Andy Posner is the founder and CEO of Capital Good Fund. Since 2009, Andy and his team have been working on the frontlines trying to tackle one of the biggest challenges homeowners face when they are thinking about installing solar on their homes: cost.
The Capital Good Fund develops lending programs, like DoubleGreen Solar Loans, that deliver the benefits of solar and other energy efficiency improvements to middle- and low- income homeowners, as well as communities of color.
Andy is passionate about the work he does. So much so that he recently got a desert-themed tattoo featuring a solar panel. So yes, Andy is all in on expanding the accessibility of renewables!
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(Note: This transcript was created using artificial intelligence. It has not been edited verbatim.)
Sean McMahon 00:00
Hey what's up everyone and welcome to another episode of the renewable energy smart pod. I'm your host Sean McMahon. And today, I'm going to be joined by someone who was working on the front lines trying to tackle one of the biggest challenges homeowners face when they are thinking about installing solar on their homes. Cost.
Andy Posner is the founder and CEO of Capital Good Fund. Since 2009. Andy and his team have been working at the grassroots level to develop loan programs that deliver the benefits of solar and other energy efficiency improvements to middle and low income homeowners, as well as communities of color.
Now, we spend a lot of time on this podcast talking about the big picture trends related to renewables. But affordability is something that still impacts the reality and the perception of residential solar. Let's be real. One of the many reasons residential solar struggles on certain policy fronts, because rooftop solar panels are still viewed by many as something that only rich people can afford. Well, Andy might not be able to change people's perceptions. But he's working hard to change the reality about the affordability of rooftop solar, one homeowner at a time.
I think you're gonna enjoy hearing Andy's story. He's doing important work. And I gotta say I enjoyed talking to him simply because of the incredible enthusiasm he shows for making renewables more affordable for everyone.
But before we kick off our conversation, here's a quick word from the exclusive sponsor of today's episode. ABS Quality Evaluations.
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Sean McMahon 02:15
Hello, everyone, and thank you for joining me today. My guest is Andy Posner, and he is the founder and CEO of the Capital Good Fund. Andy, how you doing today?
Andy Posner 02:25
I'm doing very well. Very nice to meet you. I really appreciate the opportunity to discuss solar lending.
Sean McMahon 02:29
I'm really looking forward to this conversation. But let's just kind of kick things off, you know, tell me the story. But what is the capital good fund? And how did you get started?
Andy Posner 02:36
Yeah, appreciate that question. So we are a nonprofit lender, which is perhaps a concept that people are not familiar with. We have a trade certification with the United States Treasury. We're what's called a community element, financial institution. And that's something that folks interested in kind of equitable financial services, including in the green lending space should be familiar with. It's a program that certifies lenders that have a mission focus. And there are banks, credit unions, nonprofit loan funds that have the certification. In our case, we do consumer lending for low income folks and folks of color across three thematic areas. The one that we'll focus on here is what we call our double green loan, which can be for, you know, solar energy efficiency, battery storage, and the like. But we also do loans for immigration expenses, rent or utilities, and that kind of thing. And the impetus for starting your organization was if we go all the way back to 2007 2008. I was getting a master's in environmental studies, and was interested in financing mechanisms for clean energy. There was a lot of innovation happening at the time, like for example, property assessed clean energy, which has had a mixed track record, but it was a new concept. And then the financial system collapsed in oh eight. And I've always been interested in the intersection between poverty, race and climate and environmental justice. And I don't have a background in financial services. So when I started to try to understand why, you know, Bear Stearns, going other under Lehman Brothers had any impact on low income communities. That's when I started to learn about things like redlining and predatory lending. And I realized that the same challenges that were holding back financing for clean tech, were also folding back access to equitable credit for folks for other things. And so decided to start an organization that would have a mission to use financial services to both advance climate justice and upward mobility for underserved families.
