Solar panels can help you save money on electricity expenses and reduce your carbon footprint, but unfortunately, the equipment is not free.
To achieve these benefits, despite their costs, most solar energy systems in the United States are financed with a loan and paid back over time.
Not to be confused with the solar tax credit, Property Assessed Clean Energy (PACE) programs are a series of government-assisted loans designed to help property owners pay for solar panels and other energy-related improvements in select parts of the US.
In this article, we’ll explain how PACE programs work, where they are available, and whether or not you can apply for one of these programs to help pay for your solar panels.
Note: The content herein is for educational purposes only and should not be relied upon for any other use. Palmetto does not provide tax, legal, or accounting advice. Please consult your tax, legal, and accounting advisors to determine your eligibility for any incentives or credits.
How PACE Solar Programs Work
PACE programs allow Americans to pay for clean energy improvements through government-assisted loans. Unlike an ordinary solar loan program, where you would send money directly to the lender, PACE payments are made as a part of your annual property taxes, which helps reduce upfront costs.
Essentially it works like this:
- You apply for a PACE financing program with the details of your project.
- Your application is approved, and your solar panels are installed.
- Solar power is produced on your property to reduce your monthly electricity costs from the utility dramatically.
- At the end of the year, when your property value is assessed, a special PACE assessment is made for your PACE-financed clean energy improvements (i.e., solar panels) included in your property tax bill.
- You continue to pay off portions of your PACE loan through property tax bill payments until the original cost of the improvements is reached, usually over 10 to 20 years.
In addition to solar panels, PACE programs may be used to finance energy-efficient HVAC systems, doors, windows, and smart home controls and upgrades to your property’s lighting, plumbing, and insulation.
The financing behind PACE loans may be provided by local governments (city, county, or state) or third-party financiers such as green banks and other private companies. No matter the lender, PACE loans are almost always paid back through annually assessed property tax payments to the local government.
PACE, C-PACE, and R-PACE Programs
If you’re looking for ways to pay for your renewable energy installation, PACE financing for solar comes in two main categories: residential and… well, everything else.
Commonly referred to as “R-PACE” programs, residential property-assessed clean energy loans are for single-family homes.
On the other hand, C-PACE loans are for commercial properties, including businesses, industrial facilities, farms, and non-profit organizations.
To make things a bit confusing, both R-PACE and C-PACE programs are often referred to simply as “PACE” programs, without the R or C to help clear things up.
Unfortunately for homeowners, there are nearly ten times (10x) more C-PACE programs than R-PACE programs currently available in the United States. Despite this, in the past 15 years, more than 200,000 homeowners have used residential PACE programs to make over $5 billion in energy home improvements.
Where are PACE programs available?
Before a PACE program can come to be, legislation must exist for such opportunities to be created. Although many states and cities have PACE financing legislation in place, this also does not necessarily mean that active programs are looking for participants.
At the end of 2022, 38 states, including New York, Colorado, Rhode Island, Ohio, and Connecticut, offered active C-PACE financing programs for commercial solar energy projects. For more information on specific C-PACE programs, we recommend using this map from PACENation to locate your state’s policies and projects.
Despite the popularity of commercial PACE programs across the country, residential PACE solar programs are only available in a few states. While policies are always subject to change, in the spring of 2023, residential PACE solar programs are up and running in California, Florida, and Missouri.
Things to Know Before Applying for a PACE Loan
If you are eligible for a PACE loan, remember a few critical things before you sign a contract.
First, PACE loans are considered a “debt of property,” meaning that your loan will be tied to your home or building rather than you as a person. When you enroll in a PACE program, you will likely have a lien placed on your property until your loan is paid off.
Therefore, if you sell your property midway through your contract period, the new owner will inherit the lien and PACE payments. When talking to potential buyers, this could complicate a real estate sale (one of the main problems with PACE loans) unless the benefits of the solar energy system are advertised as clearly as possible.
Other than that, it is vital to always do your due diligence when talking to any person or company about your PACE financing. Although plenty of honest professionals are making the world a better place, beware of unlicensed or unaccredited contractors or financiers that exaggerate the benefits of PACE with intentionally misleading or unsubstantiated claims.
When In Doubt, Speak With A Solar Advisor
If you are looking for every way to maximize the value of your renewable energy investment, reach out to a Palmetto Solar Advisor today. Our experts can help you find any incentives, rebates, or programs available to help you pay for solar panels in your area.
That way, you can save money on your home’s electricity expenses with emission-free power in the most cost-efficient way possible. Begin by talking to an advisor or see how much you can save with solar instantly.
