The Clean Energy Credit Union: A New Option To Finance A Clean Energy Future For Everyone

The Clean Energy Credit Union:  A New Option To Finance A Clean Energy Future For Everyone
Robert E. McGrath
1 December 2018

Clean Energy For Everybody

Have you ever tried to get a loan to finance a clean energy project, say an electric vehicle or a home photovoltaic (PV) system?  If so, I hope you had a good experience.  But many people find that banks and credit unions do not or cannot offer loans to consumers for such projects, or perhaps will lend only to the wealthiest people.

Over the past few decades renewable energy technologies have made tremendous strides, to the point that solar and wind power will soon be the preferred choice for large scale energy systems [6].  These technologies are coming into their own at many scales, including national power grids, local areas, individual buildings, and personal residences [2].

Successful deployment of clean energy can be speeded by public policies, including direct purchases, financial incentives, and legal frameworks. In the US, there is a messy policy patchwork, varying from state to state, and from administration to administration.  Even “progressive” jurisdictions such as California have problematic policies which subsidize power companies and neglect poor communities [5].  On the other hand. Illinois has, miraculously, some fairly progressive initiatives that are designed to encourage development of and equitable access to clean energy.  At a smaller scale, many cities and local areas have programs, including bulk purchase programs for clean technology, such as Solar Urbana-Champaign.

However, our transition to a sustainable economy for everyone requires more than improved technology and sensible public policy; we need financial mechanisms aligned with our goals. In particular, we want financial institutions to channel our savings into investments in clean energy, including loans to ordinary people.

Unfortunately, conventional financial institutions offer limited options for consumer loans for clean energy technologies. In many cases, given the relative novelty of clean energy systems, a lending institution simply does not have enough knowledge and experience to estimate the risks (and volatile political policies do not help).  As a result, a lender may charge high rates and require gold-plated credit history.

And what about people who do not own a home or vehicle?  We would still like to support and invest our savings in clean and renewable technology in our cities and neighborhoods.  While wealthy, “sophisticated”, investors may be able to invest their savings in clean energy through private equity markets, these opportunities are out of the reach of most of us.

A growing number of banks and lending institutions offer consumer loans for clean energy project and products, often targeting subsidies and incentives where available (e.g., [1]). These are welcome developments, but far from as universal as we’d like to see, and subject to political winds in Washington and every state.

A New Option

So, how can we finance the move to a sustainable economy for everyone?

Well, we could create our own bank!

That is exactly what the American Solar Energy Association has done.  After several years of intense effort, the Clean Energy Credit Union (CECU) received its federal charter in 2017, and began operations this year.

In a recent talk at the Solar 2018 conference in Boulder Colorado [3], CECU Co-founder Blake Jones explained that the CECU is a full-fledged federally chartered credit union, and its deposits are insured just like every other credit union. The difference from other credit unions is that CECU is a mission driven not-for-profit, with a mission to focus solely on lending for clean energy. As a credit union, it is well suited for making it possible for everyone to get the benefits of sustainable energy.

“Our vision is a world where everyone can participate in the clean energy movement:

  1. We make it easier for everyone to afford to use clean energy by providing loans with amazing terms;

  2. We make it easier for everyone to invest in the clean energy movement simply by opening a federally-insured savings account with us. Your deposits earn an interest rate and are used exclusively to help others buy clean energy products and services.” (CECU web page )

Jones has remarked that their mission means that ‘if you ask us for a loan for an electric car, we’ll give you the best deal anywhere.  If you ask us for a loan for a gas-guzzling SUV, sorry.  We don’t do that.

This clean energy mission also means that if you deposit savings with the CECU, you know that your money will be lent out for clean energy projects.  Even if you don’t need a loan today, you can put your money to work helping other people boot up clean energy.

Aside from its one-of-a-kind mission, the CECU is otherwise a normal federally insured credit union.  When fully operational, it will offer a full array of consumer services, including savings and checking accounts.

Obviously, there are limitations and caveats.  Like most credit unions, the CECU is focused on relatively small consumer loans. They won’t be financing industrial-scale wind farms or things like that.  But they will finance an electric bicycle.

Chartered credit unions are legally required to serve a particular group, a “Field of Membership”.  (Locally there are a number of credit unions serving employees of the University of Illinois, and other local companies, institutions and associations.)  In the case of the CECU is chartered to serve the membership of the American Solar Energy Society.  In short, you have to join the ASES to become a member of CECU.

The American Solar Energy Societyadvocates for sustainable living and 100% renewable energy.”  Membership is open to anyone who shares the vision.

The CECU is a purely digital operation, there are no branches or tellers. Whatever shortcomings of this approach, this means that anyone in the US can be a member, including us here in Central Illinois.

Presentations at Solar 2018

In a recent talk at Solar 2018 in Boulder Colorado, Blake Jones indicated that in its first years, it is very important for the CECU to grow its membership [3].  He encouraged every member of ASES to consider opening an account, if only for the minimum deposit.  He also encouraged people to join ASES, and then the CECU.

