By Scott Gordon
Vice President, Residential Sales, HelioPower
Recently I’ve been hearing a lot about San Diego’s Property Assessed Clean Energy (PACE) program both from customers and from solar companies advertising on KPBS. I find this curious as most of the important details (including exactly when this program will roll out, how much money will be available, and whether you’ll need to do extensive efficiency retrofits before qualifying for solar) are fuzzy at best, so before we delve into all that we don’t know, let’s cover the one thing we do know: we know that CCSE will administer the program. Otherwise, it’s anyone’s guess what’s really going on. A recent visit to CCSE’s website simply resulted in a 50,000 foot view of what PACE is and how CCSE will administer it. Search Google and most of the results herald back to the middle of 2009. As a result, all we are left with is rumor and innuendo. So this begs the question, Is PACE in San Diego worth waiting for?
An examination of other PACE (or AB 811 programs) sheds some light on what we can expect when and if PACE San Diego ever comes to fruition. While AB 811 has helped several cities speed the adoption of solar, most (with the exception of Sonoma) have experienced boom and bust cycles in financing. In many cities, allotted AB 811 money is gone within hours of the first application being submitted. The result is long waiting lists of people hoping that sooner or later additional funds will be available to fund their systems with demand always outstripping supply (of money) by an order of
magnitude. For those forced to wait for the next round of financing, there are a real costs involved: the cost of paying your electric bill, the cost of missing a rebate tier, and the cost of potentially delaying your tax credit by a year.
Let’s examine the positives of PACE financing. PACE requires no credit check or and has a liberal loan to value requirement (you must not owe more on your home than it’s worth). Thus, anyone who is current on their property taxes is eligible. If you have bad credit or have a high LTV, PACE can be a great vehicle for financing energy efficiency improvements. The PACE loan is secured against the property as a first position tax lien. Thus, the property owner repays the PACE loan bi-annually when he pays his property taxes. Interest rates on PACE loans average 7-8% simple interest, which isn’t so terrible if your credit is less than stellar or don’t qualify for alternative financing. Additionally, if you sell your home, the loan stays with the property and is assumed by the buyer.
Now let’s examine the negatives. First, if you are credit worthy, you can generally finance your solar system for 5-6% through a conventional bank or for as little as 3.1% through a PPA such as SunRun. Shaving 400 to 500 basis points off your loan can save you BIG money over the life of the system. Next, PACE money is used up quickly. In other words, if you’re not one of the first in line, chances are the program will exhaust its funds long before your application is reviewed. As a result, you’ll continue to pay high electricity rates while you wait for the next round of funding. Third, you have to pay the loan back as a tax assessment, so you’ll need to be prepared to write a larger check to the tax man bi-annually and budget appropriately.
While I believe that PACE financing in San Diego can be great for certain customers, customers with good credit and home equity are eligible for superior financing with far better terms and faster returns. If you’re considering solar for your home, you’d be well advised to examine all of your available finance options before assuming PACE is the best option for you. You should also consider the cost of waiting in your calculus. It’s possible other financing options will cost you less over the long run, help you be cash flow positive sooner, and provide you with smaller more manageable monthly (rather than bi-annually) payments. Either way you decide to go, HelioPower is here to help you secure the most beneficial financing for your solar project and can help you determine the best path for your unique situation.
Contact Scott Gordon at [email protected].