Greenpenny Puts Community Banking to Work for Clean Energy — Episode 123 of Local Energy Rules

Speaker 1:

Well, our bottom line is we hope that within five, 10 years, we, as a country have made really, really, really significant inroads in adopting renewable energy. This planet is already solar powered. We already pull together plenty of power to run this planet by capturing it with a technology that exists today. We just have to figure out how to bring people together and get it done.

Speaker 2:

Access to capital has long stymied expansion of clean energy across the United States. But thanks to an innovative energy district model in Northeast Iowa, one community bank has learned that it can help finance a nation leading solar explosion. Now, Decorah Bank and Trust is launched Green Penny, a virtual bank that only uses its customer’s deposits to finance clean energy projects. Jason MacDuff, Green Penny Vice-president, joined me in December, 2020 to talk about the new banking initiative and how it hopes to replicate the bank’s success beyond its Iowa roots. I’m John Farrell, director of the Energy Democracy initiative at the Institute for Local Self-Reliance, and this is Local Energy Rules, a biweekly podcast sharing powerful stories about local renewable energy. Jason, welcome to Local Energy Rules.

Thanks.

So I was hoping you could start off and just give folks a little bit about your background. You know, what brought you to leadership in a virtual bank that is focused on clean energy lending?

Speaker 1:

Well, I spent 24 years working at a large national bank in the country and started as a teller and worked my way up and towards the end, just stopped being inspired by the work. I love the people I worked with certainly enjoyed our customers and they were great, but I was very stressed out. I was working in a pretty unhealthy way and a lot of negative energy and two of my friends who were in banking, but were in also stressful careers. And I decided we were going to take some time and go traveling. And they had always wanted to go to South America and to Antarctica. So we did, and we visited places like the Galapagos islands. We visited parts of the Amazon. We visited Patagonia, which is stunning. We visited, and of course we took an expedition to Antarctica and you see the effects of climate change firsthand. You talk to scientists, biologists, climatologists, glaciologists, these people that have dedicated their lives to studying this and seeing it firsthand. And you can’t come away from an experience like this. Like at least I couldn’t not, being re-inspired to do something different with my career. And I’m thankful I found Green Penny because it’s a way to merge my experience and planning on seeing it and banking with a mission to help save the planet. And that’s why I’m really happy to be here.

Speaker 2:

I love that you were inspired by travel and it’s so amazing to hear about all these other places that you visited, if nothing else, because none of us can do that right now. We’re all stuck at home. You know, that slide show from that must be something that you want to revisit all the time.

Speaker 1:

Well, behind me are pictures from it. You can’t see them, but, uh, I look at them and ah, and miss miss the trip so much, it was a lot. It would change my life. Absolutely.

Speaker 3:

So let me ask you a little bit about Green Penny itself. The Institute for Local Self-Reliance has done a lot of work on community banking and small businesses, we’ll share in some of the show notes, some of our research about how we’ve shown that community banks are better at supporting small business, even through like recent events, like the PPP program, the paycheck protection program that provided loans to small businesses. So we really weren’t surprised to hear that Green Penny was launched by a community bank Decorah Bank and Trust in Iowa. Could you talk a little bit about some ways that the bank was supporting clean energy even before creating this virtual arm, both for itself and for its members?

Speaker 1:

Sure. Well, first of all, I completely agree with you that community banks do an especially good job in our country at supporting their communities and helping the local economies. We’re really fortunate to have a very robust community bank model in this country. It doesn’t exist in lots of other countries so that I agree with.

20 years ago, our bank began financing wind and solar projects. The family that controls the bank began asking how they themselves could live their lives in a carbon neutral way. So the father of our current CEO has a farm that has a wind turbine on it. It’s got solar panels on it. It’s heated geothermally he buys carbon offsets every time he takes a flight. I mean, he’s very serious about living his life in a carbon neutral way and that extended to how the bank operates. So the bank has solar, the bank has LEDs everywhere. The bank buy its carbon offsets for employee travel and employee commutes. So we operate in a carbon neutral way. And then the bank was key to forming the, what we think is the first in the country’s energy district that structured the way that ours is: Winneshiek Energy District and the combination, all of that plus getting more and more experience with financing projects has enabled us to now be in a community that has one of the highest per capita adoption rates of renewable energy, mostly solar, in the country, 10 times more than our state’s average. And we did it through collaboration. We did it for working together through bringing groups of public and private sector, folks that each want to do their part to develop real effective solutions, to expanding renewable energy and talking to anybody who would want to talk to us about how we can all do our part. And now we want to deploy that same model of cooperation to more communities through Green Penny.

