Some lenders are wary of Property Assessed Clean Energy loans because of the tax liens involved, but at least one home mortgage company found them worthwhile enough to get one.
As critics like to point out, the liens involved in both commercial and residential PACE financing are a concern when taken on in conjunction with other financing because they take priority over other liens.
But after some consideration, Embrace Home Loans and its commercial mortgage holder decided a PACE loan partially repaid through a state grant made sense for them.
"There's not much risk here," said Embrace Vice President Deanna Roy.
Embrace recently became the first business in its headquarters in Middletown, R.I., to use commercial PACE financing, an initiative of the Rhode Island Infrastructure Bank. The state signed PACE legislation in 2015.
The home lender is using C-PACE funds disbursed by Greenworks Lending in Darien, Conn., to help it pay rooftop panel installer Direct Energy Solar and make other related roof repairs on its two headquarters buildings.
Embrace is paying a little over $1 million for the new solar panel installation and roof repairs combined. A grant from Rhode Island's renewable energy fund for $330,000 covers part of the cost and the PACE loan covers the remainder. The solar panels cost $850,000 and other roof repairs cost $200,000. Because the roof repairs were related, they could be rolled into the PACE loan.
More traditional commercial financing for such a project typically has a maximum 10-year term but PACE financing has more favorable terms in that it can remain outstanding for at least twice as long, Roy noted.
With the solar panels generating $75,000 in energy cost savings per year that the installer guarantees, the solar panels would pay for themselves within 11 years, and total project would be paid for three years after that.
Is a PACE loan's lien priority a concern? Roy acknowledges it's a key hurdle in the origination process, and that's why she advises anyone considering the financing to address that point early on.
"If I had to make a recommendation I would say start talking to your mortgage holder earlier rather than later so that they become familiar with it and can do whatever they need to do to be comfortable," she said.