NJPACE vs. PPAs

We recently came across a table describing the differences and similarities between PACE and Power Purchase Agreements (PPAs), and with some modifications we present a similar chart here. The similarities are, of course, that there is no out-of-pocket expense to the property owner, and both are “off balance-sheet” transactions (i.e., they do not add to the property owner’s outstanding liabilities). But here are the key differences:

 Key Benefits

PPA*

NJPACE

 Financing Costs

HIGH

LOW

  Tax Incentives

X

 SREC Revenue

X

 Transferable on Property Sale

MAYBE

 Increased Property Value

X

 Tenants Share Costs/Benefits?

SOME

  Accelerated Depreciation

X

  Available to All Contractors?

X

*Power Purchase Agreement

Clearly, the most important differences result from the fact that under PACE, the property owner is also the owner of the upgrades, and is simply borrowing the money. As a result, the owner’s costs are lower, revenues are higher, and value is added to the property. The owner is entitled to tax credits and depreciation, and in most cases may pass along both costs and benefits to tenants.

From a contractor’s standpoint, however, clearly the most important fact is the last one. Where only the biggest firms in the industry can offer PPAs, every qualified contractor can take advantage of PACE — and can say with confidence, “We offer 100% financing that offers greater benefits to owners.”

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