Speaker 3:

I’d love you to share a little bit more about Green Penny specifically. Could you just describe a little bit more about what it is that you know, this virtual banking concept, how customers use it to either deposit money or to, to borrow money to finance, clean energy projects? You know, for example, do folks have to live in Iowa?

Speaker 1:

No, they don’t have to live in Iowa. We want to serve anybody. We can take deposits from any state in the country. Currently we are focusing our solar lending program on the four Midwestern States, Iowa, Wisconsin, Minnesota, and Illinois. But in one sentence, Green Penny is a virtual carbon neutral bank dedicated to financing a sustainable tomorrow. So what that means is the money that is deposited in Green Penny, it’s secure, you get all the same things that you get at any bank, FTC insurance and the like. It earns interest. And it’s only used to finance renewable energy projects, starting with solar. So no fossil fuels. And we think this is really important because it’s the combination of, you get the same banking experience you can get at lots of places and maybe even a nicer one because we’re community-based, right? So you’re going to get high tech tools. You’re going to get online and mobile platforms, zero ATM fees worldwide ever. But we also have bankers, Rachel, Sarah, Laurie, Mike, Kelly, and others, that are at 888 – green penny – 0 – that want to get to know you and will work with you. And so we don’t say we’re an online only bank. We think that’s unique in this space. We say we are a virtual carbon neutral, more like a community bank with real people that you’re going to get to know. So that’s one thing.

The second thing is the money is only going to go, the deposits are only going to go to clean energy projects like solar. And so if you’re not a banker, you may not know that when you bank at an institution, they take your deposits. They might pay you out a little bit of a rate for those deposits. And they lend those to other people at typically a higher rate and they keep the difference. That’s how they make money. So what are the, what are they doing with those deposits? Are they financing things that might not be helpful to environment? Of course we know that most banks are and it’s unique, we think that there’s relatively few of us that are committed to only lending those deposits out to renewable energy projects like solar. And we’re hoping that that’s enough to combat the kind of inertia that exists in banking. You know, it’s, it’s, it’s not the easiest thing to move your financial relationship from one station to another. We get that. Now we’re going to do our part to try to make it as easy as possible, but we know it’s, it’s easier to stay where you are more convenient to stay where you are than it is to switch. But we want you to switch. We want you to ask yourself the question, is it worth the inconvenience to switch my banking relationship, knowing that I’m supporting a company that’s only going to finance a sustainable tomorrow and do what I’m doing today and just allow the bank I’m banking with to continue to finance the fossil fuel industry. It’s an example. We hope you say to yourself, it’s worth it to switch. And we got to prove that we don’t, you know we’ve launched the site six months ago, so still early days, but we’re hoping that as we get the word out and build awareness, we’re gonna, we’re going to see a lot of folks who join our community.

Speaker 3:

I feel like you would have some hope in the fact that there is a broader fossil fuel divestment movement that targets institutions, and that you probably have a lot of people participating in that movement who currently bank at a place that does not align with their values. And so there ought to be a pretty good market, one would think, for folks shifting over to an institution that does align with their values around climate change.

Speaker 1:

Well, we agree. And that’s why we’re here. We just need them all to know about us.

Speaker 3:

Well, we’ll get the word out here. I wanted to ask you one thing kind of specifically about the financing. So you’re going to be using customer deposits to finance clean energy stuffs. Like you said, starting with solar. Is there any difference about how you do solar financing? Then if I were to go to like us bank or some other big institution?

