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PACE: A Little Known But Innovative Way to Finance Commercial Solar Thermal in California


Keeping up the PACE with solar thermal. (Photo: Wikipedia CC)

Have you ever had a commercial or industrial solar thermal project in California get held up due to lack of financing? Consider the recently revived PACE financing, or “Property Assessed Clean Energy.

PACE is the next best thing to having a solar thermal lease or solar thermal PPA (Power Purchase Agreement). In fact, PACE may be even more advantageous than leases and PPAs, since the property owner not only receives a solar thermal system at no up front cost, but unlike leases and PPAs, they get to keep all rebates and tax incentives.

There are slight variations among the different entities offering commercial PACE programs. There are some slight variations, but here are the basic advantages to commercial PACE programs in California:

PACE allows you to save money installing a solar thermal system with no upfront cost. Let’s be clear here: The only reason to finance a solar thermal system through a commercial PACE program (or any loan or lease) is if your proposed solar thermal system is designed to decrease the cost of your annual gas or propane bill. If your annual PACE loan is projected to be more than your annual hot water energy savings, don’t do it. It’s that simple.

You qualify for PACE based on owning your commercial property. Unlike a commercial loan or solar PPA financing, your business doesn’t have to have perfect credit or high mortgage equity to be approved for commercial PACE. You just have to own your property. So if you’re the owner of a hotel, apartment building, or a winery and just refinanced, you’re still good to install solar hot water with PACE as long as your name is on the deed.

You keep all solar rebates and Federal and state tax incentives. With a solar lease or solar PPA, your business may receive a no upfront cost solar thermal system, but your leasing company keeps all tax incentives and state rebate money. With California’s CSI Thermal program and PACE, you can directly benefit from up to a $500,000 toward the cost of your solar system, plus your cost is further reduced by the Federal government’s 30% Investment Tax Credit and other tax incentives.   lease or solar PPA.

You pay PACE payments annually through your taxes. Because PACE is connected to your local property taxes, you’ll also pay your PACE bill through your property taxes annually, or semi-annually. Check with the PACE lending agency with other options.

Interest rate is competitive. PACE loans are not as competitive as a secured bank loan, but they are competitive and they’re better than unsecured loan rates. The length of the loan can be as little as 5 years or as long as 20 years, making your payments small. Meanwhile, you save more money annually on your gas bill.

PACE loans are relatively easy to approve. PACE is less stringent about past credit history because it’s very secure for the lenders. The financing is tied to your property, not to your business or personal credit. So, if you sell your business or even go bankrupt before paying back your PACE loan, the new property owner will automatically take over any remaining PACE payments—as well as benefit from the energy savings of your solar thermal system.

The other nice thing about PACE is that you can combine other energy efficiency projects into the same PACE loan, such as lighting, insulation, or solar PV.

Have more questions about PACE or solar hot water? Contact Free Hot Water, and we’ll guide you through your options.

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