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More Midwestern banks see a chance to finance solar and energy-efficient projects

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News Tech: In an indication of growing awareness of the prospects in clean energy finance, smaller, local banks and credit unions are increasingly trying to assist homeowners with financing solar installations.

It joins the Center for Energy and Environment, a long-standing clean energy lender in the Twin Cities, as well as a few other community banks and credit unions that are now offering products in a market that was previously dominated by bigger, more established companies.

Decorah Bank & Trust, situated in Iowa, is one of the most recent institutions in the Midwest to start selling loans for solar and other renewable energy projects. A digital subsidiary called Greenpenny was recently inaugurated by the community bank to serve residential and business clients in Iowa, Illinois, Missouri, Minnesota, and Wisconsin.

Advocates for clean energy are optimistic that the presence of local lenders would boost the options available to borrowers and give people who might be less inclined to trust online lenders or big national banks more security.

Jessica Reis, vice president of communications and marketing for Greenpenny, said the bank creates a transparent loan process with no hidden fees or upfront charges, a contrast with some national lenders who use such fees to lower interest rates. The bank calls every customer who applies and communication continues via phone or email.

Drawing on local knowledge Greenpenny relaunched last year after struggling with an earlier rollout during the pandemic. Now the Iowa credit union has been adding staff to manage a growing portfolio. Decorah Bank & Trust CEO and President Ben Grimstad said his father, Larry, had started lending to organizations doing renewable energy projects decades ago because of his environmental interest.

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Decorah, home to Luther College, has a strong ecological ethos that allowed the bank to gain experience financing more than 100 local projects, most of them solar. Grimstad wanted to expand the bank beyond Decorah and decided to create a digital offering to leverage the bank’s experience with clean energy. “We are about a year and a half into it and it’s gone pretty well,” he said.

Greenpenny provides solar loans and a green mortgage product for efficiency, geothermal, battery storage and other carbon-reducing projects. The digital bank serves residential customers as well as small- to medium-sized commercial and industrial projects, but not utility-scale wind or solar farms. The loans are secured by the value of the equipment, from panels to storage devices. Greenpenny President Jason MacDuff said the bank tries to set up loans that match the amount clients save monthly on their utility bills from a new solar or HVAC system. The loans require no money down.

The average residential loan size is $40,000, with commercial projects from hundreds of thousands to millions of dollars. He noted that the bank may soon finance as many as seven community solar projects in Minnesota. But plenty of deals fall through because of low reimbursements for energy by utilities or other issues. When he joined the company in 2021, he was surprised to find so few banks offering clean energy loans. “For us to accomplish the renewable energy transition this country needs, we need more banks to be in the game helping finance these projects,” MacDuff said.

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A unique short-term solar loan Greenpenny offers matches the tax credit a customer receives. The customer pays a small interest payment and then pays off the loan when the federal government disperses the 26% tax credit. A second loan covers the remaining 74% of the project’s cost. “These borrowers, by definition, are all homeowners that tend to skew pretty sophisticated and because they’re making a pretty big investment in their home, they tend to have the means to be able to do that,” MacDuff said.

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