Speaker 1:

A lot of them don’t even do it. There’s still a lot of learning that’s happening in this space. There’s not a lot of loss history as an example yet. And typically larger established players need to see some of that before they’ll be willing to jump in. So we’re doing it because we understand that, right? We’ve been doing it for 20 years. We have our own loss history. We understand the risks. So that’s one, I think we have it available. There are a lot of players in the traditional places that, that really don’t yet. Second, and you’ve talked about this on your podcast, I know one of the biggest hurdles to significantly expanding renewable energy is capital, right? Who’s going to pay for it? Where does that capital come from? And how expensive is it? How does that, how does it help me with the economics of all of this, which is a real part of the story. It’s part of how we’re going to solve this problem is make sure the economics make sense. And the good news there is that they do now, and they’re starting to get even better and will get better over time. As things like cost for solar panels comes down and we learn more about things like loss history and can reflect the pricing of the loans appropriately. Today, we think that for example, on our residential program, you have a hundred percent financing. So there’s no added cost because we are able to finance the federal tax credit, which you won’t have to pay a monthly payment on until you get it back. At which point you just pay it back to us with a bit of interest. The rest of the project is financed through a fixed rate loan. Our best rate right now is 4.4, 5%. We think that’s a good enough rate to make the economics generally work. Meaning a customer in a residence is trading in the near term, a utility bill for a financing payment.

Now is it exact to exact? Sometimes, sometimes it’s a little bit less. Sometimes it’s probably a little bit more, but of course you’re eventually going to pay that off and you’re going to own those solar panels for 20, 25 years. And the latest technology is lasting that long. So without a lot of maintenance as well. So the economics are generally there and we have no hidden fees or hookup charges. We have a $50 processing fee, that’s it. And the approval is good for 120 days, which people are asking us all the time. Why are we promoting solar, it’s about to become the middle of winter? Well, it’s, we want to get your financing set up so that in 120 days, when it comes Spring, as one residential solar installer said to me, Jason, we’re bringing essentially into the people. So, so we want them to schedule their projects now and think about the sun you’re coming back when the spring comes. So, so we think that the terms and the features of our program are fair and reasonable, and we want them to stay that way. We really want them to be so that the economics makes sense for the customer, for our borrower. We’re not interested in kind of having hidden fees or not making the economic argument and are very transparent, clear lane.

Speaker 2:

We’re going to take a short break. When we come back, I ask whether the ownership structure of this community bank influenced its mission, we touch on the remarkable solar success in the community, I ask about the bank’s role in solar policy and in combating racial disparities in clean energy access. You’re listening to a Local Energy Rules interview with Jason MacDuff, Vice President of Green Penny, about this new virtual bank supporting clean energy. MIDWAY PITCH

Speaker 2:

You know, one thing that was exciting in hearing about Green Penny was, and I hope that someday, it’s not exciting for me to hear about banking institutions focusing on clean energy, but we had a couple of years ago done a podcast interview it’s episode 59 with folks from an institution called Clean Energy Credit Union. So they were formed out of a partnership of solar installers called Amicus Solar based in Colorado. And they had seen the same thing you’re saying, right? That access to financing access to capital is one of the struggles that we have in the clean energy industry. So it’s similarly a virtual banking shop it’s aimed at clean energy, but with a credit union structure. So it’s, you know, member owned as opposed to community owned or in the case of Decora Bank and Trust it’s employee owned, which I think is pretty cool. Do you think that these ownership structures have played a role in the way that you have this kind of mission driven financing being offered?

Speaker 1:

I do. I think our employees, I can only speak for myself, our employees are super excited that we are doing this. You know, they love to tell their family and friends that we’re in this space and trying to do what we’re all really proud of. That’s gonna accomplish the decor that we’re trying to spread that other places and that they know we’re doing it in a real transparent, authentic way. It just, it feels really good and are evangelists for us, right? They’re out there helping us tell this story because they really care about it. And of course, they’re, they’re a part of it. They’re, it’s an employee owned organization. So the direction of this organization matters to them. And is that organization doing things that’s focused primarily on making the most money out of something, or are they primarily focused on doing their role? But yeah, okay, we’re going to make a fair return and we should, but we’re also going to do it in ways that are sustainable, that are good business practices that help more people than just ourselves and yeah, they lean in on that story a lot. And I think it does contribute to why we’re here.

Speaker 3:

Well, one thing that you’ve mentioned already is this notion of loss history, and one thing that Blake Jones from Clean Energy Credit Union mentioned, mentioned in the podcast interview that I did with him, was also this issue of like financing history for solar loans and other things, you know, whether it’s electric bikes or electric cars, bankers really like data about how do these things perform. How often do you have someone not able to pay their bills? That kind of thing. It sounds like one of the goals you have is to get more of that information in house and allow you to kind of provide the best deal to folks. One thing that Blake mentioned was that it sounded like Clean Energy Credit Union was intended to actually share that loss data outside of their institution to kind of help the broader banking movement move toward clean energy. Is that also something green penny is thinking of doing?

