Key Takeaways
- PACE financing attaches to the property, not the borrower — the obligation transfers with the property on sale
- Repayment occurs through a special assessment on the property tax bill over 10–25 years
- No upfront cost to the property owner, enabling 100% financing of solar installations
- Available for both residential (R-PACE) and commercial (C-PACE) properties
- C-PACE is widely available in 30+ U.S. states; R-PACE availability is more limited
- PACE assessments are senior to mortgage liens, which creates complications with some mortgage lenders
What Is PACE Financing?
PACE financing (Property Assessed Clean Energy) is a financing mechanism that allows property owners to fund energy efficiency upgrades, renewable energy installations, and water conservation improvements through a voluntary special assessment on their property tax bill. The assessment is repaid over 10–25 years, and the obligation stays with the property — not the individual — if the property is sold.
PACE was designed to solve a key barrier to solar adoption: upfront cost. By spreading payments over the useful life of the system and tying the obligation to the property rather than the owner, PACE makes solar accessible without personal debt or credit score requirements.
C-PACE is one of the most underutilized financing tools in commercial solar. It can cover 100% of hard and soft costs, requires no personal guarantee, and terms can stretch to 25 years — longer than most commercial loans.
How PACE Financing Works
The PACE process involves the property owner, a PACE administrator, a capital provider, and the local government that collects property taxes.
Property Owner Applies
The property owner applies through an authorized PACE program administrator. Eligibility depends on property type, location, equity, and tax payment history.
Project Is Approved
The PACE administrator reviews the proposed solar installation to confirm it qualifies as an eligible improvement. An energy audit or savings estimate may be required.
Capital Provider Funds the Project
A private capital provider funds the installation cost. The property owner pays nothing upfront. Funds are disbursed directly to the solar installer upon project completion.
Assessment Placed on Property
A voluntary special assessment is placed on the property tax bill. The assessment amount, interest rate, and term are fixed at closing.
Repayment Through Property Taxes
The property owner repays the PACE assessment as part of their regular property tax payments, typically semi-annually or annually, over 10–25 years.
Transfer on Sale
If the property is sold, the remaining PACE assessment transfers to the new owner along with the property tax obligation. The solar system and its benefits also transfer.
Annual Energy Savings > Annual PACE Assessment PaymentMost PACE programs require the projected energy savings to exceed the annual assessment payment, ensuring the property owner is cash-flow positive from day one.
Types of PACE Programs
PACE programs differ based on property type and program structure.
Commercial PACE (C-PACE)
Available in 30+ U.S. states for commercial, industrial, and multifamily properties. Covers 100% of project costs including soft costs. Terms up to 25 years. No personal guarantee required. The most active segment of the PACE market.
Residential PACE (R-PACE)
Available in select states (California, Florida, Missouri). Covers solar, roofing, HVAC, and energy efficiency upgrades. Has faced regulatory pushback due to consumer protection concerns, limiting expansion.
PACE + ITC Combination
Property owners can claim the federal Investment Tax Credit on the full cost of a PACE-financed solar system. The ITC reduces the effective cost, while PACE spreads the net payment over time.
PACE for Resilience
Some states allow PACE to fund resilience improvements including battery storage, microgrids, and hurricane-resistant roofing alongside solar installations.
When modeling PACE financing in solar design software, always input the actual PACE interest rate (typically 5–9%) and the full assessment term. PACE rates are usually higher than traditional solar loans, but the transferability and property-tax deductibility can offset the rate premium.
Key Metrics & Calculations
| Metric | Typical Range | What It Measures |
|---|---|---|
| Interest Rate | 5–9% fixed | Cost of PACE capital |
| Term Length | 10–25 years | Repayment period via property tax |
| Maximum LTV | 20–25% of property value | Cap on PACE assessment relative to property value |
| Closing Costs | 3–5% of financed amount | Program fees, recording fees, underwriting |
| Savings-to-Investment Ratio (SIR) | >1.0 required | Ensures energy savings exceed PACE payments |
| Combined Mortgage + PACE LTV | Varies by program | Total debt as percentage of property value |
Annual PACE Payment = (Financed Amount × Interest Rate) ÷ (1 − (1 + Interest Rate)^(−Term))Practical Guidance
PACE financing presents opportunities and considerations for every role in the solar workflow.
- Size systems to maximize the SIR. PACE programs require the savings-to-investment ratio to exceed 1.0. Design the system so annual energy savings comfortably beat the annual PACE assessment.
- Include all eligible measures. PACE can cover roofing, insulation, and HVAC alongside solar. Bundling measures increases total project value and can improve the SIR.
- Model PACE payments in proposals. Use SurgePV’s financial modeling tool to show PACE payment vs. energy savings side by side. Cash-flow positive from year one is the goal.
- Check property value limits. PACE assessments are typically capped at 20–25% of property value. Verify the property appraisal supports the proposed system cost.
- Get paid directly from PACE funds. PACE capital providers disburse funds directly to the contractor upon project completion and inspection. Understand the documentation and inspection requirements before starting work.
