Climate First Bank plans to accelerate its solar lending operations while Senate Republicans seek to end most tax breaks for solar power and other forms of clean energy, which the Florida-based bank believes will cause other solar lenders to fail.
The proposed changes to the 2022 Inflation Reduction Act add a hurdle to the residential solar market, with an analysis by Ohm Analytics, an energy data firm, projecting
Climate First, headquartered in St. Petersburg with $1 billion in assets, relies on residential solar for roughly 20% of its $991 million in total loans. Two major solar lending institutions — Sunnova Energy and Solar Mosaic — have filed for bankruptcy this month in wake of the proposed bills.
Why Climate First Bank expects to grow as others fall
But Climate First remains optimistic.
"We feel like the sun setting on any tax credit will accelerate our business and really fix ... the solar financing industry," Climate First CEO and President Lex Ford told American Banker.
Fintechs have dominated the solar lending industry, relying on tax credits to remain competitive and offer monthly payment plans that undercut the usual cost of fossil fuel-powered utilities, Ford said. But Climate First's methodology has always been independent from tax credits, using deposits to lend at a low cost.
The failure of two fintechs this month is a harbinger of many more to come, Ford said.
"By virtue of having a long-lasting, self-sustaining model ... we should be able to grab market share in dramatic ways over the next year, two years," Ford said. "The bill allows us to have a louder voice."
FastTrack: Climate First's commercial solar loan push
While still confident in the residential solar market, Climate First last week took its first step toward cracking an untapped commercial market. OneEthos, a fintech owned by Climate First Bancorp, the holding company of Climate First Bank, launched FastTrack, which it bills as the first instant-approval commercial financing solution for solar power generation.
FastTrack aims to solve what it says is the primary issue lending institutions face when helping businesses transition to solar energy: the loan approval process. Normally, the approval process could take a week to a few months, with the lending institution needing to review multiple documents before making a decision, during which time businesses may lose interest.
The FastTrack software underwrites all of the important information in the loan, allowing OneEthos to approve projects up to $350,000 instantly and secure commitments from businesses.
What the bill means for solar fintechs and installers
If residential tax credits disappear, there will likely be thousands of residential solar installers looking to pivot to a different product. Commercial solar would be a natural switch as the only type of solar that has tax benefits remaining through depreciation, which can be between 20% and 40% of the total contract price, depending on the businesses tax liability and corporate tax rate, said David Radzihovsky, head of growth, commercial at OneEthos.
"In every major solar market in the United States, every homeowner's door has already been knocked on multiple times, and for the most part, homeowners who have wanted to go solar have gone solar," Radzihovsky said. "Most businesses' doors have not been knocked on for solar."
Commercial solar makes up just 2.9% of Climate First's total loans, but the bank closed three deals on FastTrack in its first week.
If the bill becomes a law, solar installers will go out of business, homeowners will be left with incomplete projects and some fintechs will be wiped out, but Climate First will remain standing, Ford said.