Speaker 1:

You’re certainly sharing yout experience and that, and whatever way we can, you know, we want to talk to anybody about this because we agree that there needs to be more of us out there and that we can’t do this on our own, and really solve this problem in a meaningful way. There’s gotta be more clean energy credit unions and more Green Pennies and more existing institutions that are in this space. So however we can, in a lawful way, share our experience, we’re gonna be doing that. And, and we’re going to be open to talking to anybody about what we’re working on.

Speaker 3:

That’s great. For my next question here about, I wanted to talk a little bit more about the Winneshiek Energy District that you mentioned earlier. It’s really cool model based on soil and water conservation districts, that kind of came out of the great depression as a way to help have more sustainable agricultural practices, but it’s instead designed to help save residents money on their energy costs and kind of keep energy dollars local. We actually spoke with Andy Johnson, who’s the executive director, in a previous podcast, episode 35. And you already mentioned a little bit about its success in terms of solar. I actually looked it up. I emailed Andy to ask him kind of the latest numbers and it has, you have more solar per capita in the county there than any other large us city, other than Honolulu, Hawaii. Like San Diego, San Francisco, you know, any places like Phoenix, more solar per capita, just incredible accomplishment. And obviously I’m sure Decora Bank has played a role with that. I assume that also played a role then in, in influencing the idea of doing Green Penny, as you mentioned before, because you would like to serve more than just this region in Iowa.

Speaker 1:

Yes. I mean, exactly. And we love Andy and the Winneshiek Energy District and we work with them all the time. And, and the reality is we have proven we, the community, we Decora Bank and Trust, Green Penny, the energy district, lots of other organizations that are here and the solar installers, the, the nonprofits that are here, the, the schools, the city we’ve proven that it’s possible. Right? And, and this cooperation model I speak of, that Winneshiek Energy District is such an essential part of that. And really what they do is they connect dots for folks, right? They show them how it’s possible. If you’re a residents to own the energy that’s already coming down on your rooftop today and power your home with that. Or if you weren’t a big commercial player, or you’re a nonprofit, like we have a college in town that, you know, you may not have the capital to be able to put up a solar farm that you really want to do for your university as an example, because you’re using that capital to do what your, what your mission is, right? You’re trying to teach students, but through partnering with folks in the community, we learned a way of financing a big solar field at our college through what are called power purchase agreements. And Andy promotes power purchase agreements on their site too.

And the way this works, if your listeners have not heard, maybe they have is a power purchase agreement allows the owner of the solar energy system, which is typically a third party private investor to install a solar field on a host customer, such as a local government. In this case, a university, a hospital, a school district, and they sell the electricity produced by that facility that they’ve invested in to that customer under a contract designed to provide long-term electricity cost savings. So folks, I think know that generally utility costs go up over time. So one of the benefits to this is it fixes they a school or the university or the nonprofit’s energy costs. If you, if you do things like our creative with battery solutions and et cetera, you can even lower their actual energy costs from what they are now.

So there’s ways to do this, that immediately produce savings from, from utility payments to the nonprofit and this agreement, bringing these folks together creates really four wins. The first win is to the private investor because they get to generate a return. They get to benefit from accounting treatments like depreciation and tax credits and the like, and they eventually will sell this investment back to the nonprofit who will eventually own it. So they get a nice return for their investment. The next win is for the public entity, obviously the school or the university that now says they can are, you know, powering their, uh, organization with a renewable solar field as an example. And they can benefit from the tax benefit that tax exempt entities likely cannot benefit from. And then of course, we at Green Penny can finance that investment. We can finance the private investor because of the PPA and the more, most important way. And the fourth win is that all of us can know that we’ve just done something significant to produce a sizeable, renewable energy project that’s helping to save the planet. So it’s an example of, you know, a creative way that we can, and we’ve done a lot of these now, help these large nonprofits to do what they would really like to do, which is power their facilities with renewable energy, which also helps themselves. It becomes a big selling point for in the case of the university, again, their emissions, right? They can say that they have this renewable experience and that’s, their students will really like that. So when, when, when, when we want to do more of that.

