More than 132 million Americans across the country trust their finances to a credit union. As not-for-profit financial institutions, credit unions have the flexibility to offer members lower rates on loans, fewer fees and higher-yielding returns on their savings.
While these are known benefits to banking with a credit union, a lesser-known fact is that these member-owned financial institutions have also accelerated our nation's shift to clean energy. Unfortunately, unless the COVID-19-era rule change that allows federal credit unions to participate in long-term solar loans is permanently ratified, or extended, this progress will be stunted.
Credit union involvement in the clean energy economy flourished after the National Credit Union Administration adopted an emergency rule in 2020 that allowed federally insured credit unions, or FICUs, to offer and purchase 25-year solar loans. Before the rule change, FICUs were limited to home improvement loan terms of no more than 20 years. In the face of economic uncertainty, this change ensured that federally insured credit unions could access solar loan products that deliver attractive financial returns and member benefits. In December 2021, the loan term rule was temporarily extended to 25 years.
The NCUA's rule change makes perfect sense — and not only during a pandemic. Household solar panel systems last anywhere between 25 and 30 years, with warranties that match. Similar to purchasing a car, few members can or want to pay for a solar panel system in cash. Splitting up payments over an extended period makes solar accessible, while immediately delivering benefits to members. Lower payment amounts offer members more budget certainty at a time of high inflation.
Millions of American households have already adopted solar panel systems, with an increasing number of members preferring 25-year loan terms. Many FICUs, including mine, already participate in this space, realizing meaningful returns while delivering powerful benefits to our members.
As the residential solar market continues to grow, FICUs will be at a disadvantage if they are no longer able to provide access to 25-year loan products. The growth opportunity ahead is enormous. While the market is mature, only 4% of U.S. homes have installed solar panel systems. By 2030, the number of American households using solar power is forecast to
Providing necessary financial support for solar panel systems benefits our bottom line, the communities we serve, and the climate. As a credit union, our core objective is to responsibly build capital, while offering affordable and equitable products and services. Allowing for 25-year term financing on renewable energy projects like solar panel systems is consistent with that goal.
Residential solar is helping families
Supporting long-term residential solar loans spurs local economic growth by creating well-paying jobs in a budding industry. Currently, there are
Finally, FICUs' participation in residential solar loans is a critical part of the toolkit to combat climate change. As the current administration seeks to lower carbon emissions across the economy, credit unions can play a valuable role in facilitating investments in clean energy resources. At the same time, these investments help insulate FICU loan portfolios from climate-related risks.
With the clock running out, the NCUA should consider extending the 25-year clean energy loan rule and ensure that millions of households have the chance to finance sustainable home improvement projects. This rule change should be on the books permanently, but with limited time left, a temporary solution is needed.
Credit unions are not going anywhere, but their ability to participate in a bright and growing area of the economy may soon disappear unless action is taken. If homeowners decide to go solar, let's make sure that America's FICUs are fully equipped to support them in the process.
