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When is PACE Not a Hero?

01/31/17

  05:51:00 am, by Jim Jenal - Founder & CEO   , 514 words  
Categories: Solar Economics, Ranting

When is PACE Not a Hero?

Being a full-service solar company means, in part, that from time-to-time we are asked to step in and fix a system that is no longer operational and the original installation company is long gone.  Or the installer is still around, but the client was so annoyed by the sales/installation process that they don’t want to have anything to do with the company anymore.  We even get calls from clients who are pretty sure that their system is working, but the way the install went - excessive delays, mismatched parts, or just an overall sloppy look - has left them with an uneasy feeling, and they want a second set of eyes to come out and give them peace of mind.  All in a day’s work and we are happy to help.

Tear up that contract

But lately we have come across a different situation: the system is fine, but the financing is burdensome.  Now we aren’t talking about leases or PPA’s here - we’ve outlined at length our views on those.  No, these are credit-worthy folks who are feeling trapped by their high-interest solar PACE loan.  PACE, as you may recall, stands for Property Assessed Clean Energy, and it allows homeowners with less than stellar credit to qualify for a loan to improve the energy efficiency of their home, including by adding solar.  PACE financing is not tied to the homeowner’s personal credit, and the debt “runs with the land” as part of the property tax assessment (hence the name).

Lots of solar installation companies love PACE because it is easy for them to find out in advance whether the prospective client is likely to qualify - and if they have equity in the home and are up to date on their mortgage and property tax payments they almost certainly will, and for far more than the cost of a solar system.  The paperwork is handled electronically, funding decisions are fast, and there are no “dealer fees” - points, really, that often are charged back to the client.

So what’s not to love?

In a word, the interest rate.  At a time when Home Equity Lines of Credit (HELOCs) are readily available and at interest rates often below 4%, PACE loans can be double that or more depending on the term!  That means on a 10-year loan to finance a $20,000 solar system, the PACE borrower could pay as much as $6,500 more over the life of the loan.  Ouch!

Let’s be perfectly clear: PACE is a great program for people looking to lower their energy bills but who don’t have great credit.  Their annual savings from installing solar or other PACE-funded improvements will regularly exceed the cost of the loan, providing real value to them.  But if you are a homeowner with great credit, you shouldn’t let yourself get stuck with an unduly expensive loan, just because some solar sales guy thought PACE would make his life easier!

If that is the situation you are in, shop around.  See if you can qualify for a HELOC to pay off your PACE loan - you might learn that a simple switch will greatly increase your solar savings!

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Jim Jenal is the Founder & CEO of Run on Sun, Pasadena's premier installer and integrator of top-of-the-line solar power installations.
Run on Sun also offers solar consulting services, working with consumers, utilities, and municipalities to help them make solar power affordable and reliable.

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