NREL assembles industry group to explore solar lending

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The Energy Department’s National Renewable Energy Laboratory (NREL) is seeking to facilitate loans aimed at solar system installations.

The organization recently convened the Banking on Solar working group to engage lenders and other stakeholders to address existing barriers. Although it says banks, credit unions and other lenders are beginning to offer loan products to homeowners and businesses for the installation of rooftop solar systems, obstacles remain.

The Banking on Solar initiative comprises more than 50 members representing the solar, banking, legal, regulatory and financial industries. 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 solar assets. The goal, the NREL says, “is to reduce barriers to entry for banks that wish to diversify their asset base and invest in a market with high growth potential."

NREL analyst Travis Lowder adds, "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. 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. It is also reviewing other solar debt markets, such as lending into tax equity capital structures.

The Banking on Solar 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 says. "The knowledge gained from quantifying solar risks under the SAPC mock ratings process is highly relevant to solar lenders."

The Department of Energy’s Office of Energy Efficiency and Renewable Energy is supporting the effort 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.

Banking on Solar participants include such high-profile companies and institutions as SolarCity, SunPower, NextEra Energy, OneRoof Energy, Bank of America Merrill Lynch, Rabobank, U.S. Bancorp, VectraBank, Wiser Capital and Callahan & Associates.