US Federal incentives are fading, but household demand for solar remains strong. With lower capital costs and community trust, credit unions and banks can deliver fair loans that turn solar from a niche to a norm, benefiting families and their own balance sheets alike, writes Bill Paulen, CEO of LoanTERRA, a green lending platform helping credit unions and community banks expand access to renewable energy financing.
By most measures, residential solar power should already be a mainstream investment for US households. Solar panels now convert more sunlight into electricity than earlier generations, batteries hold their charge more consistently and last longer, and overall costs continue to fall.
A recent Stanford study found that nearly 60 percent of households could cut their long-term energy bills by 15 percent through installing a solar-battery system. Yet despite these favourable economics, adoption still lags well behind its potential.
The barrier is not demand, nor technological readiness. It is the way solar loans are structured. Opaque loan terms that make costs hard to evaluate, dealer fees quietly added to the balance, and limited access to fair credit all combine to turn a promising investment into a financial risk that many families cannot justify.
In many ways, financing has become the “last mile” of US solar adoption. Panels, batteries, and installers are all in place, and demand is clear. But without reliable, transparent financing, the benefits cannot reach households at scale.
That gap leaves significant savings untapped, but it also creates an opening. Credit unions and community banks, with their cost advantages and community trust, are well-positioned to step in and make residential solar a mainstream investment.
Over the past decade, residential solar systems in the US have been financed largely through a small group of specialist fintech lenders. Their products dominate the market but often come with hidden costs that make them far less attractive than they appear at first glance.
Dealer fees – charges built into the loan but rarely disclosed to borrowers – can add up to 30 percent to the system price. On a US$30,000 installation, that’s an extra $9,000 financed, with little transparency. More than a minor add-on, this changes the economics of solar entirely, turning a system that should save families money into one that may not.
Leasing and power purchase agreements (PPAs), once the mainstay of the industry, have regained some ground in response. They can be a sensible option for households prioritising predictable payments and minimal maintenance. But the greatest long-term value – in both reduced bills and higher property values – comes from ownership. That makes loan financing the central path for most families, provided those loans are transparent and affordable.
Historically, federal incentives filled the gap, sustaining adoption even in the absence of fair financing. But with provisions in the latest federal budget creating an end-of-year cliff, their future is uncertain. As incentives recede, the shortcomings of the current finance model come into sharper focus. In a transparent, fairly priced loan market, solar’s economics would be strong enough on their own. Instead, many households remain excluded or pushed into products that erode the very benefits solar is meant to provide.
Credit unions and community banks are well placed to close this gap. Their lower cost of capital allows them to offer fairer terms, and their community focus gives them credibility that national lenders often lack. And because they already finance household essentials like cars, home improvements, and education, extending that role into solar would be a natural evolution.
Still, many community lenders have been cautious about entering the solar finance space. The hurdles are real, but they are well understood and, in practice, solvable. Solar lending has established mechanisms to protect lenders, such as fixture filings that attach to a property’s title. Performance data shows these loans behave more like superprime mortgages than unsecured consumer debt. In other words, the tools exist, and the risk is manageable. What’s been missing is lender participation at scale.
Customer expectations add to the challenge. Homeowners now anticipate a seamless, digital experience from application to installation, which often requires technology investments that community lenders have been reluctant to make on their own. Solar lending also depends on relationships with contractors and installers, networks that most community banks and credit unions have little experience managing. Monitoring quality, performance, and payment flows adds another layer of operational complexity.
Yet these barriers are not insurmountable. Financing remains the last mile of residential solar – the missing connection between proven technology and household adoption. For credit unions and community banks, closing that last mile is both a responsibility and an opportunity: they can extend meaningful savings to members while opening a new line of sustainable lending, diversifying their balance sheets, and deepening the community relationships that define their mission.
The technology is proven, the demand is clear, and the economics are compelling. Financing is the last mile. For credit unions and community banks, the decision is whether to leave households with opaque, high-cost products – or step in with the transparent, affordable lending that can make solar mainstream. Those who act now will not only help families save but also strengthen their institutions and ensure the clean energy transition delivers value locally.
“How US credit unions could make residential solar mainstream” was originally created and published by Leasing Life, a GlobalData owned brand.
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