Property Assessed Clean Energy

Property tax assessment financing is a method of paying for a solar system by packaging the costs in with the homeowners property tax. The program is run through the local municipal government and allows the homeowner to contract the solar installer of their choice. There are no up-front costs. Payments are bi-annual and packaged into local property taxes. The package payments include the project’s cost, a fixed interest rate, and administrative fees. These payments are typically lower than the homeowner’s energy bill. Since the cost of the lease does not change, the homeowner does not have to worry about inflating energy rates.

Pros: Property tax assessment financing has no upfront costs, allowing you to save money from the day the system is installed. The bi-annual payment is your only cost, protecting you from inflating energy rates and swings in the market. Additionally, you own the solar photovoltaic system outright, adding considerable value to the value of your home. The payments and system ownership are also easily transferred to new home owners if you decide to move.

Cons: The overall savings potential is less than if you were to pay in cash. Just like any financing plan there is a premium paid for paying back the costs overtime. Also, property tax assessment financing is only available in certain areas. By owning the solar system, you are responsible for system upkeep. If an inverter or panel needs to be replaced it is going to come out of your wallet. 

Property Assessed Clean Energy (PACE) is quickly becoming one of the most popular ways to finance a solar energy system. The City of Berkeley was the first to implement a PACE program in 2007. The preliminary installations allowed by the pilot program are currently being evaluated before Berkeley decides how to expand the Berkeley FIRST (Financing Initiative for Renewable and Solar Technology) program.

The main advantages of PACE programs are:

1. The major barrier of high up-front costs to the owner is practically eliminated
2. The costs are spread over a 20 year period of time
3. If the property is changes ownership, the tax transfers to the new owner

As a result of these ground breaking advantages PACE programs offer, many other cities and even the US Government are following the Berkeley FIRST example and implementing their own programs.

PACE is one of the main components in the Recovery Through Retrofit (pdf)  program created by Vice President Biden and the White House Council on Environmental Quality. This federal program would make it easier for cities to follow Berkeley's lead by having the support of the federal government and the Department of Energy.

Obviously, PACE programs are steadily becoming more popular. However, what does this mean for the average consumer? Homeowners cannot take advantage of PACE unless it is offered by the city or county in which they live. While many states have made commitments to these types of programs, most are not widely available to anyone who wants to participate. These programs are still relatively new, and take some time to get started. Not only is there the obstacle of the capital investments and loans that need to be repaid, but these programs take time to reach a scale that can accommodate more than 30 to 40 homes in an area. While the way PACE has been widely accepted signals it is only a matter of time before it is available to all homeowners, it is still not feasible for a large portion of the population. However, if PACE is available in your area, it is likely the easiest way to have your own solar energy system.