Santa Rosa's First Community Bank has partnered with Marin Clean Energy to launch an on-bill repayment program for energy-efficiency improvement projects, offering what the power agency said is a convenient and cost-competitive financing option for its power customers in Marin County and the city of Richmond.
Launched in early October, the program allows both commercial and residential customers of Marin Clean Energy to pay back the cost of financing projects ranging from $2,500 to $265,000 through their regular utility bill. While not available for rooftop solar projects, those loans are available for improvements to insulation, water management, windows and other similar systems and offer interest rates of 6.5 percent for residential projects and 5 percent for commercial for a five-to-ten-year term.
In providing capital for the residential side of the program, First Community is furthering its own push into the energy sector while feeding a combined momentum among some North Bay lenders to pursue programs directly tailored for renewable energy and energy efficiency projects.
"In general, we see an opportunity in this kind of financing," said Brian Reed, chief credit officer at the $678-million asset First Community Bank. "The idea is that they will hopefully see a reduction in their bills -- enough to cover the costs."
It is the latest effort by First Community Bank to provide capital for so-called "community choice aggregation" power agencies, a relatively new entity in California that delivers power to its customers over the existing power grid largely maintained by Pacific Gas & Electric Co. The bank has also agreed to finance the startup of a similar agency in Sonoma County, Sonoma Clean Power, which is expected to begin service early next year as the second such entity in the state.
The Marin program piggybacks on a number of existing programs for customers of the power agency, including potential cost rebates for commercial and multifamily customers and free energy efficiency assessments for both commercial and residential power users.
"It became clear that financing is an integral part of getting energy efficiency projects off the ground," said Beckie Menten, energy efficiency coordinator for Marin Clean Energy. "We'll go out and help customers with a free energy assessment, and offer them financing as well."
Users of an Internet-based self-assessment currently offered to residential customers will also soon be able to use the platform to estimate the financing cost of various energy efficiency projects, she said. The commercial rebate program is also being retooled, with a general goal of supporting 25 percent of a project's cost.
Ms. Menten cautioned that the cost savings are not guaranteed to be sufficient to cover the cost of the financing. Yet having that data on the utility bill creates a clear connection for customers.
"We think that just placing the financing on the bill leads to better payoff rates," she said.
The agency has also allocated funding it received from the California Energy Efficiency Loan Fund to provide a loss reserve for lenders, which include Sacramento-based River City Bank for multi-family and commercial loans.
Yet despite that reserve, other lenders agreed that customers financing an energy project tend to be a highly involved group at a relatively low risk of default.
"In the seven years we've been lending directly to solar, I don't think we've had a single default," said Jeff Adamski, senior loan officer at Solano County's $845 million-asset First Northern Bank.
Among the lenders that have made bigger pushes into energy loans, First Northern began solar lending to commercial customers but has since been actively looking for new residential and business customers throughout California. The bank helped finance a project to convert food waste to energy at University of California, Davis, and is exploring other options in geothermal and other fields, Mr. Adamski said.
"It's making straight financial sense at this point," said Mr. Adamski, noting that falling costs have helped amortization for solar energy loans fall from around 15 years to between seven and 10 years. "That's the first requirement -- it needs to make financial sense."
The $2.2 billion-asset Redwood Credit Union launched its own residential solar lending program in April. The lender requires proof of the planned solar installation, focusing on a streamlined process involving no collateral and rates as low as 6.99 percent, said Cynthia Negri, chief lending officer.
"Our goal was to make it as simple and easy as possible," she said. "The people who we've had come to us for a solar loan -- they're a very committed borrower."
Mr. Reed of First Community Bank noted that the Sonoma County Energy Independence Program has faced legal complications in its effort to finance residential energy projects. The entity serves as a gateway for the property-tax connected Property Assessed Clean Energy Financing program, which remains in operation but faced years of challenges concerning the lien's relationship with an existing residential mortgage.
The flexibility of the community-choice aggregation structure could allow another mechanism for providing a similar benefit to borrowers, he said.
"There was a financing void," he said, adding, "We're at the front end with Sonoma Clean Power. Their plans include similar things."
Marin Clean Energy is exploring ways to include rooftop solar in its financing structure in the future, Ms. Menten said. The power agency currently supports those projects by purchasing excess power at a favorable rate.
Other on-bill payment programs exist, including PG&E's program for commercial and municipal customers that aims to sync interest rates with anticipated savings. Ms. Menten said the Marin program was distinct in also offering service to residential customers, and could extend a relatively large volume of capital to borrowers by using bank financing -- not a reservoir of ratepayer funds.
