Just as solar manufacturers have innovated new technologies to improve the output of solar modules, solar financiers have innovated new payment models that allow more customers go solar. One such model is Property Assessed Clean Energy (PACE) financing. PACE is a state program that provides upfront financing to commercial clean energy and energy efficiency projects. PACE allows project owners to repay the cost of the system through their property tax bill across 20-25 years.
“For building owners, your tax bill always goes up less than your energy bill goes down,” said Andrew Zech, Head of Business Development at Greenworks Lending, a company that provides financial services to PACE applicants.
PACE allows businesses to finance the purchase of solar, or energy efficiency improvements with the energy savings these improvements generate. Financing a system this way makes it cash-flow positive from day one. Business owners receive immediate financial benefit from their investment in solar. Because PACE financing enables businesses to own the system, the businesses are able to claim all of the attendant tax credits and RECs generated by their system. Over the life of a system, this means a building owner could be paying anywhere from a third to a half less for their system than they would through a PPA model.
Property owners must go through an approval process to receive PACE funding. The program is designed to accommodate most commercial or non-profit owners and pre-approval can take as little as a few days Once approved, the PACE program administrator will disburse funds to the contractor and the project can be built. Building owners will need to be current on their property tax payments.
PACE programs have been initiated in 38 states including Maryland. Because PACE funding is repaid through property tax, individual counties need to approve putting PACE in their tax forms. Zech said he hopes to have PACE available in seven Maryland counties by the end of the year.
Maryland’s PACE program is modeled off of a similar program in Connecticut. In just the last two years, Connecticut has financed roughly $100 million worth of projects. In Connecticut, about half of the projects were purely solar, while the other half were a combination of other energy efficiency measures. Zech is excited by the opportunity PACE financing presents to continue solar’s growth in Maryland.