PACE Financing Offers Reasons To Go Solar

After a bumpy start, Property Assessed Clean Energy (PACE) financing has again picked up steam as public-private option for homeowners looking to solarize. Last month, the Los Angeles County Board of Supervisors voted for PACE financing for 42 cities, clearing the way for Renovate America‘s HERO program and other energy retrofit financiers to clean up their carbon footprint. This month, Connecticut securitized a PACE portfolio worth a cool $30 million.

So far, 80 percent of the U.S. has enabled PACE, and the rest probably isn’t far behind.

That’s because PACE is a rather simple solar bond that mostly copies the historical industry model for loans. Participating municipal governments or finance companies offer investors PACE bonds backed by consumer and business loans, collateralized in turn by annual property tax assessments, and then everyone lets the sunshine in. Financing for rooftop solar systems and power purchase agreements is repaid over a standard 20-year period, unless the property changes hands before that, in which case the loan stays attached to the property rather than the owner.

First implemented in progressive Berkeley, PACE has evolved to the most of the nation, even the often gridlocked District of Columbia. Despite its fits and starts, PACE’s slicing and dicing of solarization’s upfront costs over 20 years of has a distinctly bipartisan appeal.

“PACE has several benefits with respect to solar energy,” SEIA spokesperson Ken Johnson told SolarEnergy. “In some areas, it helps meet the high demand for solar consumer financing. In particular, the long-term financing aspect is crucial to eliminating the up-front cost barrier to solar energy projects. Just as importantly, PACE can increase property values and save consumers money by reducing energy costs. It’s a win-win in most cases.”

The cases where PACE have not been win-win have varied from Berkeley, which pulled the financing mechanism, to government-backstopped lenders like Fannie Mae and Freddie Mac, who were directed by underwriters at the Federal Housing Finance Agency (PDF) to “take appropriate action to avoid purchasing new or refinanced loans that were encumbered by this retrofit lending program.” This week, however, New Hampshire votes on House Bill 532 to increase the cap on PACE loans from $60,000 to as much as $1 million. The kinks are still being worked out, even as momentum increases.

“We actually feel like this program is taking off very quickly,” HERO spokesperson Severn Williams told Solar Energy. “We’re seeing more and more cities and counties join. Within the last month, HERO has launched in 42 cities within Los Angeles County alone, plus the City of San Jose and dozens of other smaller cities throughout the state. Eligibility for HERO is based primarily on available equity in a home, not on the homeowner’s FICO credit score, which means that, for some homeowners, HERO may be their only avenue for accessing affordable financing for energy- and water-saving improvements.”

“We think our record speaks for itself,” Williams added, noting that HERO is “currently financing 95 percent of all residential PACE projects. We’re active in 150 jurisdictions, more than 10,000 property owners have taken advantage of the program and we’ve financed more than $200 million in improvements, creating more than 2,100 jobs in the process. And we did all of this in just 2.5 years.”

This article appeared at Solar Energy