There has been a lot of recent effort put into broadening solar energy access, in particular to improve the availability to the low-moderate income sector. And a bank in Colorado is providing an example of how financing projects in this sector can work.
Historically, building solar in low-moderate income communities has been complex. Members of the low-moderate community frequently rent their homes, where there is generally a split incentive between the property owner and the tenant, who pays the utility bills. They may also have lower credit scores or simply less credit history on which a solar system can be underwritten.
But recently, the White House announced a wide array of initiatives to open the low-moderate income market with specific focus on property-assessed clean energy and community solar.
States are getting into the act as well. Colorado and others have leveraged the community solar business model to facilitate low-moderate income participation since 2010. Colorado requires community solar gardens to include at least 5 percent of this segment.
Clean Energy Collective (CEC), the market leader in community solar, has built 23 projects representing 12.8 megawatts in Colorado. Another eight CEC projects providing 12 megawatts are under development with Xcel, the largest Colorado utility. According to Tim Braun, CEC’s director of public affairs, securing long-term participants in the low-moderate income segment often comes with challenges that other customer segments do not have.
Enter Alpine Bank. With assets of $2.8 billion, it is an employee-owned community bank that serves western Colorado with 38 branches and over 130,000 retail, business and other customers. Alpine is also a unique entity in that it is fully committed to the environment, and sees that as a critical aspect to serving the beautiful landscape of its service territory.
Since the bank branches have relatively small rooftops, Alpine sought to procure from local community solar gardens and saw a natural partner in CEC. The bank is powering 22 of its branch locations with 328 kilowatts purchased through six CEC facilities.
Alpine also saw a natural partner in Family & Intercultural Resource Center (FIRC), a local entity that provides a food bank, health insurance, parenting classes and financial counseling among its varied services for Summit County, Colo. residents.
“By purchasing community solar and working with FIRC, Alpine Bank is demonstrating our commitment to the communities we serve and to the environment at the same time," said David Miller, senior vice president and head of Alpine’s green team.
To help CEC meet the 5 percent requirement for low-moderate income customers, Alpine procured that portion of CEC’s Breckenridge Ullr Community Solar Array system (representing 82 panels for a total of 25 kilowatts) and donated it to FIRC, which in turn found families in the community to accept the donated power. Importantly, the community solar garden is established as a limited liability company, and thus designed to be financially self-sufficient.
The investment in the donated panels represents a valuable tax deduction for Alpine Bank, which consistently seeks to reduce its tax burden. It also allows the bank to meet its lofty environmental goals, and may be eligible to meet the bank’s Community Reinvestment Act requirements as mandated by the U.S. Department of Treasury’s Office of Comptroller of the Currency.
That office oversees how banks meet the requirements under the law to either invest in, loan to, or provide banking services to low-moderate income residences. Scores are factored into regulatory allowance decisions regarding a variety of bank business activities, and the banks take their scores very seriously.
The bank regulator recently provided guidance on eligible community development loans and included those that “finance renewable energy, energy efficient, or water conservation equipment or projects that support the development, rehabilitation, improvement, or maintenance of affordable housing or community facilities” (see a recent SEIA webinar on the issue here).
The guidance by Treasury is significant because banks are incredibly cautious entities -- they will not venture into uncharted waters without sufficient regulatory clarity.
Alpine’s investment and donation are eligible for the reinvestment act because they are seen as “supporting community services targeted to low- or moderate-income individuals.” According to Alpine’s Miller, such investment is clearly replicable by other banks. And now, banks may have even more opportunities to meet the requirements and finance solar energy systems.
Of course, education of solar developers, banks, and even regulators in the field needs to continue. But Alpine’s willingness to seek creative mechanisms to connect to its customers, do well, and meet regulatory requirements provides a great case study and valuable clarity to the broad U.S. banking industry.
Mike Mendelsohn is the senior director of project finance and capital markets at the Solar Energy Industries Association.