By Jacob Bayer, founder and CEO of Luminext
The HERO PACE program provides a great service to our nation by financing all sorts of projects that help us reach our renewable goals. HERO Direct Pay emerged in late 2015 and so far, it’s proven to work very well for both contractors and clients in California. However, what made the Direct Pay service great in 2015 is not what keeps it alive right now.
How does HERO Direct Pay work?
The main goal of HERO Direct Pay is to simplify solar financing and speed up solar proliferation. It removes credit score as a financing obstacle for homeowners and allowed them to leverage home equity as a sole guarantee.
Direct Pay makes contractor’s happy as well. It facilitates their relationship with distributors, giving them unlimited access to resources because they are 100% financed by the HERO program.
What made it popular in 2015?
While consulting on residential solar energy projects back in 2015, we noticed that suppliers were often overwhelmed by the number of solar requests they were receiving. Working overtime and hiring additional crew was the first response to the increased demand, however, it soon became clear that cash flow will become the main bottleneck hindering progress. Having unlimited access to resources through HERO Direct Pay helped contractors better manage their cash flow.
Buying vs buying outright
Even though the majority of customers were buying, the number of outright purchases (when the customer becomes the owner of the system, rather than leasing) was very low and tying in money became a huge issue. HERO Direct Pay service couldn’t have come in a better time as it allowed contractor’s to take on a lot more projects during the ITC frenzy.
Another thing to note is that this service emerged in California, one of the leaders in solar proliferation. If you consider that not all people have a good credit score and that a large number of those who can afford solar have already added it to their homes, this program starts to make even more sense.
Why is it popular now?
After all that excitement dissipated and the threat of losing the ITC dissipated, the demand for solar slightly slowed down. This meant that giving every home in California a chance to go solar became even more important for the local industry.
HERO Direct Pay is flexible, offering 5, 10, 15 and 20-year plans with annual interest rates as low as 5%. For clients, this is more than acceptable, especially if they are considering solar as a way to lower their utility bills.
As for contractors and distributors, the deal could not be more favorable. They get paid on time, the Direct Pay projects they take on don’t affect their credit score and being approved for the HERO program improves their portfolio.
Following grid parity
Since the HERO Direct Pay is a service that works for all, we shouldn’t be surprised if it becomes available in more regions across the U.S. All regions that have reached a certain saturation point with solar installations are definitely prime candidates, as well as regions that recently reached grid parity.
New regions where solar energy has become a viable option might not have contractors that are financially capable of meeting the newly created demand. This creates a scenario similar to the one near the end of 2015 and all problems can be solved much in the same manner, with HERO Direct Pay.