The Power of Solar Funding with CollectivePACE
Story by Sara Carbone, CollectiveSun Content Marketing Manager
When Merced Golf & Country Club decided to go solar they were not able to afford the capital expenditure and were having trouble qualifying for traditional financing or a PPA that fit their needs. Happily, they found a solution with CollectivePACE. CollectivePACE is a commercial finance product that allows tax-exempt organizations to fund their solar projects through low-cost, long-term financing and a tax-like credit towards the purchase price.
Often, the economics of solar are not as attractive for nonprofit organizations because they are unable to monetize federal solar tax credits and depreciation benefits. Like Merced, they may not have the cash up front or struggle to secure funding with attractive terms. James Patenaude, Director of Sales Management at 64Solar, said, “For too long, nonprofits have not been able to take advantage of the performance based incentives.”
CollectivePACE, the result of a collaboration between CollectiveSun and Greenworks Lending, was created specifically to address this kind of problem. It combines the financing models of solar leasing and state-legislated C-PACE programs with tax credits, resulting in solar financing terms that allow for positive cash flow from day one. Lee Barken, Chief Community Officer for CollectiveSun, states, “With CollectivePACE, we have created the $0 down financing solution that nonprofit clients across the country have been asking for.”
A Partnership Between Solar Financing Leaders
CollectiveSun is exclusively dedicated to assisting nonprofits and tax-exempt organizations looking to fund solar projects. These organizations include houses of worship, private schools, transitional housing, arts and community centers, golf clubs, for-profit entities without a tax appetite, and others. CollectiveSun’s main funding vehicle is their Solar Power Agreement (SPA). The SPA monetizes the solar tax credit so as to provide a 12% or more tax-like credit to customers. Over 140 customers across 19 states have utilized the SPA.
Greenworks Lending is the leading provider of Commercial Property Assessed Clean Energy (C-PACE) financing in the US. The company was founded in 2015 to bring optimal financing via C-PACE to renewable energy and energy efficiency projects. Since then Greenworks has offered financing to hundreds of commercial properties and is active in 22 states. In 2017 they completed the industry’s first rated securitization and completed another the next year.
In July 2018 the two companies joined forces to simplify the process of funding PV solar projects for nonprofits and tax exempt organizations. The result was CollectivePACE.
The Power of CollectivePACE
CollectivePACE brings together the SPA and the C-PACE loan. The nonprofit lowers the cost of their solar installation by 12% or more via the SPA and gains access to the longer-term, lower-cost financing of a C-PACE loan in order to fund the remaining 88%.
The SPA is a deposit lease agreement wherein nonprofits enter into a lease with the third party, CollectiveSun. CollectiveSun owns and guarantees the performance of the solar system for at least the first six years, after which ownership can be transferred. This third party ownership arrangement allows nonprofits and commercial properties without a tax appetite to tap the full economic benefits of solar and lowers the installations cost by 12% or more.
C-PACE financing, available in over 35 states, starts with a state-level government policy that classifies clean energy upgrades as a public benefit. The upgrades are able to be financed with no money down and repaid as a benefit assessment on the property tax bill. This assessment transfers on the sale of the property and ends up saving property owners money because it makes sure that the energy savings and incentives are greater than the repayment cost. Ultimately, the program lowers property owners’ annual costs, supports their effort to be sustainable and offers better-than-market financing for new construction.
There are additional advantages to using CollectivePACE for both the customer and the contractor. Tim Olson, Associate Director of Solar and Storage at Greenworks, states that the strong partnership between Greenworks and CollectiveSun means that “the team can quickly help contractors review potential projects, present the product to property owners, collect the necessary documents, and close on the financing in a way that helps get projects built and leaves customers happy.”
Olson also explains that through CollectivePACE contractors are able to increase sales by offering nonprofits an option with an easy path to qualification. He states, “we don’t look at credit scores, we don’t require personal guarantees, and we finance 100% of the hard and soft costs of a project. Often there are 6-24 months before they even have to make their first payment.”
CollectivePACE in Action
Merced Golf & Country Club, located in Merced, CA, needed $720,000 capital for their 305 kW rooftop and carport solar system. With CollectivePACE they swiftly secured a 15% discount (the amount of the available discount at the time) through the SPA as well as 85% financing with a C-PACE 25-year term loan. As a result, the club was cash flow positive from the beginning and saved $42,454 in the first year, with a projected savings of $2 million over the lifetime of the system.
New Milford United Methodist Church in New Milford, Connecticut also funded their 105 kW rooftop solar system through CollectivePACE. Mike Hopp, the Chair of Trustees, described the church’s decision to go solar as fully aligned with their desire to save on operational costs and reduce their carbon footprint. He said, “Once it is up and running it is going to be great for the next generation, the footprint on the earth, the town, everything.” A streamlined financing solution means that nonprofits and other tax-exempt organizations can tap the power of solar and apply the savings to mission related activities while minimizing their carbon footprint. CollectivePACE presents a win-win for both customers and contractors. As James Patenaude of 64Solar says, “CollectivePACE Financing has proved to be a valuable resource in working directly with many nonprofits. With CollectivePACE, they have the ability to go solar and reap all of the benefits.”
Email CollectiveSun’s VP of Sales, Matt Brennan.