PACE Makes Solar Energy Affordable
An extremely popular means of funding the investment in solar energy is the Property Assessed Clean Energy (PACE) program. Actually there are several PACE programs available to homeowners in California. The programs help reduce the upfront costs associated with energy efficiency, renewable energy, and water conservation projects. The key is that these projects are affixed to real property and tend to increase property values, while saving the owners on energy costs. The California Legislature declared that programs that authorize public agencies to finance the installation of such real property improvements serve a public purpose.
- California FIRST – With CaliforniaFIRST, you receive funding for energy efficiency, renewable energy, and water efficiency improvements and repay the financed amount on your property tax bill over the course of up to 25 years.
- HERO – HERO is a partnership between business and local government that enables property owners to make their homes more energy and water efficient by providing them with affordable financing for a range of home improvements. Property owners pay for the improvements along with their property taxes over 5 to 20 years.
- Ygrene – Ygrene has partnered with certain municipalities to provide 100% financing for qualified clean energy home improvements. The Ygrene Energy Fund is a leading provider of clean energy financing for residential and commercial properties throughout the United States. The award winning, privately funded YgreneWorksTM program provides immediately accessible financing for energy efficiency, renewable energy, water conservation and, in certain areas, hurricane protection, electric vehicle charging stations and seismic upgrades. Ygrene is committed to making it easy for families to invest in their future and a healthier environment. Because of the long range benefits of photovoltaic (PV) solar energy systems, Ygrene will finance solar projects for up to 30 years.
There are subtle differences between the various PACE programs, but they are more alike than they are different. With either program, funding is based upon the equity you have in your home, not on your FICO Score. No out of pocket cash investment is required on the part of the homeowner. These are loans, however, and must be repaid eventually. The loan term can range from 5 to 30 years, depending upon the project at hand and the PACE program you select.
What is unique to PACE, compared with conventional bank financing, is that payments are made to your County, together with your property tax assessment — hence the term “Property Assessed.” These loans are available to pay for qualified “Clean Energy” property improvements.
Also unique to PACE is that loan approvals are not based upon FICO scores, or proving politically correct debt to income ratios. Qualification for PACE financing is based upon property value and equity. The ability to repay the PACE loan, like any other, is still vital. But these loans are for energy efficient home improvements that help property owners economize. In essence, then, the PACE-financed improvements eventually pay for themselves through energy savings or other conservation measures.
We often find that homeowner budgets actually enjoy a net increase in disposable income, after replacing their ever increasing electric bill with a fixed long-term solar energy loan payment.
If you can currently afford to pay your electric bill, for example, then it stands to reason that you can afford to pay back a loan to pay for a solar energy system that may all but eliminate that expense. We often find that homeowner budgets actually enjoy a net increase in disposable income, after replacing their ever increasing electric bill with a fixed long-term solar energy loan payment.
Typical property improvements that qualify under the “clean energy” requirement include:
- energy efficient replacement windows
- energy efficient HVAC systems
- solar energy systems
- artificial turf & water conservation landscaping
Financing the purchase of a solar energy system through PACE qualifies the homeowner for the 30% Federal Investment Tax Credit (ITC). This benefit and incentive is slated to end at the close of 2016, however. There is strong sentiment that the solar ITC will likely NOT be renewed. Consequently, homeowners who are aware of the benefits of solar and the this available tax credit would be wise to go solar sooner than later.
FICO credit scores are not taken into consideration when qualifying for a PACE loan to finance qualified home improvements. Thus, even credit challenged homeowners may be eligible to make the money saving investment in solar energy systems.
Another attractive feature of PACE loans is that the homeowner’s first loan payment can be delayed for up to a year or more. This is because the PACE loan does not require monthly payments. Instead, payments are made concurrent with property tax payments.
In some situations, depending upon the PACE program utilized and your income tax filing status, your solar energy investment may even be tax deductible.