Study shows PACE financing’s big impact in driving solar installations

PACE solar financing

A federally funded analysis by researchers at Lawrence Berkeley National Laboratory (LBNL) offers evidence that the home-improvement financing option known as Property Assessed Clean Energy (PACE) has been “uniquely successful” as a driver of residential solar-power systems in California. Essentially, many of the systems installed via this financing vehicle simply could not have happened without it.

The study covered the years 2010-2015, when residential PACE programs such as Renovate America’s HERO financing were expanding rapidly across California. While previous studies demonstrated that early, regional PACE programs increased the deployment of residential solar photovoltaic (PV) systems, this new analysis is the first to demonstrate these impacts from HERO and other large, statewide residential PACE (R-PACE) programs.

“Our estimates imply that the majority of PV deployment financed by R-PACE programs would likely not have occurred in the absence of the programs,” researchers Jeffrey Deason and Sean Murphy wrote. “These results suggest that R-PACE programs have increased PV deployment in California even in relatively recent years, as R-PACE programs have grown in market share and as alternate approaches for financing solar PV have developed.“

PACE programs like HERO empower homeowners to make energy and efficiency improvements to their homes and pay for them over time at a competitive, fixed interest rate through an additional, voluntary assessment on their property taxes.

“PACE was designed to encourage the adoption of more clean-energy technologies, and it’s encouraging to see evidence that these programs are really moving the needle when it comes to driving deployment of distributed solar PV and empowering homeowners to go solar,” said Renovate America CEO Roy Guthrie.

Since it launched in late 2011, HERO has financed the deployment of over 183 megawatts of residential solar capacity across over 30,000 homes – more than any other PACE provider. That’s equivalent to almost 5% of the total residential solar PV capacity installed across the territory covered by the three California investor-owned utilities (SDGE, PG&E, SCE). To put it another way, HERO has financed the installation of more PV capacity than exists in the following 14 states, combined (as reported by SEIA as of March 2018): Alaska, Arkansas, Kansas, Kentucky, Maine, Montana, Nebraska, Oklahoma, both Dakotas, Rhode Island, West Virginia and Wyoming.

The LBNL analysis, which was funded by the U.S. Department of Energy’s Office of Energy
Efficiency and Renewable Energy – Building Technologies Office, noted that California’s residential PACE programs are worth studying because they have in many respects been “uniquely successful” among energy-efficiency and solar PV financing programs. California is the nation’s largest market for PACE financing.

The researchers also noted that California has identified PACE as one of the tools that will help it meet the energy-efficiency targets laid out in Senate Bill 350, the 2015 law that calls for the state to double energy-efficiency savings by 2050. They added that several states are considering an increasing focus on financing programs like PACE as opposed to utility rebates to drive deployment of energy efficiency.

— Solar Builder magazine

Connecticut Green Bank’s PACEsetter award given to Direct Energy Solar

Direct Energy solar

The Connecticut Green Bank awarded Direct Energy Solar and Durham Agricultural Fair Association the PACEsetter Outstanding Project Award for their solar project, a Power Purchase Agreement (PPA) secured by Commercial Property Assessed Clean Energy (C-PACE), at the Durham Agricultural Association Fairgrounds in Durham, CT.  The system is 188.65 kW and composed of 686 Hanwha QCell 275-watt panels with a SolarEdge Inverter System.

The PACEsetter Awards were created by the Connecticut Green Bank to acknowledge those who are advancing the green energy movement through the C-PACE program, and whose leadership establishes a “pace” for others in their field to follow. This is the third annual PACEsetter Awards ceremony.

“Our ‘PACEsetters’ are the driving force behind the C-PACE program,” said Mackey Dykes, Vice President of Commercial, Industrial, and Institutional Programs at the Connecticut Green Bank. “The Connecticut Green Bank is happy to recognize Direct Energy Solar as a PACEsetter and highlight their outstanding C-PACE project in Durham, Connecticut. Projects like these set an example for others to follow as the C-PACE program grows.”

Three takeaways from SEIA white paper on financing C&I solar with C-PACE

C-PACE is an innovative program, administered by the Green Bank, which helps commercial, industrial, and non-profit property owners access affordable, long-term financing for meaningful energy upgrades to their buildings. C-PACE enables building owners to finance qualifying energy efficiency and renewable energy improvements through a voluntary assessment on their property tax bill. As the program grows, more Connecticut businesses achieve lower energy costs and increase their bottom-line. The Green Bank recently announced that they had closed their 200th C-PACE project.

— Solar Builder magazine

Drive more commercial solar projects with these new documents from SEIA

solect solar commercial install

Here’s a commercial install from Solect Solar.

Commercial solar has a ton of potential, and the Solar Energy Industries Association (SEIA) wants to make that potential clearer for customers and investors, today making two documents available to spur investment.

The first document is a contract that combines the benefits of a Power Purchase Agreement (PPA) with Property Assessed Clean Energy (PACE) to provide customers with a valuable new financing option.

“The PACE PPA further builds out SEIA’s suite of model contracts so all solar transactions can be efficiently negotiated and financed,” said Mike Mendelsohn, SEIA’s senior director of project finance & capital markets. “Our goal is to broadly open the U.S. commercial real estate sector for solar deployment, and the PACE PPA is a valuable tool to allow that progress to happen.”

