PACE program solar panels: Are they the right option for you?
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PACE programs are an option for financing solar panels and other home improvement projects.
It’s currently available to homeowners if you live in California, Florida, or Missouri.
If you live in one of these states, you may already know someone who used PACE to install solar panels on their home.
So how does it all work? What are PACE programs, who is eligible, and - most importantly - is it a good way to buy solar panels?
Read this guide on PACE solar financing to find out.
PACE stands for Property Assessed Clean Energy. PACE programs offer financing for energy efficiency, renewable energy, and water efficiency upgrades to the property. The types of projects covered include solar panels, heating and cooling equipment, insulation, efficient windows, landscaping, and more.
PACE loans have some interesting features: they are long-term, require no money down, and have relaxed eligibility criteria. The loan is attached to the property, and not the borrower. Repayments are made through the property tax bill.
Using PACE financing for solar panels is a popular choice. Because home solar panel systems offer big financial savings, they allow for PACE-financed projects that are cash flow positive from year one.
In other words, assuming you have a suitable home, a solar installation can immediately reduce your electricity bill by more than your annual PACE assessment.
PACE programs can only be used to buy residential solar panels in the following three states:
These are the only states which currently have active residential PACE programs (R-PACE). Without an active R-PACE program where you live, it is impossible to use PACE for solar panels.
If you’re interested in using PACE financing for a solar panel installation, a local solar company can help you help out. They can present you with options, and process the paperwork.
When it comes to its basic features, using PACE financing for solar panels looks a lot like taking out a solar loan.
Residential PACE programs offer amounts of between $5,000 to $100,000. The average PACE financing arrangement falls towards the lower end, at about $25,000 each.
This is more than enough to cover a home solar panel installation, which typically runs between $15,000 and $25,000. See solar panel cost data.
PACE financing is generally offered at fixed interest rates of around 6.5 - 9.0%.
Repayment schedules are flexible, depending on the size of the project as well as its functional life. The timeframe for repayments is usually 5 to 20 years long, but can even be as long as 30 years.
Let’s now dig a little deeper and see what the pros and cons of PACE financing are.
Here are the possible downsides to PACE financing that you should consider:
Before taking any major financial decision, make sure to do your research and seek professional financial advice if needed.
PACE financing is different from a loan.
With PACE financing, by contrast, the borrowed amount is attached directly to the property.
With a loan - whether it be secured (backed by an asset) or unsecured - the borrowed amount remains tied to the borrower themselves.
This key difference aside, PACE financing arrangements are set up a lot like regular loans. They usually have a loan-like structure of repayment, with the borrower required to pay back the principal along with interest.
In fact, because of the similarities, PACE financing is often referred to as “PACE loans” by the media, solar professionals, and consumers. It’s common to see the two terms used interchangeably, including on this website.
Installing solar panels on your roof can be an effective way to save money and earn a great return on investment.
However, whether or not you stand to save, and by how much, can depend on many factors, including the terms of your financing.
To make sure that buying solar panels PACE financing is a worthwhile option for you, follow these steps:
Use the solar calculator at the bottom of this section to see a forecast of the costs and savings of solar panels over 25 years. The estimate takes into account your energy needs, the rates offered by your utility, and all applicable incentives and rebates. It will tell you:
You will now have a clear idea of how much money you save with solar panels.
Compare the terms of PACE financing against other solar financing options, such as a solar loan.
If you qualify, you should be able to get a lower interest rate with a HELOC or home equity loan.
However, if you have a less-than-stellar credit score, or have only built up limited equity on your home, a PACE loan might be easier to get.
First off, we recommend you only consider local solar installers with high review scores; here’s why.
The next step is to request multiple quotes from the installers you’ve identified. You can also check the quotes against solar panel prices found online.
By shopping around, you’re more likely to get a good deal that matches your needs.
PACE was pioneered in 2008 in Berkeley, California. It is a financing model that operates through state legislation and local government participation.
What this means is that the state government is responsible for passing enabling legislation to establish a PACE program. It is then up to individual local governments to decide whether or not they want to opt in.
The role of local governments and municipalities here is key. If they choose to participate, they:
PACE programs are designed to address multiple goals:
PACE is divided into two subcategories, R-PACE and C-PACE.
R-PACE stands for residential PACE, and it refers to the financing of energy efficiency projects for homes. R-PACE is offered in just three states: California, Florida, and Missouri.
C-PACE, which stands for commercial PACE, is solely for commercial property. C-PACE is much more widespread; there are active C-PACE programs in 28 states plus D.C.