The Massachusetts Department of Energy Resources (DOER) and Mass. Clean Energy Center are about to launch a $30 million program to encourage local lenders to start lending money to qualified homeowners for residential solar panel installations. The DOER hopes to start accepting applications for the new program, which reduces costs for homeowners and risk for the lenders, within the next four to six weeks.

Michael Judge, acting director of renewable energy for the DOER, said the money would be used to pay lenders a portion of the interest up front, to buy down the rate for the homeowner to 3 percent or less. The money could also be used to give qualified low- to moderate-income homeowners or people with poor credit a reduction in their principal.

“The goal is to use the $30 million to leverage four to five times as much money in loans,” Judge said. “We’d like to see lots of solar projects built and lenders educated so they’ll be as comfortable doing these loans in the future as they are making car loans today.”

Judge said most lenders don’t make loans on solar equipment because they’re unfamiliar with it. A typical solar panelinstallation costs around $25,000. Consumers who can’t pay for the equipment themselves often lease the equipment from the installer or a third party, and that winds up being expensive and cutting into the savings the panels provide in the first place.

“There are substantial benefits to owning solar equipment versus leasing it,” Judge said. “The money stays in the local economy by borrowing from a local lender and homeowners keep more of the savings.”

A 2013 study by the DOER showed that the benefit to the homeowner is 10 times greater if they owned the equipment, rather than leased it. Judge said it also found the economic impact to the state is 50 percent higher when the systems are owned, rather than leased.

Judge said the program is seeking more lenders from around the state to participate in the plan, dubbed the Massachusetts Solar Loan Program. He said there are a dozen or so lenders ready to enroll in the program and as soon as he gets a “critical mass of lenders” in all areas of the commonwealth, they’ll be ready to go.

“Installers have been waiting for this program and they’re chomping at the bit,” Judge said. “Any installer who has participated in commonwealth’s Solar Rebate Programs program will be able to participate. There are several dozen who do the bulk of the installations in the state, but in total there are well over a hundred qualified installers.”

Dan Barnett is the residential sales manager for one of the approved installers, Solar Flair, in Ashland. Barnett estimated that 90 percent of the solar panels his firm installs are owned, not leased. He thinks the loan program will help make solar energy available to more residents.

“The solar loan program the state is offering takes down some adoption barriers that exist with outside loan providers, like the fees some third parties charge installers,” Barnett said. “It opens up a sector of the market for lower income families. There’s still a decent number of people out there who would like to go solar, but they can’t afford it.”

The program will be open to qualifying residential homeowners statewide. Commercial properties or solar installations that are receiving other state subsidies are not eligible for participation. All banks and credit unions in the state are eligible to participate.

Getting Banks On Board

Colin Quillinan of Spillane Consulting is helping the DOER introduce the program to lenders around the state. He said the main hurdle in getting lenders interested in participating is overcoming the unknown.

“A lot of lenders are used to auto loans, home equity loans and mortgages. A solar loan is just a new market,” Quillinan said.
Quillinan said the program is rolling out at roughly the same time that new TRID regulations for mortgages came out. He said complying with the TRID regulations takes up so much of a bank’s bandwidth, that some just don’t want to take on anything new.

“We haven’t had a lot of lenders slam the door in our face,” Quillinan said. “It’s just that solar is a new market. It’s something that doesn’t have a lot of history. Bankers, being bankers, like certainty. But, at the end of the day, it’s an underwriting decision and it has become very appealing to banks.”

Robert Collins is the executive vice president of BankFive in Fall River. BankFive was the first lender approved by the Clean Energy Center last week and has not been in the residential solar market until now.

“The attraction to us is we’re a community bank and we try to bring in programs that will benefit our local area,” he said. “We see this as a positive option for our customers. Our motto is ‘Let’s thrive together.’ We have customers that are solar installers, and customers who would want to take advantage of the program. We see it as just another part of being a community bank.”

Collins said he mentioned the program to one of his customers who is a rooftop solar panel installer. The installer talked about the program with some other parents at his child’s soccer game and Collins said they’re ready to file an application as soon as the program is online.

“We just think it’s a great opportunity,” he said. “Solar energy is so confusing for people, and to have someone step up and make it simpler for the homeowner, we think it’s great, and we want to be a part of it.” 

Editor’s Note: This article has been updated since it was originally published on Oct. 25 to reflect the correct title for Michael Judge. He is the deputy director of renewable and alternative energy for the Mass. Department of Energy Resources.