**C-PACE Financing Poised for Growth Despite Green Energy Funding Cuts in New Legislation**
The recent enactment of the One Big Beautiful Bill Act (OBBB) of 2025 has introduced new restrictions on tax credits for renewable energy initiatives. Despite the potential implications for green funding, Bali Kumar, Chief Operating Officer of PACE Loan Group (PLG), remains optimistic about the future of commercial Property Assessed Clean Energy (C-PACE) financing.
Kumar asserts that the OBBB will not hinder the growth of C-PACE. In an interview with Connect CRE, he emphasized that the financing method remains robust, particularly as it is administered under state law without involvement of federal funds or oversight.
“We don’t expect to see any reduction in opportunities to use C-PACE financing for new construction projects, renovations, or recapitalizations,” said Kumar. “The number of states offering C-PACE financing continues to grow. Georgia, North Carolina, New Jersey, and New York are expanding their programs, and we are seeing more applications every day.”
One key provision in the OBBB mandates that certain renewable energy projects must begin by July 4, 2026, and be operational by January 1, 2027, to qualify for remaining federal tax credits. According to Kumar, this urgency is actually accelerating demand for C-PACE.
“These projects are now racing to the closing table to benefit from both C-PACE financing and federal tax credits—a financial ‘double dip,’” he added.
**Opportunity Zone Expansion Providing a Boost**
Another potentially transformative aspect of the OBBB is the permanent expansion of the Opportunity Zone (OZ) program, initially introduced through the 2017 Tax Cut and Jobs Act. Kumar believes this development will open up more avenues for C-PACE financing.
“C-PACE is a great fit for OZ deals, where we’ve already seen successful implementation. These areas are primed for significant redevelopment or new development,” he said.
He noted that redevelopment projects often entail modernization of HVAC systems, windows, electrical setups, elevators, and plumbing — all of which are eligible for C-PACE financing.
While there had been a slowdown in OZ projects in recent months, Kumar expects the revitalized and extended program under OBBB to renew investor interest and spur new developments.
**Interest Rates and C-PACE Market Dynamics**
When asked about the impact of stagnant high interest rates, Kumar maintained that C-PACE remains a flexible financing tool.
“In our current ‘higher for longer’ interest rate environment, C-PACE is helping reduce the overall cost of capital, particularly for projects leveraging more expensive construction debt,” he explained. “We work closely with senior lender partners to ensure all deals meet necessary debt service coverage ratios (DSCR).”
**The Role of C-PACE in Opportunity Zones**
Reflecting on its historical use, Kumar observed that C-PACE was not widely adopted during the initial rollout of the OZ program in 2017 due to limited availability and awareness. However, as the financing option has become more widespread, Opportunity Zone investors have increasingly turned to C-PACE to improve financial outcomes.
“Savvy investors recognized early that C-PACE could enhance internal rates of return and stretch capital across multiple deals. Plus, C-PACE aligns well with the long-term investment horizons typical of OZ projects,” he said.
**Future Outlook and Additional Benefits from OBBB**
While OBBB curtails some energy tax credits, it simultaneously opens new advantages for energy-efficient building upgrades — a core use case for C-PACE.
“C-PACE excels at financing energy-efficiency improvements that reduce building operating costs. Even as some federal incentives expire, C-PACE remains a relevant and powerful tool,” said Kumar.
Furthermore, OBBB now permits owners to fully depreciate energy improvements in the first year, providing a fresh incentive for adopting energy-efficient building upgrades.
**About Bali Kumar**
Bali Kumar has been with PACE Loan Group since 2021 and brings nearly a decade of experience in C-PACE financing. He previously served as CEO of Lean & Green Michigan, where he helped establish one of the nation’s strongest PACE programs. His professional background includes roles at Deloitte, Proskauer, and the Wayne County Land Bank in Michigan. Kumar holds degrees from Brown University, the London School of Economics, and Berkeley Law and is a member of both the New York and California bars. He also serves as the Board Chair for the Minnesota Clean Investment Fund Authority (MNCIFA), Minnesota’s first Green Bank.
