Solving a Persistent Problem
The Clean Energy Credit Union set out to solve two financing problems: access to low-cost capital and demonstrating the value of clean energy investments. While there have been lenders for clean energy projects large and small, most have been backed by venture capital. The high cost of venture capital meant high interest rates on loans.
Traditional banks and credit unions, with federally insured deposits, offer lower loan rates, but their inexperience with clean energy products means they typically treat a loan for solar or home insulation just like a loan for a car or boat. In other words, they fail to account for the money saving value of a clean energy investment, whether its electric bill reductions from solar or gas savings from an electric vehicle.
The credit union will address both market failures. To lower costs, it offers a triple play: online-only to lower overhead costs, federally-backed deposits, and the nonprofit credit union structure. The Clean Energy Credit Union will also build a portfolio of loans to show that financial savings from clean energy enhances the likelihood of repayment.
Doubling Down on the Cooperative Structure
Credit unions differ from banks in that the shareholders are the customers, each of whom holds an ownership share. Blake described the difference and how it benefits customers:
“Both have federally insured deposits…they provide very similar retail banking services (checking accounts, savings accounts, loans)…The difference is that banks are for-profit entities and their goal is to maximize profit for their stockholders. Credit unions are not-for-profit 501c1 organizations and their goal is to serve their members––to provide the best possible services, at the best possible prices, to their members. They don’t have stockholders to serve, so there’s not a return they have to pay to stockholders.”
The Clean Energy Credit Union was the brainchild of another organization with its members’ best interest at heart: the Amicus Solar cooperative. Amicus is a network of solar installers who buy solar installation materials in bulk for lower prices and who work together to meet demands for larger scale solar installations.
While the credit union won’t recommend particular installers, they will recommend networks of cooperative or like-minded solar electric and solar thermal installers or contractors, including Amicus. In that way, they support the mission of supporting other member-focused organizations.
Listen to the Local Energy Rules podcast interview with Stephen Irvin, president of Amicus Solar, in June 2017. Host John Farrell and Stephen discuss the benefits of the cooperative structure and the origins of the Clean Energy Credit Union.
Goal: To Accelerate Clean Energy, To Be One of Many
Many of the early supporters are excited to join an institution with a focus on expanding clean energy. But Blake recognized that in order for the credit union to get past the “startup phase,” they will have to offer the “full suite of retail banking services” including checking accounts and credit cards, as well as a smartphone app. They also want to offer services to commercial customers, especially to lend to clean energy companies.
The biggest challenges are to pace themselves and to spread the word. “Our mantra we keep telling ourselves: we have to learn to crawl before we can walk, we have to learn to walk before we can run, we have to learn to run before we can fly.” They don’t have much of an advertising budget, either, so they hope for great word-of-mouth advertising.
The credit union already offers loans for solar, energy efficiency, electric vehicles, and electric bikes, but it’s planning to expand offerings in the near future. Targets include community solar subscriptions and mortgages for net zero or very efficient homes.
“Ultimately, our goal is to be the cheapest place where you can get a loan for a net zero energy home because we know that––just like with solar panels on your roof or doing energy efficiency improvements or having an electric vehicle––your operating costs are going to be a lot less, your utility bills will be a lot lower.”
Although the Clean Energy Credit Union wants to grow, Blake says they would “consider it a failure” if they didn’t inspire others to follow. Their goal is to spark an expansion of low-cost lending for clean energy at many financial institutions.
Helping Reach the Underserved
The Clean Energy Credit Union also hopes to be more effective at bringing loans to low-income folks and those with poor credit histories by taking into account the cash flow from clean energy investments. It won’t just inform their own loan portfolio, but the loan performance data will be shared with other financial institutions to show that default rates for clean energy are different than for traditional consumer loans (e.g. for cars).
This is the 59th edition of Local Energy Rules, an ILSR podcast with Director of Energy Democracy John Farrell that shares powerful stories of successful local renewable energy and exposes the policy and practical barriers to its expansion. Other than his immediate family, the audience is primarily researchers, grassroots organizers, and grasstops policy wonks who want vivid examples of how local renewable energy can power local economies.
Photo Credit: Clean Energy Credit Union