The sizable up-front cost of solar has long been a challenging hurdle. So has rooftop siting –roofs are often shaded, in the wrong orientation, not owned by the people who live there, or otherwise unable to host a solar system. What if we could overcome both of these obstacles with one solution—one local solution?
A Colorado credit union and solar company might have figured this out.
Shared solar has been growing in popularity, largely because of its novel approach to solving the challenge of rooftop siting. Shared solar allows potential subscribers to participate in a common, shared system and, in return, receive credit on their energy bills for their share of generation. Colorado-based Clean Energy Collective (CEC) has been a pioneer in this field. I recently reached out to Tom Sweeney, the company’s chief operating officer, to find out more about their approach to that other big challenge: customer financing.
Mr. Sweeney said that when they were first thinking about financing options for their customers, he had contacted several traditional lenders and solar lenders that typically engage in solar leasing models. Neither was all that interested in creating a lending solution for shared solar, however. And neither really fit well with CEC’s business model.
This was somewhat surprising because shared solar represents an excellent proposition for lenders—a large potential customer base that typically has a very high repayment rate. “The social consciousness that comes with solar represents the integrity of customers, and on-bill savings helps them repay their loans,” said Sweeney.
Enter Sooper Credit Union.
Dan Kester, is president and CEO of Sooper Credit Union, which was originally established to serve the employees of King Sooper’s grocery chain. It later merged with several other credit unions to serve members in four western states: CO, WY, UT and NM. When he and Tom Sweeney started talking about credit unions and shared solar, well, it was one of those light bulb moments.
According to the Credit Union National Association, “credit unions exist to help people, not make a profit.” Credit unions have a reputation as being more flexible than traditional banks, offering aggressive rates, and being more customer-friendly. The credit union culture seemed like a natural fit for shared solar loans.
With a little planning and a few regulatory filings, Sooper was able to offer several competitive shared solar loan options to CEC customers. These include a 20-year loan, with no money down, no fees, no prepayment penalty and interest rates as low as 6%, fixed for the first 10 years, in addition to shorter-term loans with interest rates as low as 2.25%.
I tracked down Dan Kester for his take on the Sooper/CEC shared solar financing partnership. “Sooper is always looking to develop solutions with energetic partners,” he said. He explained how they worked together to develop a financing product that was fair for their customers while being a good investment for the credit union and their membership. “This turned out to be a really good fit for our members and for Sooper.”
Kester explained the difference between the Sooper financing option and traditional “on the roof” solar loans. Traditional solar loans are secured (or collateralized) with a home equity loan against the house on which they’re installed. In other words, they are wrapped up in the value of the home, not secured by the panels themselves.
Sooper and CEC developed the first loan of its kind by using the actual panels of the shared solar project to secure the loan. To do that, they submitted a regulatory filing to Uniform Consumer Credit Code in order to secure the shared solar interest. In a traditional loan, the lender would secure the loan through a deed of trust. Kester believed no other bank had ever configured a solar loan this way, although this mechanism is often used for other types of consumer loans. He also noted that CEC partnered with the credit union to provide additional security. The loans have been reviewed by auditors and examiners, who, according to Kester, were very supportive of how they were structured.
When I asked Kester if he thought other credit unions should embark down this path of shared solar financing, he responded with an enthusiastic ‘yes!’ “Credit unions should seize this opportunity to invest in our green future,” he said, “and be recognized as the innovative but responsible lenders that we always have been. These are great, well-secured, strong revenue producing loans.”
As I did further research into credit union financing, I found more examples of credit unions partnering with group solar purchasing programs, such as Alternatives Federal Credit Union, which is working with a Solarize project in New York state. I also found many more that provided “green” loans for various onsite renewable energy and energy efficiency projects, like Puget Sound Cooperative Credit Union. And there are many more examples across the country.
It may be too soon to call this a trend, but based on this initial interest and experience in helping members invest in renewable energy, it seems like credit unions are well suited to take on shared solar financing on a much larger scale. Stay tuned!
Image: Tian Tower, Clean Energy Collective