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."
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