Solar Lending Program Offers Options to Marginalized New England Households
Solar Lending Program Offers Options to Marginalized New England Households
By Sarah Shemkus, Energy News Network, April 28, 2022
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A community development nonprofit has launched a new solar lending program in Massachusetts and Rhode Island aimed at making it possible for more homeowners to invest in solar panels.
The DoubleGreen Solar Loan is designed to serve households regularly marginalized by existing financing options by offering lower interest rates, longer loan lengths, transparent terms, and more flexible underwriting standards.
This year, the fund aims to close $10 million in solar loans, with 60% of the funds going to low-income households and homeowners of color. The program works with a network of trusted solar installers to ensure buyers are treated fairly and transparently and not charged hidden fees.
“The average income and the average [credit] score of solar adopters has started to come down, but it’s still predominantly upper-middle class and whiter,” said Andy Posner, founder and chief executive of the Capital Good Fund, the organization offering the new loan program.
Posner launched the Capital Good Fund in 2009, with the mission of providing financial services and education to underserved populations. Today, the fund offers three loan products in nine states. The immigration loan program offers borrowers up to $20,000 to help pay for asylum applications, legal assistance, green card fees, or other related expenses. The impact loan program provides small sums to help cover pressing needs like car repairs or utility bills, helping borrowers avoid turning to predatory payday lenders. The weatherization loan helps homeowners pay for energy-saving measures like insulation, storm windows, and high-efficiency heating equipment.
So far, the organization has loaned $20 million to 10,000 families, with a repayment rate of 95%.
The new DoubleGreen Solar Loan evolved out of the weatherization lending program when borrowers started expressing interest in adding renewable energy to their homes as an additional cost- and carbon-cutting measure.
“We all need to be targeting a zero-carbon footprint in as short a period of time as possible,” said Conrad Geyser, founder of Cotuit Solar on Cape Cod, one of the program’s installation partners. “And the economic results of a solar system are good — one can make money from installing solar.”
DoubleGreen Solar offers loans with annual interest rates between 3.099% and 4.2%. The program’s standard repayment period is 25 years, longer than most bank solar loans, to ensure lower payments that are more manageable to households where controlling monthly cash flow is highly important. To compare, at UMassFive, traditionally a major solar lender in Massachusetts, solar loan interest rates start at 4.49% for a five-year term.
The DoubleGreen loan is also unsecured, cutting down on paperwork and reducing risk for the borrower.
“It will significantly lower the hurdle for people that need financing for solar, because it’s an unsecured loan with a very favorable rate,” Geyser said. “Before, those things did not come in the same package — it was one or the other.”
To fund the loans, the Capital Good Fund borrows money from impact investors at an average interest rate of 3%. The margin between what the organization pays in interest and what it charges borrowers pays for about 20% of the program’s operating costs. The rest is funded by grants and private donations.
Why is DoubleGreen needed?
Both Rhode Island and Massachusetts have programs aimed at easing the way for aspiring solar owners, but there are still barriers to adoption, particularly among the lowest-income homeowners.
In Rhode Island, homeowners looking to install solar can take advantage of net metering to earn bill credits for the power they generate, up to 125% of on-site consumption per billing period, or participate in the Renewable Energy Growth program, earning 28.75 cents per kilowatt-hour generated for the first 15 years they own their system. The state also offers grants of up to $5,000 to assist in the installation of solar panels, though the program is limited and fills up quickly each application period.
The Solar Massachusetts Renewable Target incentive pays the owners of solar panels a fixed rate per kilowatt-hour of power generated. The rate goes up for low-income households.
In both states, however, affording the system in the first place remains a challenge for low-income households that don’t have enough savings to pay upfront or have credit scores too low to qualify for a favorable loan from a bank.
For six years, the state-sponsored Mass Solar Loan program lent $45 million — the majority to low-income homeowners — to fund residential solar system installations. The program offered low interest rates and partial principal forgiveness for lower-income borrowers. However, the program wound down at the end of 2020. Some of the participating banks have continued to offer solar loans, but the options remain limited.
In addition to financial obstacles, there can also be informational and even emotional barriers to increasing solar installations for low-income households. Installers and lenders often fail to market to underserved populations, Posner noted. And within these communities, residents themselves may think of solar as a luxury limited to wealthier — and often White — homeowners.
“There is a misconception that solar is only for the affluent, which is really shameful,” said Ron Bennett, president of Got Sun Go Solar, an approved DoubleGreen solar installation partner that serves both Massachusetts and Rhode Island.
To help dispel these beliefs, DoubleGreen will be doing active outreach to encourage underserved homeowners to consider going solar. The group will contact its database of 600 households that have borrowed as part of the efficiency loan program, and reach out to community action groups that can help spread the word. Posner also expects to hire what he calls “energy concierges,” to go out into underserved communities, educate homeowners, pre-qualify them, and make referrals to installers.
The program currently serves Massachusetts and Rhode Island, but Posner expects to expand into the remaining seven states where the Capital Good Fund operates by the end of the year.
