Commercial solar has lagged behind utility scale and residential solar for two reasons. The first is that paybacks for commercial solar have historically been longer than CFO’s would like -- anything over 3-4 years is a “big” decision and usually gets pushed aside. The second reason is that the financing structures for commercial solar were complicated; although leases and PPAs are effective in reducing operating costs, they are not necessarily good long term investments.

New financing options for commercial solar are changing this picture. Banks are getting more involved in providing unsecured loans for solar installations, and secured solar loans are becoming available that offer relatively low interest rates. Property Assessed Clean Energy, or PACE loans are perhaps the most significant innovation.

PACE loans are secured by the property itself, and are paid back as part of annual tax assessments. If the property is sold the loan on the solar improvement automatically goes to the new owner. The loan debt typically does not show up on a company’s balance sheet. And if the property is leased to a tenant with a triple net lease in which the tenant pays an allocated part of the property taxes, then a portion of the solar repayment loan can be automatically passed on to the tenant (who in exchange gets the benefit of free solar electricity).

If you own or have a long term lease on a commercial property in a solar friendly state, please Listen Up to this week’s Energy Show on Renewable Energy World for the latest on financing options for your commercial solar installation.