You can learn more about these financing plans here.

The second document, co-authored by SolarKal, is an educational report designed to explain the value of on-site solar to commercial property owners. According to the report, Solar Energy and Commercial Real Estate (CRE): Insights for Your Investment Property, solar systems can allow commercial property owners to raise rents, lower operating expenses, negotiate lease extensions, and increase the net present value, or NPV, of their buildings.

Both documents were developed by SEIA’s C&I Working Group, which is focused on creating solutions for the commercial and industrial sectors.

Download the PACE PPA document here.

— Solar Builder magazine

Three takeaways from SEIA white paper on financing C&I solar with C-PACE

solar financing

The commercial and industrial (C&I) sector remains the biggest opportunity for solar, but also the most frustrating to finance. We looked at some boutique financing concepts in our Sept./Oct. issue, and last week the Solar Energy Industries Association (SEIA) and Alta Energy jointly released a white paper highlighting an underutilized financing tool: Commercial Property Assessed Clean Energy (C-PACE). With C-PACE , a property owner can finance 100 percent of the cost of solar and/or energy efficiency upgrades as a voluntary property tax assessment on a commercial building for 10-30 years and can be easily transferred to new owners, the paper notes.

Here are three key takeaways from the report.

C-PACE financing immediately opens up C&I markets to solar that were unreachable through more traditional methods. States such as Florida, Kentucky, Minnesota, Arkansas, Missouri, Nebraska and Wisconsin that do not allow power purchase agreements (PPAs) but have working C-PACE programs. And even in states with thriving PPA deals, C-PACE financing can be a more appealing deal, allowing an owner to take advantage of tax incentives immediately.

C-PACE allows for all-encompassing energy efficiency plans to be bundled right along with the solar system. An example in the white paper is a 500-kW system that would not be cumulatively cash flow positive throughout the term of the loan, but with a $100,000 lighting retrofit project bundled into the financing package, the project stays positive while total project savings increases by $150,000. Seen here:

SEIA PACE financing solar

This same strategy is useful in states where a solar+storage system would make a huge impact in cutting peak demand charges.

C-PACE financing can also make a solar system attractive in situations where it made no sense previously — like an owner who does not pay the energy bills. Because C-PACE financing is tied to the property taxes, owners can pass the cost of the array onto the energy-consuming tenant. Poor credit is also not a factor, as we dove into in this article.

 

— Solar Builder magazine

California beefs up consumer protection for PACE financing

california PACE financing

California Governor Jerry Brown signed two bills into into law that provide a regulatory and consumer protection framework for Property Assessed Clean Energy (PACE) financing.

The companion pieces of legislation – AB 1284 and SB  – are the result of a year of development and negotiations among low-income consumer advocates, environmental and clean-energy groups, the banking industry, Renovate America and other private-sector PACE program administrators aimed at improving PACE by strengthening consumer protections.

Amisha Rai, Senior Director of California Policy at Advanced Energy Economy, said: “The PACE program is helping consumers and communities throughout California achieve greater energy savings while expanding access to advanced energy products and services. AB 1284 and SB 242 establish a clear, enforceable statewide consumer protection and regulatory framework for PACE that will serve as a model for other states. We are pleased to see California lead the way in passing this critical package.”

AB 1284 will significantly enhance PACE underwriting, regulate PACE at the state level, and enforce compliance with all PACE laws by PACE administrators and individual contractors.

Specifically, the bill will:

• Strengthen and standardize the current underwriting standards in PACE based on home equity and on-time mortgage and tax payment history; and require that the most accurate Automated Valuation Models are used for establishing the value of the home;
• Establish new underwriting standards predicated on income verification and ability-to-pay to determine that property owners can meet their annual PACE obligation in addition to their current debt obligations and basic household expenses; and
• Establish a licensing and regulatory framework for the PACE industry in California, which will be subject to oversight by the California Department of Business Oversight (DBO).

Financing beyond FICO: Using asset-backed loans, PACE to get solar deals done

 

The California Low-Income Consumer Coalition, made up of 11 consumer policy and legal advocacy organizations, worked to improve the legislation and says AB 1284 “introduces protections that have been absent from, and critically needed in, PACE programs.” The coalition moved from opposing the legislation to neutral, stating some reservations which the Department of Business Oversight will likely address in its regulatory process.

SB 242 will establish state-of-the-art consumer protections, further setting PACE apart from other forms of financing. Chief among these is the requirement that PACE providers conduct a recorded, live, confirmation of terms call with property owner before they sign their assessment contract, as a reinforcement to written disclosures modeled on the federal Know Before You Owe mortgage form. In addition, the law establishes data reporting requirements to local government partners, including data that speaks to the projected energy and water savings and local economic and job impacts, as well as on categories of products installed and homeowners served.

SB 242 also establishes an expanded “right to cancel” for a property owner using PACE, enabling the property owner to cancel their separate home improvement contract if they cancel their PACE financing within their three-day right to cancel. The law limits the amount of money that program administrators can pay to contractors, whether directly or indirectly, to the price charged by the contractor to the property owner. And it also prohibits the reimbursement of marketing, advertising, and program collateral expenses to restrict the usage of such reimbursement to evade the anti-kickback provisions.

— Solar Builder magazine