Speaker 3:

It’s interesting. You were talking about power purchase agreements, because one of the things that obviously that ILSR works a lot on is clean energy policy. And one of the underpinnings for solar development is generally net metering policy, which allows people to get credits on their bill for the electricity they produce and really impacts whether folks can get a reasonable return on their investment. And I should mention too, that in Iowa, there’s been a lot of heated debate in the past couple of years about this policy with big investor-owned utilities saying, we got to get rid of this because it impacts their bottom line and their market share and farmers and nonprofits and solar customers saying, wait a second, we should be able to use our own rooftops to generate energy and to lower energy bills. So was Green Penny involved in this energy policy debate in any fashion, given that it really could have an impact on whether or not customers can come and finance solar arrays and earn that return?

Speaker 4:

Sure. I mean, we, again, we will talk to anybody about this on any turf and the policy aspects of this, whether it’s in a state or federal, they affect how we can come to market for our customers, right? I just mentioned earlier with our residential solar loan program, and even with our commercial one, there are tax credits that are involved in the current products and the current agreements. If those go away, then that changes what we have to do. I’m not saying we stop at all, but, but it does change what we do. So the folks that are in the state, the folks that are in Washington need to understand that. We met with one of the congresswoman’s office recently to talk about that very issue. And there are other things that, as we play a significant role, hopefully increasingly significant role in the economics of all this and the economics are so central to it. We should have a seat at the table in those conversations and advance a point of view as folks brainstorm on different ways of ups trying to solve this issue. That involves lots of different folks. We certainly want to be at both tables.

Speaker 3:

Jason, there’s, there’s a lot of conversation nationally about racial equity right now. And as with many other things, there’s a disparity in who has access to clean energy like solar, you know, with, for example, African-Americans are less likely to have solar, even when we adjust for income, which we would think might explain some of that disparity. Is there anything specific in Green Penny’s mission or its practices that can help address racial or economic disparities in clean energy access? What can you do, and what can’t you do as a bank?

Speaker 4:

Well, it’s a, it’s such an important question. In fact, we were just at a renewable energy focused conference and we got asked questions like this a lot. In fact, I’m meeting with the head of the NAACP Energy Commission in Wisconsin in a few weeks to talk more about this, because it’s so important. I think we should take a minute though and acknowledged where we’ve been and where we’re headed. So, you know, the banking system a hundred plus years ago actually had some pretty deplorable practices around, literally calling out certain neighborhoods that might have concentrations of certain people of color and classifying them as undesirable and, and not lending to them as a result, a practice called red lining and that, and many, many, many other practices, um, and experiences of people of color have led to significant economic differences between, uh, different ethnicities. So you mentioned African-Americans, you know, 74% of white families own their homes versus 44% of Black families today in 2021.

And home ownership, for those who don’t know, first of all, your home is probably for most Americans, the largest investment that they will ever make. It’s also so critical to building wealth and to wealth on to future generations. So this persistent gap in homeownership between white Americans and Black families has significantly contributed towards, at the average American white family, having 10 times more or wealth than black families. And that impacts purchasing power, which of course right now in this move towards renewable energy option, which requires capital, that significantly diminishes the purchasing power of Black families and businesses. So, so what do we do about it? Well, first of all, we need to talk about it. So you ask this question is really important and we want to be part of conversations where this is addressed. There are a few ideas. Every bank in the country gets a, uh, CRA rating, a community reinvestment act rating that looks at things like community development, small business development, and the like in low to moderate income communities are also part of that scorecard. So what if, as part of that rule-making around CRA and those scorecards, we thought about energy and we thought about how we’re investing and the banks are helping to have low to moderate income families make investments in renewables. What we don’t want to do is, we don’t want to go back to the practices of a hundred plus years ago, where ethnicity is being considered in any sort of way and underwriting practices at all. You don’t want certainly unconscious bias, but definitely not conscious bias to go into lending decisions. And as an industry and the regulators have gone light years away from that those practices that were really problematic long ago. So we don’t wanna go back there, but we do want to understand how funds are flowing into low to moderate income communities. And we want to understand what that means for renewables and maybe in a blind way that keeps the banks out of it. What does that mean for people of color? I think another thing that we have to recommend is we can get creative here, because funds are flowing to energy utility and, you know, paying utility bills today that can be converted into finance payments that then creates the investment in renewables. So we have energy assistance programs, as an example, for low to moderate income folks who, you know, might be spending 13, 14, 15, 20% of their monthly income just on utilities. And so imagine if rather than just giving them the money to pay for your, their utility bills, we came up with a creative way to, to invest in solar and renewable energy installation and funded it through that program and wiped the bill out for those folks for many, many years. I mean, imagine the wealth creation, maybe not wealth creation, maybe just the freeing up of some money to be able to live a more healthy and sustainable way could happen. I mean, there’s other ideas like that, but we need to come together and really think about, uh, ways that we can create, which we can do that enough. There are things that Green Penny can do to make that.

