The World's #1 Renewable Energy Network for News, Information, and Companies.
Untitled Document

Who Needs Third-Party Finance? Loan Programs Offer Low-Cost Direct Ownership Opportunities

Direct ownership of solar systems offers an array of benefits generally not available to third-party finance. And new loan programs are making it easier to achieve that goal.

To date, direct ownership has not been a primary driver of small-scale solar deployment. Instead, residential and commercial customers alike appear to strongly prefer third-party ownership—via leases or power purchase agreements—over direct ownership. According to SunRun, 75% of the California market relies on third-party financing.

That's likely due to the immediate cash requirements necessary to invest (a typical 5-kW residential system can cost on the order of $20,000–$35,000, assuming installation costs of $4–$7/W). And if my own experience is any indication, end-use customers are generally not interested in filling out the paperwork necessary to recover the tax credit offered to homeowners (as distinct from the business investment tax credit or 1603) or utility renewable energy certificates (RECs).

With respect to the cash layout, there may be some new opportunities to borrow the lion's share of the installed system costs, negating most out-of-pocket expenses. And although there is likely more paperwork than in a third-party lease transaction, the benefits of direct ownership may be worth the effort.

One example loan option is the "Step Down" program offered by Admirals Bank. Step Down works directly with installers and developers to essentially promote the program through their client contacts. Step Down is available in every state except for Texas. According to Ryan Wells, Vice President and Director of Renewable Energy Programs for Admirals Bank, the bank is signing up roughly seven to 10 new contractors every day, and the bank is writing several million dollars in residential solar loans each year.

Step Down is a registered program under Title 1, administered by the Federal Housing Authority (FHA) of the U.S. Department of Housing and Urban Development (HUD). According to HUD, the agency insures eligible private lenders against loss on property improvement loans they make. Loan applicants must have good credit histories and the ability to repay the loan in regular monthly payments.

Title 1 loans are capped at $25,000 for single-family homes or $60,000 for multifamily structures and can have maximum terms of 20 years. Different loan aspects apply for manufactured housing — whether on permanent foundations or not.

Wells indicated the bank loans under Step Down carry a fixed simple interest rate of 4.95%–9.95% for most borrowers and are tax deductible. He also argued direct ownership — achievable for many when partnered with a low-cost loan—offers several advantages over a third-party lease, including locked-in payments (some third-party leases escalate annually), a likely appreciation to the home, and ownership rights to alter or move.

I searched for developers that know about Title 1 financing and found several. For example, Black Platinum Solar — serving the Phoenix, Arizona, region — encourages customers to consider a Title 1 home loan. The company — an Admirals Bank client — explains, "[u]nlike a lease, as the property owner you own the PV system, receive any incentive rebates from your utility company, and can take the state and federal tax credits." Which, as mentioned above, can be a lot of work but may also provide significant cost benefits to motivated homeowners. Other loan specifics include:

  • No equity or appraisal necessary
  • Both secured and unsecured loans available
  • Flexible terms (5, 7, 10, 15, or 20 years)
  • Fast pre-qualification process, typically in 24–48 hours
  • 100% up-front funding
  • Low, fixed rates based on current market rates in your area
  • Tax-deductible interest (be sure to consult your tax adviser)
  • No pre-payment penalties.

In fact, a wide range of other government programs are available, including from Fannie Mae, Freddie Mac, the Veteran's Administration, and the Environmental Protection Agency. These programs offer customers a wide range of financing opportunities and should speed deployment of solar systems.

This article was originally published on NREL Renewable Energy Finance and was republished with permission.

Lead image: Bank building via Shutterstock

Untitled Document

RELATED ARTICLES

Sunrise in Pakistan as the Country Delves into Solar PV

Robert Harker Pakistan has joined the list of countries that are exploring solar power as a means to bridge critical energy generat...

Global Renewable Energy Roundup: China, Kenya, Turkey, India Seeking More Renewables

Bloomberg News Editors China is being encouraged by three industry groups to double the nation’s solar-power goal for 2020 to make up for sh...

Why Smarter Grids Demand Smarter Communications Networks

Mark Madden

Historically, utility networks and communications networks have had little in common.

The Importance of “Switching Costs” to the US Residential Solar Industry

Paula Mints The DoE and numerous organizations and governments globally are focused on driving down the cost of solar convinced t...

PRESS RELEASES

Intersolar AWARD „Solar Projects in India“ – Applications being accepted until September 18

The Intersolar AWARD in the category Solar Projects in India honors projects in the fie...

OFS Announces Commercial Availability of InvisiLight® MDU Optical Solution for Multiple Dwelling Units

OFS, a leading-edge designer, manufacturer and supplier of innovative fiber optic netwo...

New local energy partnership brings innovative solar tracker to Washington State

A new partnership will bring the innovative AllEarth Solar Tracker solar electric syste...

30 days to GRC Annual Meeting & GEA Geothermal Energy Expo

The Geothermal Resources Council (GRC) has announced that it is only 30 days to go to t...

FEATURED BLOGS

Cronimet / THEnergy study: In solar for mines size does not always matter - Reducing CAPEX with energy efficiency and load shifting

Munich, September 2015. Mining companies are constantly gaining interest in solar solutions because frequently solar ...

Final Program Now Available for GRC Annual Meeting & GEA Geothermal Energy Expo

GRC Annual Meeting & GEA Geothermal Energy Expo - Final Program from

Vacancy? No Problem!

Have you ever tried to sell an efficiency product or service to a prospect that owns or manages a building with high ...

Shedding Some Light on a Taxing Situation for Community-Shared Solar

For renters and for property owners with inadequate roof space, the many benefits of solar electricity may seem out o...

FINANCIAL NEWS

CURRENT MAGAZINE ISSUE

Volume 18, Issue 4
1507REW_C11

STAY CONNECTED

To register for our free
e-Newsletters, subscribe today:

SOCIAL ACTIVITY

Tweet the Editors! @jennrunyon

FEATURED PARTNERS



EVENTS

Intersolar North America 2016

Exhibition: July 12 - 14, 2016; Conference: July 11 - 13, 2016 Intersola...

Intersolar South America 2015

Exhibition and Conference: September 1-3, 2015 Intersolar South America ...

Intersolar Europe 2016

Exhibition: June 22-24, 2016; Conference: June 21-22, 2016 Intersolar Eu...

COMPANY BLOGS

Less Is More

When you’re giving a presentation, one of the easiest things to do...

Captivology

One of the biggest challenges we face as efficiency sales professionals ...

How To Optimize Your Meeting Schedule

Do you spend more time in meetings than you do actually working? While m...

NEWSLETTERS

Renewable Energy: Subscribe Now

Solar Energy: Subscribe Now

Wind Energy: Subscribe Now

Geothermal Energy: Subscribe Now

Bioenergy: Subscribe Now  

 

FEATURED PARTNERS