX-PACE Project Eligibility

About Texas PACE Authority

Texas PACE Authority (TPA) is a nonprofit organization and the leading administrator of TX-PACE programs in Texas, serving 114 cities and counties across the state at the time this article was published. 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.