The availability of financing for energy efficiency and renewable energy projects has come a long way over the past few years, but it also has a way to go to gain further acceptance, experts in the field said during a session at the 2015 ULI Fall Meeting in San Francisco.

“Europe is way ahead of the U.S. on sustainability programs,” said Jack Rizzo, head of global construction and development services for Prologis, a San Francisco–based owner, operator, and developer of industrial real estate. “Energy costs in Europe are more expensive than in the U.S., so real estate developers and owners in Europe are always on the lookout for ways to save operating costs through energy efficiency.”

U.S. real estate companies must be convinced that building retrofits increase the intrinsic value of a property and enable tenants and owners to pay less for energy, said panel moderator Richard Chien, senior program coordinator in the city of San Francisco’s Department of the Environment.

For more than five years, he added, San Francisco has offered the Property Assessed Clean Energy (PACE) financing program for commercial buildings and multifamily properties with more than five units. “The PACE structure allows property owners to access long-term, 100 percent upfront financing for energy efficiency, renewable energy, and water conservation projects and pay it through their property taxes. There are now 30 active commercial PACE programs in the U.S. with basically the same structure that have funded $150 million in projects, and that number is growing every year. That’s getting to scale.”

Shannon G. Smith, founder, chief executive officer, and managing partner of Charlotte, –North Carolina–based Abundant Power Group LLC, said that the Abundant Power Group’s Clean Source Capital division designs and delivers energy-financing programs to developers in partnership with states, local governments, and utilities nationwide and has been popular with owners and developers.

“Banks are getting a little bit more excited about financing energy efficiency improvements,” Smith added. “More and more financial institutions understand that the money used to fund efficiency improvements will flow back in the future. At Abundant, we have good financial credit underwriting and we spend a lot of time going over the engineering of a potential project to make sure the right types of improvements are being sought.”

In Alabama, Smith said, Abundant has helped finance $45 million in energy-efficient improvements for over 130 buildings—enhancements ranging from flow toilets to new roofs featuring solar panels. “The right efficiency improvements could cut a building’s energy bill in half,” he added.

Abundant is working to better show the value of retrofits to customers, including demonstrating how a specific retrofit led to savings or tenant retention, Smith said. “That’s where the value gets unlocked,” he continued. “You have to show the particular savings to others like appraisers. So, we have to make sure we have intelligent building data.”

Improving the energy efficiency of a building definitely adds value to the building, Rizzo said, but “we aren’t seeing appraisers recognize these investments as additional building value. Appraisers aren’t attributing increased value to sustainability efforts. Value is being created with rooftop solar installations, but the full value for this revenue stream is not being recognized. We think it will be eventually.”

The future of U.S. energy efficiency is linking it to the tenant experience, continued Smith. “There needs to be a demonstrative link between intrinsic value and energy improvements,” he emphasized.

At the same time, Rizzo said American developers need to make a strong case that financing energy efficiency projects is a good use of capital. “At Prologis, our customers are asking for energy-saving improvements, and we have several corporate sustainability initiatives,” he explained. “Since we must [offer] competitive lease rates, we want to have the lowest overall operating costs, so energy efficiency differentiates us by lowering the cost of energy for our tenants. We make the case that it costs less to operate our energy-efficient buildings.”

Pier LaFarge, cofounder and chief executive officer of Washington, D.C.–based SparkFund—a financial technology company that enables customers to pay over time for energy-saving equipment—added that while many customers understand the value of energy efficiency, “they just don’t have the time or energy to stop what they’re doing in the normal course of their business and think through a complicated engineering or financing proposal. The task before us is to radically streamline the process for customers to uptake efficient technology, from sales, to analytics, to providing financing to remove the upfront cost barrier and align customer payments with the value they receive over time.”

Energy efficiency is still a new industry, Rizzo noted, predicting there will be more focus on it as the value proposition becomes clearer to owners and developers. “There’s a value around energy efficiency,” he added. “There is more awareness about energy consumption costs now than there was before, particularly with our top 100 customers. It’s going to be a powerful force over next five years.”

Europe, though, remains far ahead of the United States in performing and financing energy conversions. “In Europe, you are able to see exactly how energy efficient your building is,” Rizzo said. “Europe issues energy performance certificates [EPCs]—a result of a European Union directive. Each building gets a score that is displayed on a plaque on the structure. It’s sort of like a scarlet letter. It takes the ambiguity out of ‘my building is better than your building,’ and I think at some point in time we’ll see it over here.”