Sean McMahon 04:45
Okay, and obviously, that's a hot topic right now, both the redlining and things like that in a broader banking sector, but also the upfront costs that come with you know, solar and other energy efficiency programs. So, what are the basics of the double green solar loan program and how does it work,
Andy Posner 05:00
We started doing DoubleGreen loans, which is our brand name for our green lending in 2011. At the time, it was just for energy efficiency measures in Rhode Island and Massachusetts. And in October of 2021, we decided to add the double green solar loan, which was specifically for solar battery backup, and also things that need to be done to make those upgrades possible. So a new roof breaker box upgrades featuring. And we decided to structure it in a way that it would be as inclusive as possible, particularly with a focus on low income homeowners and homeowners of color. It has a 25 year term, which is fairly standard in the industry, and an interest rate that we had to we've had to raise slightly because of interest rate adjustments from the Fed. But it's still low enough that the savings on the loan payment is less than the savings from the solar system in most cases. And that's really the key design factor, particularly for our target market. Because and I'm sure we'll get into this with the inflation Reduction Act. But one of the key challenges when we look at solar adoption for underserved communities, which is pretty low, is that the solar tax credit is not refundable. So if you don't have a taxable liability, you don't really have a way to monetize that 30% credit yourself. And that's effectively that's the most aggressive policy you could possibly have in terms of tax policy.
Sean McMahon 06:38
Just let me jump in real quick. So when you're talking about what are the rates, like right now? I mean, I know you obviously everyone's had to raise things because the Fed has raised things, but how does it compare to the rates in terms of a typical solar loan?
Andy Posner 06:49
Yeah, right now, we have two options that a customer can choose from. And I'll give those and then I'm going to explain the context for how solar lending works presently. So one option is no closing fee, and a straight 6.99% APR fixed with no application closing prepayment or late penalties or fees. And again, that 25 year term, and we don't have any minimum income or FICO requirements. And it's a very inclusive underwriting approach, we had to raise that from 599. Because we do borrow the money we lend out and our rates went up. The other option, which is much more popular is where we put a 20% closing fee that's fully disclosed on top of the loan amount. So if it's a $20,000 system, you'll find as $24,000, for example. And that brings the interest rate down to 249 to 349. So that option is better for anyone that's planning to keep the loan for longer than five years. Now, the important context here is that in the solar industry, that is often what's called a dealer fee. And the problem with the dealer fee is that other lenders don't disclose it. If you go to an installer and you pick one of their FinTech partners, unbeknownst to you, in so doing, the cash price of your system will go up by anywhere from 20 to 40%. And they don't tell you that. So they'll say, Oh, you're borrowing at 299. But you're actually not. And candidly, I'm not even sure how that is legal. There's something called The Truth in Lending Act that would appear to prohibit that. So what we've done is we've fully disclosed that explained the benefit, and now people can make an informed decision. And like I said, but 80% of customers do choose that option.
Sean McMahon 08:44
Okay, and I know your nonprofit, that obviously helps keep costs down. But what other things do you do to keep costs low to borrowers,
Andy Posner 08:50
There are a couple of key strategies. The first one is that as a nonprofit, we are able to raise grant dollars to subsidize our operations. That can mean you know, we don't have to we can get a grant to cover a loan officer. So we our interest rate doesn't have to cover those expenses. Or we can do what are called credit enhancements that allow us to lower our borrowing cost. And that's the other. The second key thing is that we don't pay as much on our debt as like a good lead would, which means we can pass on more savings. And then the last tool we have is that we have a program in which we go out into the community. We engage people about solar, we design the system, approve them for financing, and then we have relationships with installers where we hand over this funded design system and say you go do the engineering, procurement and construction VPC and we've negotiated a lower cost per watt because they don't have to pay for the customer acquisition and you know, all the design work.
Sean McMahon 09:53
So you're basically doing the lead gen and all the business development for them and then they just come in and do the installation. Correct. Gotcha. All right now, you mentioned earlier the inflation Reduction Act, and I want to get to that. So what kind of impact with the tax credits or some of the other aspects of the IRA have on this market and the work you and the team do?
Andy Posner 10:12
Yeah. So obviously, we're very excited that the tax credit was increased from 26%. Back to 30. And extended for 10 years, we worked really hard to make it refundable. Meaning that even if you have no tax liability, under refundability, you would just get a check from the IRS that got stripped it was in Dilbeck. Better it got stripped out of the IRA. However, the IRA does have a provision that there's another section of the tax code, which is the commercial tax credit section 48. And under under that nonprofits are eligible for direct pay. Which means that if we were to do a lease not alone, where we the nonprofit capital could fund own the panels and lease it to the homeowner, we would be able to receive the tax credit. For the first time you're normally you have to do a complicated tax equity structure, and it's costly, and the return expectations are very high.