- Register with PACE programs. Most PACE administrators maintain a list of approved contractors. Registration is free and opens access to a pipeline of PACE-funded projects.
- Build PACE timelines into schedules. PACE applications and approvals add 2–4 weeks to the project timeline. Start the PACE application process early to avoid delays.
- Document everything for disbursement. PACE capital providers require completion certificates, inspection reports, and final invoices before releasing funds. Keep paperwork organized.
- Lead with “no upfront cost.” PACE’s biggest selling point is 100% financing with no money down. The property owner’s credit score is not the primary qualification — property equity and tax payment history matter more.
- Address the mortgage concern. Some mortgage lenders object to PACE’s senior lien position. Explain that C-PACE programs typically require mortgage lender consent, while R-PACE rules vary by state.
- Highlight transferability. The PACE assessment transfers with the property, so owners don’t face a balloon payment if they sell. The next owner inherits both the solar system and the remaining payments.
- Compare PACE to other financing. Show side-by-side comparisons of PACE vs. solar loans vs. leases vs. PPAs. PACE’s longer terms often produce lower monthly payments, though total interest paid is higher.
Model PACE Financing in Solar Proposals
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Real-World Examples
Commercial: 200 kW Warehouse Rooftop
A warehouse owner in Connecticut installs a 200 kW system for $420,000 using C-PACE financing at 6.5% over 20 years. The annual PACE assessment is $37,800. Annual energy savings are $52,000, making the project cash-flow positive by $14,200/year from day one. The federal ITC further reduces the effective cost by 30%.
Residential: 7 kW Home System (California)
A homeowner in California uses R-PACE to finance a $21,000 solar installation at 7.9% over 20 years. The monthly PACE payment is $172, while the eliminated electricity bill was $195/month. The homeowner saves $23/month immediately and avoids the credit check required by traditional solar loans.
Multifamily: 350 kW Apartment Complex
An apartment building owner in Maryland finances a 350 kW solar-plus-storage system via C-PACE for $980,000 at 6.0% over 25 years. The assessment payment is $76,600/year. Combined energy savings and demand charge reductions total $98,000/year. The building’s operating expenses decrease, increasing net operating income and property value.
Impact on System Design
PACE financing affects design decisions differently than traditional loans or cash purchases:
| Design Decision | PACE Financing | Cash or Solar Loan |
|---|---|---|
| System Size | Maximize size within SIR and property value limits | Sized to budget or ROI preference |
| Additional Measures | Bundle roofing, insulation, storage to increase value | Typically solar-only |
| Payback Focus | Cash-flow positive from year one | Shorter payback preferred |
| Customer Qualification | Property equity and tax history | Credit score and income |
| Interest Rate | Higher (5–9%) but longer term | Lower rate but shorter term |
For commercial projects, combine C-PACE with the federal ITC for maximum impact. The ITC reduces the effective financed amount, while PACE spreads the remaining cost over 20–25 years. This combination often produces the best cash-flow profile for building owners.
Frequently Asked Questions
What is PACE financing for solar?
PACE (Property Assessed Clean Energy) financing allows property owners to fund solar installations with no upfront cost. The cost is repaid through a special assessment on the property tax bill over 10–25 years. The assessment is tied to the property, not the individual, and transfers to the next owner if the property is sold.
Is PACE financing a good idea for solar panels?
PACE can be a good option for property owners who want solar with no upfront cost and who may not qualify for traditional financing. The interest rates are typically higher than solar loans (5–9% vs. 3–7%), but the longer terms, no credit score requirement, and transferability can make it attractive. Compare PACE terms against solar loans, leases, and PPAs before deciding.
Does PACE financing affect my mortgage?
PACE assessments have senior lien status, meaning they are repaid before the mortgage in a foreclosure. This can create issues when refinancing or selling. For C-PACE, most programs now require mortgage lender consent before the assessment is placed. For R-PACE, rules vary by state. Always disclose the PACE assessment to your mortgage lender and to potential buyers.
What states offer PACE financing for solar?
As of 2026, C-PACE is authorized in over 30 U.S. states plus the District of Columbia, with active programs in most of those states. R-PACE is more limited — California and Florida have the largest residential programs. Check PACENation.org for current state-by-state availability and active program administrators.
About the Contributors
Co-Founder · SurgePV
Akash Hirpara is Co-Founder of SurgePV and at Heaven Green Energy Limited, managing finances for a company with 1+ GW in delivered solar projects. With 12+ years in renewable energy finance and strategic planning, he has structured $100M+ in solar project financing and improved EBITDA margins from 12% to 18%.
Content Head · SurgePV
Rainer Neumann is Content Head at SurgePV and a solar PV engineer with 10+ years of experience designing commercial and utility-scale systems across Europe and MENA. He has delivered 500+ installations, tested 15+ solar design software platforms firsthand, and specialises in shading analysis, string sizing, and international electrical code compliance.