24. Solar Makes Dollars & Sense
Massachusetts Bankers Association’s 2021 Renewable Energy Summit
Solar: Investing Makes Dollars & Sense
“We’re capitalists at heart, and the economics behind this stuff works.”
- James Daley
Over one month ago at the Mass Bankers Association 2021 Renewable Energy Summit, attendees heard from Coastal Heritage and Needham Bank—two Community Bank Champions and experienced solar lenders and tax equity investors.
The solar tax equity market alone - estimated to be over $20 billion in 2021 - is growing in tandem with the solar market. According to Norton Rose Fulbright, about 50% of tax equity in recent years has been supplied by two mega-banks: JPMorgan and Bank of America.
Most of the solar tax equity investments made by big banks are in large utility-scale solar projects or aggregations of high FICO score residential customers. Community Bank investment in solar is on the rise, capturing a larger share of the market, and leading the way with community-based solar projects.
While discussing his team’s interest in solar project financing, James Daley, SVP and Director of Structured Finance at Needham Bank: “Do as much as you can, and don’t hold back.” In addition to the encouragement from his auditors and advice from his legal team, Mr. Daley went on to discuss three reasons why Needham Bank continues to invest in clean-energy projects.
Let’s Do It
“We know our tax basis will go up down the road.”
- James Daley
James joined Needham Bank in 2020 with a focus on building out a strong renewables practice, and he knew solar financing would be additive to the bank’s portfolio. After listening to Sunwealth’s solar tax equity pitch, James not only identified an opportunity to add diversification to the banks commercial lending portfolio, but also identified a low-risk way to offset the bank’s tax liability with a tax equity investment. “I asked my CEO, ‘what does the tax planning look like for next year?’” Within a few weeks’ time he had received the green light-- “Let’s do it.”
A History of Making Money
“We look at this stuff as investment grade.”
- James Daley
In today’s market, banks are flushed with liquidity due to the Fed / Treasury rapidly increasing the broad money supply. Needham Bank’s team has a lot of capital to deploy on the debt side and they are ready to do so. As James notes, “Banks have a history of being rigid on things, but they have a history of making money.” Swift returns from solar investments, he notes, set the asset class apart.
“Just ask around your legal network,” says James, “They’ve been looking at this stuff for decades.” From his standpoint, the marketplace is more stable than it has ever been. He goes on to reassure community bankers that investing in solar projects is not as complex as it may seem, “You find a place where the sun is, you make sure the sun will be there, and you underwrite to that amount of sunlight… it’s easier than you think.”
Not Fast Enough
“We’re talking about displacing hundreds of millions of people around the world.”
- James Daley
While discussing the importance of combatting climate change, James noted that, “another report came out the other day: solar panels are being installed at record pace, but not fast enough.” So long as we burn greenhouse gases to meet our energy needs, storms will get bigger and climate disruption will accelerate.
Recognizing that many in his community live near the sea, James is wary of the consequences of failing to address the climate crisis. He proudly promotes investments in solar, “Clean energy is good for us all and everyone can win from it.”
Solar Tax Equity Investing and Lending provides community banks, like Needham Bank, a win, win, win.
MBA 2021 Renewable Energy Summit
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Andrew Hollander joined Sunwealth as an Associate shortly after graduating from Bentley University. He is amped to put his degree to work and motivated to create a clean energy future for all. When he’s not managing solar assets, he can be found watching Seinfield or spending time with friends and family.