Sean McMahon 11:12
What kind of feedback have you gotten, or maybe it's early days, but what kind of feedback you're anticipating from from homeowners, you know, on that whole owning the panels on the roof as opposed to leasing them from you?
Andy Posner 11:22
Yeah, it's a game changer for everyone, the our customer base being low income, is able to save a lot more money under a lease model, they also don't have to worry about taking on a huge debt. Because this doesn't, wouldn't show up on the credit, which often people are worried about. They don't have to worry about if they sell the home, they suddenly have to pay off a $35,000 system, there's a guarantee on savings, and then our follow up maintenance. So the feedback is extremely positive. Also, it allows us to actually pay a slightly higher return to the people that lend us money, which is important because at some point, we want to be doing billions of dollars of these leases. And there's only so much below market rate money that we can raise. And also the IRA includes adders. So, for example, they define something called an energy community, which is there's a number of definitions, including census tracts that had a coal plant closed in the last 10 years. If we do a solar lease to somebody in one of those communities, then the tax credit is actually 40% of 30%. We also can monetize other things like renewable energy credits. And again, because we're nonprofit, we can pass most of those savings on to the homeowner, it is truly a game changer. Because there's never been a nonprofit lease model, because we didn't have a way to get the credit before. It also means that we now have an opportunity to roll out a commercial lease program. So that could be for an affordable housing complex, a community center, Small Business and the like. I've sort of drove to this moment for 14 years candidly.
Sean McMahon 13:02
Well, it certainly seems like things are growing. Hmm. Can you tell me more about the size of your current operation? You know, where are you operating now? And what kind of plans do you have to expand your footprint?
Andy Posner 13:11
Yeah, we're in an exciting time. Organizationally, we're headquartered in Rhode Island. And actually, we have a 24 kilowatt solar system on our roof. And we have a DC fast charging station in our parking lot for EVs. And we actually lend in 10 states. Currently, we only offer the solar loan in Rhode Island, Massachusetts and Texas. So with the leasing, we see opportunity to bring the program to a number of other states, for example, Colorado, New Jersey and Georgia are very high in our list. Additionally, the inflation Reduction Act has this $27 billion Greenhouse Gas Reduction Fund, which is grant money that will flow from EPA, to nonprofits, including probably us we're a very good fit for it. That will allow us to more rapidly expand the program, the Biden ministration is very interested in making sure that the benefits of the bill in fact, they want 40% of the benefits of the bill to go to underserved communities. And that's really where organizations like us come in, because we know how to reach those communities.
Sean McMahon 14:20
We'll be right back.
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Sean McMahon 15:13
And now back to our conversation. Okay, now I understand you also have a loan program for weatherization. How does that program work? And what does it cover?
Andy Posner 15:22
Yeah, and actually, as I mentioned, that program has been a long, has been in existence a lot longer than the solar lending. Currently, we offer it as part of a utility program in Rhode Island and Massachusetts, which is a really interesting example of the power of local and state public policy. So if you live in one of those two states, you can actually get you a homeowner can get an interest free loan from us or a bank for heat pumps, insulation, ductwork, removal of knob and tube wiring, removal, mold, that kind of thing. And those loans go up to $25,000. And the reason we're able to offer it interest free, is that we actually get an interest buydown from the utility, meaning that they pay us interest upfront, which makes it viable for us. And it makes it much more affordable for homeowners. And we've done about $10 million of those loans with a 99.4% repayment rate, even though our borrowers are mostly subprime. So it's been extraordinarily successful. As we look to bring that to other markets, we're going to do it, but it's a little more difficult because in Texas, for instance, they don't have a utility sponsored program. Meaning that in the New England program, the utility has a third party administrator, that vets contractors, and they set all the program parameters. So all we have to do is review the homeowners application, we don't have to worry about vetting the contractor or the project. In other markets where that doesn't exist, we have to do that. So that just adds complexity and cost. And then without that interest buydown the homeowner will have to pay interest. You know, so that's an example we're having a progressive Public Utilities Commission utility and state legislatures is essential. But nevertheless, we do plan to bring it to Texas, Colorado does have a similar program through their Green Bank, the Colorado Clean Energy Fund, and we're hoping to bring it there. And there are some tax credits in the bill in the IRA. That will incentivize things like heat pumps. The only downside is that those credits are also not refundable. So I do worry that a low income homeowner will not have tax liability to benefit from those tax credits.
