PACE and Solar in VA

The average Virginian spends a little more than $2,000 a month on energy.  What can be accomplished with $2,000 a month to make the home environmentally sustainable instead of spending it at the gas and electric companies?

Is it solar?  Suppose 10 kW of solar is added to your roof.  10 kW in the 23120 zip code provides 13,915 kWh per year on average. At 0.11 cents/kWh, which is the current consumer rate, (at present, a 10% increase is expected soon, also it increases slightly every year) the system generates $1,536 dollars in electricity per year.  Current tax Incentives have a big impact on solar economics. https://pvwatts.nrel.gov/pvwatts.php   

Assume each kW costs $2,400 installed. If this is paid for in a PACE special assessment over twenty-five years, (some panels are guaranteed for 30 years) the payment at 5.39% is $2,047.73 (This also covers adding $5,523 in PACE overhead and accounting for the benefit of the 26% federal tax credit.) By Including the Federal Tax Credit of 26% (this year and next) using a PACE program and finding 25-year PACE financing, any consumer can actually be paid to allow the PACE program to buy the solar panels.  Including homes covered by almost all FHA loans, but that’s another story.

Bottom Lines: The home value increases by adding solar panels, The consumer has no debt on his finances. There is a property assessment. The owner spends nothing out of pocket. AND the assessment is not  required to be paid off by the program if the owner sells the property. The panels stay and so does the PACE assessment. This is another aspect of PACE that makes it very special. The property owner’s cash flow is improved by an average of $230 dollars per year in years 3-25, more after that.  That’s not much but this indicates even solar panels in VA can improve the primary mortgage holder’s debt coverage ratio while simultaneously increasing asset value.

It’s also smart for a homeowner and the mortgage lender to replace a constantly rising variable cost with a fixed annual payment.

The mortgage industry is decidedly reluctant to accept PACE loans and either erroneously or mistakenly insists that a PACE loan is superior to a mortgage when in fact it is not. ONLY PACE payments IN ARREARS are.  FHA had issued a statement saying PACE loans were compatible with FHA mortgages at one point and then reversed itself early in the previous administration.   

Solar is the worst performing energy investment, but the idea here is: Can we can make even this change financially beneficial without government spending and further subsidy? The answer is "Yes we can!" This is a conservative and business responsible solution to climate change and energy conservation that will provide local jobs and economic stimulus. It can be utilized throughout the state if enabled.

This is only a first round illustration.  It is far more important to get the best answers for each home on a case by case basis. The “reduce before your produce” mantra is key.  If you can reduce a home to zero energy, solar panels are unnecessary.  Reducing the electrical energy needed by using better weather sealing, insulation, duct sealing, energy controls, LED’s, skylights and geothermal HVAC can all provide better carbon footprint reductions at lower costs and provide better financial returns.  The point that needs to be made is where will the capital come from?  Pick up the PACE!

Note to Mortgage lenders and the MBA:  The preceding evidence a Virginia solar PACE transaction makes it smarter to grant and or approve a PACE loan by all mortgage lenders.  With a mortgage investment and a PACE investment by the same mortgage lender being especially beneficial as overhead can be minimized. Repayment is not guaranteed on the primary mortgsge.  Repayment is almost guaranteed on the PACE assessment. On the PACE portion, the lender’s capital has no little to no market risk. While subjecting the same amount in a new bigger mortgage increases the lenders market risk..  As in 2008 a 60% decrease in market valuation is a possibiity. However, the assessment value would be undiminished.

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