Increasingly, banks, credit unions, and other lenders are beginning to offer loan products to homeowners and businesses for the installation of rooftop solar systems. However, barriers to accessing this growing market still remain. The Energy Department's (DOE) National Renewable Energy Laboratory (NREL) recently convened the Banking on Solar working group to engage lenders and other stakeholders to address these barriers.
Banking on Solar comprises more than 50 members representing the solar, banking, legal, regulatory, and financial industries, among others. The group's principal efforts center on standardizing contracts and underwriting processes, as well as educating banks and regulators about the risks and rewards of the solar asset class. The goal is to reduce barriers to entry for banks that wish to diversify their asset base and invest in a market with high growth potential.
"There are many states where third-party finance is unavailable and there are solar customers who may prefer to own their systems over leasing them," said NREL Analyst Travis Lowder. "A greater prevalence and diversity of loan products could enable higher rates of solar adoption in these markets."
The working group has already begun developing standardized loan documents and underwriting criteria in the residential and commercial markets. Other solar debt markets, such as lending into tax equity capital structures, are also under consideration.
The Banking on Solar working group is operating in parallel with the SunShot Initiative-funded, NREL-led Solar Access to Public Capital (SAPC) working group. SAPC is designed to facilitate capital market investment via securitization.
"The two initiatives are complementary, as securitization offers banks an opportunity to free up their balance sheets and expand their loan activities," Lowder said. "The knowledge gained from quantifying solar risks under the SAPC mock ratings process is highly relevant to solar lenders."
The effort is supported by the Department of Energy's Office of Energy Efficiency and Renewable Energy through the SunShot Initiative. Banking on Solar will host several webinars in the months ahead to introduce banks to the solar asset class. The group will also have a presence at several upcoming banking conferences around the United States. For more information on this group and its activities, please send an email to firstname.lastname@example.org.
Banking on Solar participants include:
AFC First Financial Corporation
American Bankers Association
Bank of America Merrill Lynch
Blank Rome LLP
Callahan & Associates
Capital City Bank
Capital Fusion Partners
City University of New York
Clean Power Finance
The Climate Bonds Initiative
Coalition for Green Capital
Community Development Financial Institutions Fund
Connecticut Clean Energy Finance and Investment Authority
Digital Federal Credit Union
Energy Programs Consortium
Energy Sense Finance
Environmental Defense Fund
Greater Cincinnati Energy Alliance
Harcourt Brown & Carey
Independent Community Bankers of America
K&L Gates LLP
Latham & Watkins LLP
Lawrence Berkeley National Laboratory
M-Core Credit Corporation
McHenry Savings Bank
Mosaic National Cooperative Bank
New York Green Bank
New York State Energy Research and Development Authority
Renovate America Inc.
Rocky Mountain Institute
Sandia National Labs
Self Help Credit Union
Skadden, Arps, Slate, Meagher, & Flom LLP
Solar Energy Industries Association
Zions Energy Link
NREL is the U.S. Department of Energy's primary national laboratory for renewable energy and energy efficiency research and development. NREL is operated for the Energy Department by The Alliance for Sustainable Energy, LLC.