Debt-Free Solar Financing: The PACE Program

Solar energy is good for the planet and the pocket book, and the industry is growing at an unprecedented pace. But one major obstacle for almost anyone considering solar is its substantial up-front cost. In this post, we’re going to introduce a unique solution for farms and businesses (even home-based businesses): PACE Financing.

What is PACE Financing?

PACE stands for Property Assessed Clean Energy. Property assessments have been used since the 1800’s to fund public infrastructure improvements like sidewalks, fire stations and street lighting. PACE is a program created by the state legislature that allows a homeowner to opt into a property assessment to fund specific private infrastructure improvements.

The PACE program pays for solar up front, then charges bi-annual installments at the same time that you are paying your property taxes. The first payment isn’t due until the May of the year following the application, so the owner has the chance to recoup the 30% federal tax credit, the utility rebate (if any), up to 18 months of no electricity bills, and 20% accelerated depreciation before paying anything out of pocket.

Here is the cash flow chart for a recent customer:

At its very lowest, this homeowner will have an extra $2,500 on hand thanks to solar. At the end of 30 years–the lifetime of a typical system–the homeowner will be $129,000 ahead.

How do I apply?

The paperwork is surprisingly easy. You do have to get a signature from the property’s mortgage holder (if any). We submit the application back to the St. Paul Port Authority, who then coordinates with your county to set up the assessment.

How much does it cost?

Similar to a loan, the program does charge annual interest at a rate of 4.5% for the 10-year duration of the assessment. While you may be able to get a lower interest rate through a bank or credit union, our customers thus far have found the benefits of bi-annual payments to be well worth the higher rate.

Another beautiful thing about the program is that it is neither debt funding nor equity funding. No loans will show up on a credit check, barring you from other financing opportunities. And no additional mortgages are placed on the house. If you move, the assessment remains with the property and is assumed by the new owners.

In summary…

PACE Financing is the silver bullet of the solar industry, overcoming the last hurdle for businesses considering cheap, clean energy. If you have a business and a suitable site, there is simply no reason not to go solar.