PACE Loans Offers a Third Solar Financing Option

3-16-2015 PACE Loans Offers a Third Solar Financing Option

In the solar financing world, there are usually two options: third party ownership or solar loans. However, a third method of financing the installation of photo-voltaic (PV) solar panels is gaining steam.

Known as property-assessed clean energy (PACE) loan programs, this financing option offers property owners a unique opportunity to go solar while reducing risk.

What is PACE?

PACE loan programs are a local government and community initiative. They offer property owners the opportunity to invest in energy-efficient retrofits and upgrades both commercial properties and (in some states) homes. Approved property owners get 100% financing and repay the investment through a property tax assessment. Payment terms generally last up to 20 years.

One major benefit of PACE is it eliminates the initial cost of upgrading a building’s energy systems. The second benefit comes in the form of low-cost, long-lterm financing.

Until 2010, PACE loans were in the hands of government-backed housing lenders Fannie Mae and Freddie Mac. The government refused to let the lenders underwrite home mortgages for people who had PACE loans. It was too risky for the lenders. As a result of this action, most PACE financing shifted to the commercial market.

PACE vs Third Party Ownership

In third party ownership, homeowners don’t own the solar panels on their roofs. They either lease them from a company or they buy the power that the panels produce at a reduced rate.

With a PACE loan, homeowners effectively own the panels on their roofs. They make systematic payments over several years. One point that separates PACE loans from standard solar loans is that homeowners don’t need to make a down payment on the panels.

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Residential and Commercial PACE Around the US

California has completed the most PACE residential projects, coming in at about $500 million. That’s enough money to upgrade 25,000 homes.

Elsewhere in the US, PACE is gaining attention. In Summer 2014, Texas launched its “PACE in a Box” toolkit, which makes it easier to get commercial PACE financing. Other states expanding commercial financing include Utah, Illinois, Florida, and Colorado.

Residential PACE is making a comeback in South Florida, one of the first places to return to residential financing in 2013.

Problems With PACE

There are more options and opportunities for residential PACE financing than ever before. However, some organizations don’t want to see the rapid adoption of PACE.

In South Florida, the Florida Bankers Association is challenging the validations on the bonds that back residential PACE loans. The bankers don’t want homeowners to pay their PACE loans first if they have outstanding property payments.

So far the PACE movement in Florida has managed to overcome these legal hurdles. If the victories continue, Florida’s residential PACE market will likely grow in the next year.

Find PACE Programs

PACE advocates are pushing to make residential and commercial financing a reality across the country. However, it’s up to local and community governments to start the programs. If you’re interested in getting PACE financing for your house or business, visit to find out if your state supports the PACE initiative.

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