Competition among residential solar loans

"Loan and finance companies are now going head to head to outdo each other to make solar loans more appealing and competitive for homeowners."


It’s rare that solar news takes a front and center position in the financial segment of the daily news but that is exactly what is happening with a new kind of financing. Like any emerging industry, solar energy is creating competition at every turn. While this in itself is not unusual solar news, the fact that renewable energy is now being mentioned in the financial news, is. Loan and finance companies are now going head to head to outdo each other to make solar loans more appealing and competitive for homeowners. This newly created competition among solar energy money sources is due to the fact that the solar energy industry is growing at an astounding 17 times faster rate than the entire US economy. In fact, according to studies from the Solar Energy Industries Association (SEIA), US solar panel installations have been growing at a 60% compounded annual rate since the year 2006. 

There is a huge appeal for banks to appease and to appeal to homeowners and potential buyers as solar is gaining in popularity every year. This is not surprising as there are so many benefits to having solar panels installed and used in a residential setting. The addition of solar panels is known to increase the value of residential properties. This is a welcome addition to the widely acclaimed fact that solar power reduces the homeowner’s carbon footprint by reducing greenhouse gas emissions. The most obvious benefit to homeowners is that solar power reduces costs and saves consumers money over costly energy consumption. Though there is an initial cost to installing solar panels, homeowners opt for solar technology anyway in efforts to attain long term benefits and savings. 

Enter the competition. Conventional residential and consumer loans do not specifically cover solar power installations, clean energy homes and the financing of electric vehicles. The need for specialized financing has been noted by clean energy enthusiasts that are now forming nonprofit credit union charters to provide better financing options for renewable clean energy enthusiasts to build and finance homes that reflect this sustainable energy lifestyle. The Clean Energy Credit Union or CECU is one of these new banks. They have been given a federal charter; really the first of its kind, for a national non-profit financial services cooperative that will concentrate  exclusively on providing affordable loans for clean energy products and services. 

The CECU will literally raise the bar for the solar home loans market in the US. There already are several prominent names in the US solar loans market including Mosaic and EnerBankUSA. The drawback to these existing lenders is that their loans financing is backed by traditional venture capital firms and the ensuing money is too expensive. This cost factor shows that there is clearly room for competition among lenders. The CECU is a nonprofit credit union and founder Blake Jones claims that “it doesn’t have any stockholders to pay or venture capital firms looking for a return on investment.” As a further benefit, the credit union will look for depositors that are interested in investing in clean, sustainable solar energy in a safe and secure way. 

According to Blake Jones, funds from federally insured deposits are among the least expensive moneys in the market today. Access to these funds is a major reason why banks and credit unions typically have been able to provide the most competitively priced loans for any products and now that can include solar power and sustainable energy products and services. The goal of the CECU is to work with funds from federal deposit insurance in order to pass on those cheaper borrowing costs and financially assist homeowners who want to put solar panels on their roofs or electric cars in the garage. These specialized loans from CECU will be specifically designed to cater to customers that are solar owners. 

Why can’t traditional credit unions and banks offer these long term loans geared toward the solar market? They can but they’ll need to keep payments low enough to match the savings realized in electric bill savings from solar power generation. Traditional banks are looking to CECU for inspiration and guidelines as they now have their federal charter and will soon move into the crowdfunding phase. This will allow the credit union to build up the ability to loan out more solar power funds for purchase and conversion projects. At the time of this writing, CECU is planning on launching in late 2017 and will serve members of the American Solar Energy Society, as well as the general public by initially offering federally insured savings accounts, clean energy CDs, and loans to help people “afford solar electric systems, electric vehicles, home energy efficiency retrofits, electric-assist bicycles, net-zero energy homes, etc.” 

What can you do now to finance solar power at your residence or business? Personal loans and credit card debt are two ways but it’s wise to remember that any savings from having solar panels at you property will most likely be offset by the high cost of fees and interest rates. The Title 1 FHA Loan is available for any homeowners that want to upgrade their home’s energy efficiency through the use and addition of solar energy. The FHA offers their FHA Power Saver loan program that is designed to cover the cost of a solar panel installation project balanced by the potential energy savings involved. 

One little known way to benefit from solar power additions is to lease them. It’s a highly affordable way to add solar panels to your home without many of the headaches associated with financing and long term purchases. Luke Bonham, a Portland resident discovered this to be true after using a company called SolarCity for his solar installation. Bonham selected the lease plan where SolarCity will maintain ownership of the solar panels, and then offer him the option to buy, remove, or continue leasing the solar panels after the lease runs out. 

HELOCs are offered by traditional banks and savings and loans. Solar panels can be purchased using these Home Equity Lines of Credit or HELOC as they are known in the banking world. Once a HELOC is in place you can borrow against the equity that you’ve accumulated in your home. To qualify for a solar HELOC you can expect to fill out an application and have your home appraised to prove equity. You’ll need to factor the cost of your HELOC payment into your budget. Long term, your costs will be offset by the solar savings but care should be taken that no payments are missed as this will affect credit scores and even put your home in jeopardy for foreclosure, negating any solar benefits accrued. 

With little competition among solar lenders, rates are still fluctuating in the medium to high range. Just as you would shop around for good solar panel rates, you should do the same for good loan rates. As the competition for solar lending increases, expect rates to drop and financing choices to increase. Expect to see more of these specialized financing programs as the industry matures, and solar financing becomes more common. Soon, solar news may include financing options and interest rate variations and vice versa. Financial news and solar news will soon go hand in hand as the renewable energy industry matures and becomes more conventional. 


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