Improving loan opportunities could boost solar rates where third-party financing is lacking in some states, said Banking on Solar recently.
Assembled by the Department of Energy’s (DOE) National Renewable Energy Laboratory (NREL), Banking on Solar plans to make progress eliminating roadblocks for banks that want to invest more in solar energy’s potential, and increase their own asset mix.
Challenges remain in obtaining finance for solar rooftop systems, despite banks and other financial institutions offering more and more options to businesses and homeowners.
“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.”
Banking on Solar consists of more than 50 members from banking, legal, and regulatory sectors. Well known names include: Bank of America Merrill Lynch, Citi, Environmental Defense Fund, and SolarCity. The group is working on normalizing loan documents, and underwriting rules for commercial and residential markets. It also plans to inform regulators and banks on solar asset class prospects.
Banking on Solar is working together with the SunShot Initiative-funded, NREL-led Solar Access to Public Capital (SAPC) working group. SAPC was arranged to speed up capital market investment from securitization. This is a practice where contractual debts (i.e., mortgages, credit card debts) are pooled then sold to investors as consolidated debts (i.e., bonds).
“The two initiatives are complementary, as securitization offers banks an opportunity to free up their balance sheets and expand their loan activities,” said Lowder.
“The knowledge gained from quantifying solar risks under the SAPC mock ratings process is highly relevant to solar lenders,” he said.
In the near future, Banking on Solar will present webinars to banks on solar asset classes while creating a presence in future meetings.
States will need to ramp up low-carbon energy investments like solar as climate change becomes more of a present-day threat and as energy demand increases. At the same time, as prices fall, solar becomes more attractive to banks. However, some financial institutions may still have questions on how solar works and be hesitant to invest. This hampers potential lending and opportunities. NREL’s Banking on Solar working group is a good step in improving the solar lending process.
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