Santa Fe sets PACE for solar installations

Santa Fe County is playing guinea pig for cities and counties statewide to finance solar installations on homes and businesses.

In mid-June, the county will launch New Mexico’s first Property Assessed Clean Energy (PACE) program, which allows home owners and businesspeople to obtain loans for solar systems and repay them through property taxes. It’s a new approach to solar promotion gaining momentum nationwide, but Santa Fe County is the first in New Mexico to adopt it.

The county hopes to serve as a model for more localities statewide, said Economic Development Director Duncan Sill.

“We hope to develop templates for designing and administering the program that will be useful for other jurisdictions,” Sill said.

The county signed a $51,000 contract in April with Renewable Funding LLC – a California firm that helps administer PACE in other states – to design the local program. It will sign a second contract for the firm to manage PACE once it launches.

Brian Cassutt, local program manager for Renewable Funding, said he expects more to sign on.

“Santa Fe is taking the lead, but we’ve been talking with officials in many places,” Cassutt said. “Santa Fe’s program will allow others to see how it works before moving forward.”

The PACE program started in 2008 in Berkeley, Calif., where Cisco DeVries, former chief of staff for the local mayor’s office, pioneered the initiative. DeVries later formed Renewable Funding, which now administers PACE programs in about 200 counties and municipalities in five states. The company is helping more states to pass enabling legislation to allow local governments to adopt PACE.

The New Mexico Legislature passed it in 2009. It allows local officials to form Renewable Energy Financing Districts, which sell bonds to finance solar installations on homes and businesses. Borrowers repay loans over 20 years as a special assessment on their property tax bills.

The arrangement offers property owners access to credit while eliminating upfront costs, which often impedes roof-top solar development, said Randy Sadewic, general manager of Santa Fe-based solar installer Positive Energy Inc.

“It provides an immediate source of funds,” Sadewic said.

Odes Armijo-Caster, chief operating officer at Albuquerque’s Sacred Power Corp., said it can help people with credit problems.

“It will allow lower income people who otherwise couldn’t afford a solar system to get a photovoltaic installation on their homes,” Armijo-Caster said.

The Albuquerque City Council approved a financing district last fall, but it has yet to launch a PACE program. Santa Fe County created its financing district in October.

Interest rates might discourage some from applying for PACE assistance, because many can get commercial loans with 5 percent interest.

Rates must still be determined, but PACE borrowers will pay between 6 percent and 8 percent, Cassutt said.

Still, many benefits will offset higher interest rates, such as lower electric payments, a 20-year repayment period and state and federal tax credits that can lop off about 40 percent of a residential solar system’s cost.

“With current tax incentives, a reasonably priced system and a reasonable interest rate, the financing option will yield positive cash flow over the life of an improvement [project],” Cassutt said.

Most solar installers expect an enthusiastic response from property owners.

“A lower interest rate can help, but even at the rate they’re discussing, I think it will lead to a big customer uptake,” Sadewic said.

Property owners are already showing interest.

“We haven’t done any active outreach, but we’ve already received about 200 inquiries,” Sill said.

The program will start with $10 million in financing – enough for about 500 homes and businesses. To speed things along, the county will sell “micro-bonds” of $10,000 to $20,000.

“We won’t wait to aggregate a huge bond series,” Sill said. “Micro-bonds are the most expedient and efficient way to roll out the program.”