Jones discussed a second way to support the CECU everywhere.  The CECU is partnering with other credit unions. These deals give the CECU more money to lend.  But more important, the enable other credit unions to dip a toe in clean energy lending and to learn about the performance of these loans, while also broadening their portfolio and perhaps deciding to offer their own CE lending in the future.  Jones encouraged people to talk to their own local credit union, to suggest that they participate in these clean energy loans with the CECU. Credit unions are cooperatives, governed by their members, so it is very possible to influence this decision.

It is worth nothing that obtaining a federal charter for a credit union is not a trivial matter. The CECU’s mission-oriented lending design is unusual and was subject to significant scrutiny by the regulators. It took a lot of effort and persistence to secure the charter, and the fact that CECU succeeded suggests to me that it is well thought out and well run.

A Conversation with CECU Co-Founder Jones

In a recent email exchange, Jones discussed the CECU with me [4].

Q: “Why is the CECU important for central Illinois?”

Jones: “Since CECU is an online-only, federally charted credit union, it can serve members anywhere in the USA.  So, technically, this answer would be the same for people all over the USA and not just in central Illinois.  Throughout the USA, and in Illinois as well, it’s currently not very easy for most people to participate in the clean energy movement – nor is it easily apparent for anyone to determine how to do so or what their options are for participating.  CECU is important because (a) people want and deserve a better way to participate in the clean energy movement; (b) in order to encourage widespread participation, we need to make it easier for everyone to use and to invest in clean energy; and (c) propagating clean energy via a cooperative model provides benefits for multiple stakeholders such as mitigating climate change, reducing pollution, improving public health, creating jobs, building community wealth, promoting democratic organizations, improving national security, increasing energy independence, promoting personal financial independence, and more.”

Q: “How can people in central Illinois benefit from the CECU?”

Jones:  “They can join CECU and then (a) get fantastic loan rates that can help them afford to buy clean energy products and services (such as EVs, solar PV systems, green home improvements, etc.); and (b) be able to deposit money in their savings accounts that’s federally insured, earns an interest rate, and is only used to help other people be able to pursue their own clean energy projects.”

 Q: “What can we do to spread this model to our local area?”

Jones: “Technically, the model is already available to residents in central Illinois via CECU (first they’d just have to be an ASES member, or they’d have to be in the family or household of an ASES or CECU member, and then they’d be eligible to join CECU – this costs as little as $10 to join ASES for a 1-year membership).  That being said, over the long run, CECU’s goal is to set a positive example for other CUs and banks throughout the USA, and to proactively seek partnerships with other CUs and banks, to get them comfortable with and/or teach them how to do clean energy loans.  By asking your local lenders if they offer “clean energy loans like the ones that Clean Energy Credit Union offers,” this can help encourage them to pay attention to this important and growing market and sector of the economy.”

So, in summary, the CECU offers three potential wins for our community: accessible loans for clean energy projects, a simple and safe way to invest in clean energy, and a potential collaboration to help our local credit unions invest in clean energy.

Disclosure:  The author is long time member of the American Solar Energy Society.  He has no financial or other connection to the Clean Energy Credit Union.

For more information:

Clean Energy Credit Union: https://www.cleanenergycu.org/home/home
American Solar Energy Society: https://www.ases.org/Illinois Future Energy Jobs: https://www.futureenergyjobsact.com/Illinois Solar For All: https://illinoissolar.org/Illinois-Solar-for-All

Solar Urbana-Champaign: https://www.growsolar.org/solar-urbana-champaign/


References

  1. Andrew Belden, Steven Clemmer, and Kathryn Wright, Financing Clean Energy: Cost-Effective Tools for State Compliance with the Clean Power Plan. Union of Concerned Scientists, 2015. https://www.ucsusa.org/sites/default/files/attach/2015/07/financing-clean-energy.pdf
  2. John Farrell, Is Bigger Best in Renewable Energy?, Institute for Local Self-Reliance, 2016. https://ilsr.org/wp-content/uploads/2016/12/Is-Bigger-Best-in-Renewable-Energy-Report-Final.pdf
  3. Blake Jones, Clean Energy Credit Union: Financing the clean energy movement, in Solar 2018. 2018: Boulder, CO. https://drive.google.com/file/d/1Jmwq1BsjHQpKsZutbEDFHbp5v8Xg0gtB/view
  4. Blake Jones, Personal Communication, September 3, 2018.
  5. Carmelita Miller, New Energy Efficiency Business Plans Will Lead to Fewer Benefits for Underserved Communities, in The Greelining Institute – Blog. 2018. http://greenlining.org/blog/2018/new-energy-efficiency-plans-cut-benefits-for-underserved-communities/
  6. World Economic Forum, Renewable Infrastructure Investment Handbook: A Guide for Institutional Investors Geneva, 2016. http://www3.weforum.org/docs/WEF_Renewable_Infrastructure_Investment_Handbook.pdf

 

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