Sean McMahon 17:38
All right, well, it certainly sounds like you and your team are riding a wave of momentum. Now one of the things I like to do on this show is ask guests for bold predictions. In your case, I want to hear your thoughts specifically about moderate to middle income homeowners and communities of color. What percentage of those folks do you think will be able to benefit from programs like yours in the next five years?
Andy Posner 17:58
So there's been some interesting data recently showing that while adoption of for example, solar is very low in low income communities and communities of color, it has been increasing slowly. And I think that the pace of that adoption is going to accelerate really fast, particularly because the bill does a lot to incentivize doing. So you know, those actors that 10% attr for certain communities means that installers are really going to prioritize reaching those communities, we have to make sure it's done equitably and ethically. And the grant dollars that are available are going to give nonprofits like us and GRID Alternatives and all sorts of frontline groups the resources they need to engage and reach communities. The other trend that is providing tailwinds for adoption of these technologies is the fact that energy prices are rising so fast, while the costs of EVs and the like are coming down, although maybe temporarily went up because the supply chains, right. But suddenly, the math on going solar is much better. When you have in Rhode Island, I think the utility price is going to go up 25% For electricity in the next cycle. So it's becoming something that is where it used to be more of an environmental decision to go green. Now it's becoming a an economic decision. And I think that's what the inflation Reduction Act does really well is it just has all these incentives, these carrots to make it the more logical choice.
Sean McMahon 19:30
Now, you mentioned some of the market conditions that are affecting the electric vehicle sector. But with supply chain issues and the investigation going on at the Commerce Department. Do you have any concerns about the supply of solar panels for some of your projects?
Andy Posner 19:43
I don't know if your listeners are familiar with the or if you've covered this before, but the the Commerce Department which ironically enough, Gina Raimondo, who's the Commerce Secretary, she was governor of Rhode Island, and I've known her I first met her when she ran for treasurer of Rhode Island and I am disappointed with how commerce is handled. This tariff dispute back when there was the uncertainty, our installers are just buying up a year worth of capacity, and the price per watt do go up, that is stabilized. But now there's this looming uncertainty about 2024. So I am worried about that. And we'll just have to see what happens. My bigger concern is not so much in the residential sector. Well, I will say this, My other concern in the residential sector is permitting. Because, for example, when we put solar on our roof, it took the city of Providence almost five months to give us the permits. And that's just unacceptable. And I think a lot of homeowners are going to sour on this when they start hearing how long it takes. And so permitting in the residential sector is a problem. The National Renewable Energy Laboratory has this software called solar AP plus, which
Sean McMahon 20:52
I was gonna bring that up because we previous episode, we had Arthur Coulson on just to talk all about solar app. And you know, it's they're trying to expand and be everywhere. But it sounds like they're not in Rhode Island yet.
Andy Posner 21:03
They are not no. And we actually have applied for funding to hire someone that will work with municipalities to adopt it. Because we just solar cost too much in the US. I mean, I think in in Australia, it's something like a third of the price, something like that. And a lot of it has to do with the well, there are existing tariffs on panels, and then all of those soft costs, which is absurdly high. And then, of course, the commercial utility scale, the interconnect queue is a nightmare. And I do I worry a lot about all the new powerlines we're going to have to build. And candidly, I think that rooftop solar, or canopy solar is going to have to be more of the solution just because we don't have the wires to carry all the commercial scale power from the desert to the cities. So even though rooftop cost more, we don't have a lot of other alternatives in many cases.
Sean McMahon 21:56
Are there any other concerns you have out there going to headwinds? My listeners might not be thinking of that you're living and thinking about every day?
