PACE financing, or Property Assessed Clean Energy, started out about 10 years ago as a financing mechanism for residential solar. Basically, the cost of the solar system is repaid over a 5 to 20-year timeframe as a part of the building’s property taxes. The benefits are that the property serves as security for the loan, there is almost no repayment risk (everyone must pay their property taxes), interest is deductible, customers are almost always cash flow positive in the first year, and the property can be transferred more simply than if there is a standard solar lease or PPA.
These advantages also apply to PACE loans for commercial solar installations – with two extra benefits. First, many commercial PACE loans are structured in such a way that the tax and depreciation credits are front weighted so that commercial property owners are very cash flow positive in the first few years. Second, many commercial leases are triple net — in other words the tenant pays for utilities, taxes and maintenance (in addition to utilities). If there is a commercial PACE solar loan on the property, the tenant gets the benefit of lower electricity costs and automatically pays for the slightly higher tax assessment from the solar PACE loan. Voilà – no cost to the building owner.
My guest on this week’s Energy Show is Brandon Deno, Vice President of Solar at Clean Fund. Clean Fund is the leading provider of PACE loans for commercial buildings. Please Listen Up to The Energy Show on Renewable Energy World as Brandon explains the ways in which solar developers and building owners can take advantage of PACE loans for their commercial properties.