Speaker 3:

You mentioned that in order to really move the industry of banking beyond red lining, there has been this really strong effort to remove ethnicity from underwriting criteria, which makes a lot of sense, right? You don’t want someone’s application to come into the bank and allow a banker to make a decision just based on racial bias potentially, or even, or other factors that they could relate to that when you, you did mention though, and I’m just curious, like a bank could, for example, look at where it’s lending. And like you said, with the, the community reinvestment act rating, there are certain geographies, right? Certain census tracks, certain zip codes where you could say, oh, we know that if we are investing more in these areas, we are probably disproportionately helping people of color who have experienced this long time discrimination. Is there a way where like with data that you can help inform the way that the bank makes decisions, even if they’re not at the individual level where that is strictly prohibited, but at an organizational level?

Speaker 4:

Yeah. I mean, there are definitely ways in which you can make assumptions and extrapolations based on zip codes and even down to neighborhoods and then make some correlations to wealth or low-income. And the tricky part though, is then you extending that into race. Yes, it’s generally true, unfortunately, that there, there is a relationship between ethnicity and income and wealth. How you specifically do that, the devil’s really in the details. And so we’d want to be careful about it, but we should figure out ways in which we, we can come together to figure it out so that we make sure we’re not leaving those communities behind when it comes to renewable investment. And again, we should be smart about it because there’s money already going to pay the utilities, whether it be by governments or by the families and the businesses themselves that can be redeployed and used to create some significant investment in renewables and those communities. We just have to be smart about it.

Speaker 3:

My last question here is, do you think that other community banks in Iowa or elsewhere might follow in your footsteps? Would you want them to, and what do you hope happens with Green Penny in the next five years?

Speaker 4:

Well, I think so. And I think we have a situation where there are a lot of community banks in this country that are struggling to find new avenues for growth. The reality is that the big banks are getting bigger. The small banks are kind of holding their own, and it’ll be interesting to see what happens over time. But as you said, early on, and I agreed the community bank system is a real strength for our financial system in the country. So if this new venture with Green Penny proves out, I think for sure that more community banks will try to do something similar. And we want that. We hope that happens. And you know, our bottom line is we hope that within five, 10 years, we as country have made really, really, really significant advancements and adopting renewable energy. This planet is already solar powered. We already produce plenty of power to run this planet by capturing it with a technology that exists today. We just have to figure out how to bring people together and get it done. And, you know, if we do that well, bring people together to get that done, Green Penny will be a beneficiary of that no doubt, but it’s more important to us that we get to bring a bunch of people to the table. And we really meaningfully make inroads on this problem of climate change.

Speaker 2:

Well, Jason, thank you so much for taking the time to introduce us to Green Penny and to share so much about the work that you’re trying to do.

Speaker 1:

Thank you so much, John, for having us it was wonderful.

Speaker 2:

Thank you so much for listening to this episode of Local Energy Rules with Green Penny Vice-president Jason MacDuff discussing the new virtual bank focused on financing clean energy. On the show page, look for links to Green Penny and to its parent Decora Bank and Trust and links to podcasts, to the Clean Energy Credit Union and Andy Johnson from the Winneshiek Energy District. At our website, you can also find our Community Power Map that ranks states by their distributed solar policies and an interactive Community Power Toolkit for examples of how cities have accelerated solar deployment. Local Energy Rules is produced by myself and Maria McCoy with editing provided by audio engineer, Drew Birschbach. Tune back into Local Energy Rules every two weeks to hear more powerful stories of communities taking on concentrated power to transform the energy system. Until next time, keep your energy local and thanks for listening.