A Deep Dive on C-PACE Solar Financing

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As solar energy experiences significant growth worldwide, new financing options continue to develop – some gaining more traction than others. One of the less-discussed financing solutions is PACE (Property Assessed Clean Energy) financing for solar energy systems. PACE and C-PACE (Commercial Property Assessed Clean Energy) financing is a method of renewable energy financing which allows property owners to tie the cost of their system directly to the value of their property.

A commercial customer who elects C-PACE financing will receive financing from a government-sponsored bank to cover the up-front cost of installing a clean energy system on their property. The customer then pays back the loan over time, via the property tax bill the customer already receives. While the loan is outstanding, the lender (the local government) will place a lien on the property. This means that in the event of a foreclosure, the outstanding loan is repaid before any other claim is filed, and that the loan (and renewable energy system) is inexorably tied to the property itself. If the property owner who entered into the agreement with the local government sells the property, the tax assessment and ownership of the solar array stay with the property, and the new property owners take responsibility for the regular payments and assume ownership of the array.

Why Choose C-PACE?

C-PACE financing offers multiple benefits to customers looking to finance a solar array. First and foremost, the financing method allows a customer to take advantage of a solar solution without requiring a large, upfront capital payment. This lowers a significant barrier to entry in the solar market, and allows a larger portion of property owners to pursue a solar solution.

Additionally, by tying the solar or renewable energy loan to a piece of property itself, the solar customer is able to receive full financing for the project without taking up a personal bank loan, which keeps financing channels clear for other projects that cannot be financed in such alternative ways. This is especially beneficial to companies who may need to take out other loans to finance equipment or startup capital to fund the day-to-day operations of the business. Additionally, C-PACE financing does not factor customer credit quality into the issuance of a loan, enabling those with less than optimal credit to receive financing for a solar installation.

C-PACE programs have seen significant success nationwide in recent years. Rhode Island, in the process of bolstering its burgeoning solar industry, implemented a C-PACE program this spring. The program enables owners of eligible commercial buildings to finance up to 100% of various renewable energy and energy efficiency upgrades. Financing for the Rhode Island C-PACE program is offered by private capital providers, and payment terms are calculated based on useful life of the building improvements, which is generally 25 years.

Is C-PACE available in Massachusetts?

Massachusetts first implemented C-PACE enabling legislation in 2010.  The legislation allowed individual municipalities to create ordinances to enable their own PACE programs and energy efficiency revolving loan funds. The administrative burden on municipalities to underwrite and develop technical specifications for projects was prohibitive. The 2010 legislation also did not specify a source of external financing for the energy efficiency revolving loan funds, thus, not a single PACE loan was made under that .

A new C-PACE program for Massachusetts was proposed in 2014, and has been frequently debated but never passed. The new program would relieve some of the prohibitive burdens of the 2010 legislation, enabling Massachusetts property owners to take advantage of this program.

As solar energy gains continued popularity throughout the country, it is only fitting for the industry to include financing options suitable for more people and businesses to take advantage of the renewable technology. C-PACE financing does just that. We hope to see positive legislative action soon for the C-PACE program in Massachusetts, and hope that this growing solar financing option enables more property owners the option to go solar.

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