In “Why Now Is The Time For The Commercial Building Industry To Jump On Board With Solar,” Jamie Evans writes that even though solar makes economic sense, there are still several major hurdles to be overcome.
Even though costs have dropped, solar is still a big investment. Financing and monetizing solar assets may be considered the trickiest aspect of solar project development. The financial structures are complex and require experienced investment partners, notably those who can monetize tax credits and depreciation benefits to assess the true cost of ownership.
Solar Power Purchase Agreements (PPAs) that allow customers to reap the benefits of solar electricity without the upfront capital expenditure have gained popularity, however, structuring these deals through multiple contracts can become increasingly confusing. Furthermore, for customers contemplating PPAs, many of the traditional metrics used to calculate a return-on-investment are less relevant in the context of new financing opportunities.
Unfortunately, financing options tend to be limited for those in the non-residential market sector typically looking to install anywhere from 250 kilowatts to 20 megawatts. Many corporate and institutional investors view these projects as too small to be worth their while and tend to favor large- scale solar projects.
This is one of several major areas where PACE makes sense when other options don’t. PACE can finance virtually any size project, providing it can cover the costs of processing (which can be as much as 5% of a smaller project, but typically less than 1% for a very large one). PACE ensures a steady supply of private financing by providing a high degree of security to investors through the use of Special Assessments, which are paid to the town along with property taxes. Assessment notes or certificates constitute a new asset class for banks, insurance companies, pension funds, and other sophisticated investors. To the investor they offer market rates on highly secure paper; while to the property owner they offer the opportunity to get the highest quality, most efficient, and most durable energy systems for less than what they’re already paying today.
What’s not to like about that?