Several states, including Maryland, Connecticut, and Rhode Island, have recently passed a bill allowing commercial building owners to finance renewable energy upgrades. Local governments are offering private financing through the property tax authority. State sanctioned PACE financiers offer loans for these projects which are paid back through the building’s property taxes. That means the financial obligation is attached to the property itself regardless of ownership changes. The loans are paid back over a specific term (usually 20 years) via an annual assessment added to the property tax bill. The objective of the financing mechanism is for the PACE payment to be a fraction of the old power bill.
Does that sound too good to be true? Here are the top three reasons it’s time to take advantage of the PACE program:
- PACE is an off-balance-sheet financing mechanism that is tied to the property rather than
an individual or business
- PACE offers an immediate ROI by covering the cost of solar installation, new roof, and structural solar improvements while cutting energy costs and creating revenue through the selling of excess energy
- PACE is tied to heavy tax incentives that offer financial savings beyond the power bill
The model of implementing a PACE solar energy array is based on a couple of key factors:
- The system is Net Metered and the power will be fed back into the building.
- The building owner will utilize a 30% Federal Investment Tax Credit and Federal and State Depreciation which all can be used to help pay down the loan.
- If a building owner chooses to apply these incentives to the PACE loan, the project will be cash flow positive year one. The state of Maryland also passed a property tax exception preventing the solar asset from increasing the business owner’s normal property taxes as well as a sales tax exemption.
- To qualify, property owners must have an adequate tax liability to take the depreciation and tax credit benefit. The PACE loan is limited to 25% – 35% of the total property value. System sizes are also based on the power usage of the building and the available space for solar panels.
PACE Financing is quickly becoming American business owner’s best path to installing a solar energy generator on their facility with zero out of pocket cost; by redirecting the funds used to pay their power bill, they pay down the loan on their solar equipment with just a portion of the savings. Currently, 18 States have adopted the PACE program, including, MD, DC FL, NY, NH, RI, & CT.
Solar Energy Incentive Details:
- Business owners are eligible for a Federal Investment Tax Credit of 30% that will be returned to the property owner by the IRS as a credit toward tax liability that can be applied all in one year, or spread out up to five years.
- The system will also be eligible for Federal Tax Bonus Depreciation that allows the property owner to depreciate 85% of the total system cost.
- Renewable Energy Credits (RECs) are the environmental attributes, often referred to as a Carbon Credit, which has value in several US states including Maryland, and is calculated and paid each month by the brokerage firm of your choice.
- Net-Metering: The system will be fully authorized by the power company through their standard Interconnection application process and will produce power that will be fed back into the building to be used as it is generated. Batteries are not included in the system and power that is not used will be fed back to the grid to the utility company who will credit the business owner’s bill for the excess generation.
- Solar modules have a warranty of 25 years, with an expected life of greater than 30 years.
- For roof installations, the system will be fully authorized by the manufacturer of the roof and will not affect the roofing warranty.
- The system will run with little or no maintenance and internet monitoring will be included with your system which allows business owner to track their production online as well as share that information publicly.