Property Assessed Clean Energy (PACE) Solar Program: What it is & How it Works

Property Assessed Clean Energy (PACE) Solar Program: What it is & How it Works

Last Updated on September 11, 2023 by Jeremy Pearl
Apr 18

If you’re interested in installing a solar energy system, one of your first questions is probably how you’ll cover the cost. You’re not alone in this. Solar panels are a fantastic investment, and financing options designed to offset the upfront expenses are widely available.

Today, one of the most popular financing methods is the Property-Assessed Clean Energy program (PACE loan program, for short). This solar energy financing option is designed to finance renewable energy, water conservation, and energy efficiency projects for homeowners and commercial establishments.

Here’s what you need to know about this program, and how it could help you get the solar system you want:

What is PACE Financing?

The PACE energy program is a special type of secured loan designed for people who don’t want or are unable to purchase their solar panels with cash. The PACE program pays 100% of a project’s upfront costs and is repaid over the course of 10-20 years.

While there are several types of solar loans, solar leases, tax credits, and solar power purchase agreements available throughout the country, PACE solar is only available in areas where the local government has set aside funds for financing. Currently, 33 states and DC have passed PACE-friendly legislation, and 19 states plus DC have active PACE programs.

The Benefits of PACE Financing for Solar

PACE is a comprehensive program, providing funds for many energy-efficient and environmentally-friendly improvements, including the following:

  • Insulation
  • Weather sealing
  • High-efficiency water heaters
  • Solar
  • Other on-site renewable energy systems

When you secure PACE financing,  the program takes the cost of a project and spreads it over the project’s lifetime. Because it’s a long-term financing option, PACE helps meet high consumer demand for solar financing, and decrease the cost barriers associated with many renewable energy projects.

In addition to reducing upfront costs, PACE can increase property value. In fact, PACE pilot programs across the country have found that PACE properties enjoy lower foreclosure rates and higher energy savings.

5 Unique Aspects of the PACE Energy Assistance Program

While PACE may resemble other solar loans in that it provides funds to install a solar energy system, it’s quite a bit different from many other solar financing options.

Here are a few of its unique aspects:

1. PACE is a Fixed, Long-Term Program

Most solar loans are repaid in monthly installments. PACE, however, operates on a fixed, long-term schedule.

This means that homeowners make a single, annual payment on their loan for a fixed term. The payment comes in the form of an assessment added to yearly property taxes and stays with the building or property upon its sale.

2. PACE Covers Upfront Costs

Install solar panels with PACE, and you’ll enjoy the benefits of immediate solar power, without the upfront costs. The financial perks go even further than that, though.

According to EnergySage, homeowners commonly benefit from the net gains of a solar investment, due to the fact that electricity savings are typically much greater than annual increases in property taxes.

3. PACE Loans Transfer During Home Sales

If you obtain a PACE loan and decide to sell your home before the loan is paid off, the remainder of the loan will transfer to the new owner of the property.

This is different from other loan systems, which are negotiated separately from the property. When the property and the loan are linked, the home sales process is simple and streamlined.

4. PACE Loans are Determined by Your Property’s Tax Capacity

While other lending and financing options are determined by your credit, PACE loans rely on the tax capacity of your property. This is ideal for homeowners with less-than-ideal credit and can serve to make a solar system for the home more accessible for certain households.

5. ​PACE Offers a Possible Tax-Deductible Write-Off

If you get PACE financing, you could enjoy a tax-deductible write-off of the interest and fees associated with the loan. In some cases, it may also be possible to write the loan payment off of your property taxes. These potential write-offs go up to about $10,000 annually and can be a major financial benefit for homeowners.

The Current State of PACE

In the past several years, PACE has become widespread throughout the country. As it stands today, both commercial and residential PACE programs are available. Both allow property owners to finance the upfront cost of renewable energy projects and various other eligible property improvements.

By the end of 2017,  more than 150,000 homeowners had used the PACE program to create $4 billion in energy efficiency and improvements to their homes. If you’re interested in taking advantage of PACE funding to add solar panels to your home, now is a great time to take the plunge. In addition to helping you get the panels you want, PACE funding will help you decrease your carbon footprint and enjoy a greener home.

To learn more about PACE financing, or to get a quote for your solar project, contact Sandbar Solar now.

About the Author

Jeremy has worked in the solar industry since 2006. He has a Bachelor’s Degree from UC Santa Cruz in Environmental Studies. Jeremy has spent most of his solar career in residential sales and Sales Management in both California and Hawaii. He was raised in Santa Cruz County and is passionate about helping local residents make the switch to clean and reliable renewable energy. Jeremy lives on the Westside with his wife and two boys and enjoys music, photography and hiking in his personal time.

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