Federal agency inaction may hamper residential solar loan access

The National Credit Union Administration can extend an exemption to allow federal credit unions to provide 25-year solar loans.

December 21, 2022Ryan Kennedy

The Solar Energy Industries Association (SEIA) warned that an expiration date is approaching for a COVID-19 exemption on solar loans that allows Federally Insured Credit Unions (FICU) to participate in 25-year solar loans.

On December 31, 2022, FICUs will be banned from participating in 25-year solar loans if the National Credit Union Administration (NCUA) does not extend the exemption. Sean Gallagher, vice president of regulatory affairs, SEIA, said NCUA has the opportunity to extend the rule or make it permanent.

“If they don’t, it would shrink the pool of financing available to homeowners that want to go solar at a time when the Biden Administration is trying to tame runaway inflation and implement the most influential climate law in history,” said Gallagher.

The loan market in the U.S. solar industry increased 37% over the last year, and a record number of families adopted solar in Q3 2022, reported Wood Mackenzie. Each month more than 20,000 residential customers sign loan agreements, said SEIA. The organization said homeowners see the greatest monthly savings on 25-year loans, which also typically match the installation’s warranty period.

The Inflation Reduction Act (IRA) is expected to drive an additional 222 GW of solar capacity, create 200,000 American jobs, and lead to $600 billion in investment in the U.S. economy, but inaction from NCUA could cut off an important source of funding to support those installations, said SEIA. By 2031, U.S. solar installations could offset 492 million metric tons of carbon annually, which represents 32% of U.S. electricity sector emissions in 2021.

“The NCUA’s inaction will hurt the financial health of FICUs, the same banks the NCUA was established to protect. It would also deny credit union members the financial opportunities they have come to expect and cut off an avenue for FICUs to reduce their climate-related financial risks,” said Gallagher.

Gallagher continued that FICU solar loan participation is an important revenue stream that limits exposure to the fossil fuels, a sector that carries the risk of stranded assets and is increasingly less financially attractive amid technology, policy and economic shifts. This is occurring while a growing number of financial institutions, including credit unions, are increasing investments in sustainability-based products and services to mitigate the financial and societal impacts of climate change.

“The NCUA has the power to enable FICUs to fully participate in the solar and storage market. Ongoing access to 25-year solar loan products will help to ensure credit unions remain resilient while maximizing performance and creating new jobs and economic opportunities for credit unions and their members,” said Gallagher. “Inaction at this juncture would be antithetical and a grave mistake.”

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