Andy Posner 22:02
Oh, yeah. Net metering. I live in California. And I just put up solar. So I think I'll be grandfathered into net metering. 2.0 as they call it, but net metering 3.0. I mean, it needs to be modified, it is too generous, for sure. But I am worried that they're going too far in the direction of disincentivizing. Solar for residential scale, particularly when the aforementioned permitting problems for commercial utility scale are not likely to go away anytime soon. And while we have 10 years of regulatory certainty, on the credit, we don't have that on the on the net metering side. So that's a big concern. The other concern I have is that the practices we discussed briefly about those hidden dealer fees, I think that at some point, the Consumer Financial Protection Bureau or somebody is going to investigate how a lot of these fintechs are operating. And it's going to be a huge black eye on the industry. I mean, I get why they do it. But I don't think it's legal to not disclose it. And I'm very concerned about that. And then I mean, the other thing is just sort of supply of batteries. Because we are seeing more and more people do solar plus battery. The problem is, it can be hard to get your hands on a SunPower or a Tesla Powerwall system, and just getting homeowners to wait six months for their battery. It's a tough value proposition. And it's tough for installers as well.
Sean McMahon 23:26
Are you hearing any feedback from homeowners who are looking at this as a resiliency play? I mean, obviously, there's cost savings and things like that. But like you mentioned, you're in California, you got fires, you know, things like that, Florida hurricanes, whatever, what percentage of, of your borrowers are going this route? For that reason, like they want to be able to keep their home powered through some natural disaster.
Andy Posner 23:48
That is certainly a motivator. I will say that. The other thing that needs to happen is that utilities need to find a way to better compensate homeowners for the value of the batteries. Because even in California, like I have the tariff that I'm on my peak power price, like 50 cents a kilowatt hour. So obviously, when I'm discharging for my batteries, I'm saving a lot of money. But in other places, we don't have that kind of time of use, differential or even any time of use. It's hard to make the economics justifiable for batteries. And when you talk about a low income homeowner, I don't know that for the five blackouts a year, a 13,000 or, you know, battery system on its own isn't enough justification. You know, it's very difficult to calculate the ROI on these battery systems. So I really would like to see more programs that will better compensate folks for adding a battery because the grid needs it and the homeowner needs it as well.
Sean McMahon 24:50
So are there other organizations out there that are doing something similar to what you're doing?
Andy Posner 24:54
There's a lot of innovation happening in the space and that's going to proliferate when that comes to mind is a company called posit Jen, which has raised a lot of capital, venture capital and the like. And they focus on primarily low income homeowners. They focus on training underserved folks who work for them. And they're vertically integrated in a very interesting way. Whereas we partner with installers, they do the installation, and they also do the financing. And they can do efficiency and renewable. And they've had a lot of success with their model. There's also a lot of innovation happening in like heat pumps, for example, there's block power, which is doing heat pump leasing, in affordable housing complexes, or commercial scale. And then there's a nonprofit like clear alternatives, which is free and low cost installations on data, reservations and other places. There's a lot of really good things happening. It just needs to speed up. And the things we've already talked about that are slowing it down include the permitting process, the challenge of access to credit for underserved homeowners supply chains. And then you know, the other concern I have is that the bill is going to accelerate clean energy for sure, no doubt. But because there are no sticks, I worry that we're still accelerating our development of fossil infrastructure, LNG terminals and the like. And so aren't the atmosphere doesn't care about how many terawatts of solar installed they care about what the parts per million of carbon dioxide are. So that's the other question is, can we get a head start to bend the emissions curve in aggregate?
Sean McMahon 26:35
Okay, well, hey, Andy, this has been a wonderful conversation. I mean, you truly sound like someone who lives and breathes this stuff.
Andy Posner 26:40
I do indeed. And actually, to give you an idea of how passionate I am about solar, I recently got a tattoo of a solar panel in a desert motif. On my legs. I'd be happy to share a photo for your your listeners to take a look at.
Sean McMahon 26:53
Are you serious? Yeah. Okay, well, yes. Send that over. And I'll try and include it in the show notes somewhere so our listeners can take a look at your desert solar panels.
Wonderful. I will do that.
Okay, well, thanks again. I appreciate your time today and have a wonderful day. Thank you so much. That's our show for today. But before we get out of here, I want to say one final thank you to our sponsor, ABS Quality Evaluations.
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