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Massachusetts solar loan program leaves banks confident to lend

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Massachusetts solar loan program leaves banks confident to lend

At the end of the program, private solar loans will continue, but low-income homeowners could be left behind.

Massachusetts’s leased solar loan program comes to an end this month, leaving behind a more robust solar financing market, but also removing a tool that lenders and installers say has been invaluable in bringing the benefits of solar power to underserved households.

“This has allowed us to bring solar power to people who might not otherwise have access to it,” said Richard Bonney, project developer for solar installer RevoluSun, who has completed 141 projects in the program framework. “This is the biggest concern on our side. ”

The Mass Solar Loan program was launched in 2015 with two objectives: to revive the residential solar financing market and to expand access to solar for low-income households.

At the time, residential solar was starting to take off in Massachusetts, but the majority of installations were part of power purchase agreements, a contract in which a solar company essentially leases rooftop space for panels to customers. owners, who then agree to buy the electricity. generated at a reduced price.

These agreements have saved customers money and helped reduce greenhouse gas emissions from power generation. However, the companies that own the panels have enjoyed the financial benefits of state renewable energy incentives and federal and state tax credits. And because most of these companies were from outside Massachusetts, the local economy was not fully feeling the positive impact of the growing number of solar installations.

“We were basically promoting solar power, and 90% of the value went out of state,” said Ben Mayer, vice president of residential marketing and sales for SunBug Solar.

The benefits were particularly limited for low-income customers, who could already have benefited from a reduced electricity tariff through the utility.

The Massachusetts Clean Energy Center set out to design a loan program that would solve these problems by making it easier for homeowners of all income levels to buy – and reap the rewards of – their own systems. More loan programs here @ https://www.paydaynow.net/

The agency ended up creating the Mass Solar Loan, a five-year, $ 30 million program that encouraged banks to lend money for residential solar projects by requiring borrowers to work with an approved solar installer who had been approved by the state, giving banks more confidence that the project would result in a functioning facility.

“I knew the project was going to be built well, on budget, and when they got it going it was going to work,” said Robert Terravecchia, chairman of Coastal Heritage Bank, one of the participating lenders. “It was kind of a gold rush for a while, and it gave me confidence that I wasn’t going to be dealing with a bunch of nighttime freaks.”

The loan program has also agreed to cover part of the lenders’ losses in the event of default. This element made it less risky for banks to venture into a new market. It also allowed them to adjust their underwriting criteria and approve loans to applicants with less than ideal credit, creating more opportunities for low-income residents to finance a solar installation.

To further target low and moderate income homeowners, the program also included provisions that lowered the interest rate for income-eligible borrowers and paid off a portion of a borrower’s principal – 20% or 30%, depending on the level. income – once the project is completed. completed.

“These things together created a government loan that was a bit off the charts,” Mayer said. “I mean, it was a ridiculously good program.”

The loan program has received an additional $ 15 million over the years, but has not been extended. Some of the provisions have also evolved over time: reduced interest rates have been phased out and principal repayment is now only available to lower income borrowers.

The clean energy center plans to end the program on December 31, as originally authorized.

The program has been successful, say lenders, in showing banks that solar loans can be a worthwhile product to offer. Default rates were generally very low on loans made under the program, lenders said. At Coastal Heritage Bank, less than 1% of loans were bad, Terravecchia said.

UMassFive, a credit union that has been the state program’s primary lender, has created its own solar lending program with terms similar to mass solar lending. This new program lent $ 6.5 million in 2020.

“The demand is still huge,” said Richard Kump, president of UMassFive. “We have to provide that funding. ”

Cape Cod Five did not participate in the state’s program, but seeing the success of solar lending from other banks, developed a modified version of its home equity loan for solar borrowers.

“We have extended the underwriting guidelines to take into account that solar power adds value and makes homeownership more affordable,” said Robert Talerman, co-chairman of the bank. “We’ll probably expand this to reflect that it’s getting even more common and maybe even make it a bit easier on the customer.”

Without the income-based support of the state program, however, market-based loan programs are unlikely to reach low-income households on anything like the mass solar lending scale. Of the 5,700 loans granted under the program, 3,000 were for borrowers with low-income client arrangements.

Even though banks and credit unions appear to be stepping up their solar lending, they will not be able to fill all the gaps left by the state’s program. Almost 30% of the program’s loans have gone to applicants with a credit score of less than 720, a level that lenders generally consider quite risky.

And while many homeowners are expected to use home equity loans to finance a solar installation, borrowers who make smaller down payments or haven’t owned their home for a long time may not have enough equity to fund a loan. .

Massachusetts’ solar incentive program has provisions targeting low-income households, but has tools to help homeowners overcome the initial hurdle of the initial cost of installing a system.

There is nothing on the horizon to fill this gap, and Gov. Charlie Baker’s administration doesn’t seem to see the point in funding more solar incentives for low-income residents, Mayer said.

“It would be funny if it weren’t so aggravating,” he said. “If anything, you should figure out how to increase the investment. ”

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