New thinking in EERE projects

Energy Efficiency, Renewable Energy ( EERE ) seems to be a puzzle that the current banking professionals seem to be attempting to solve with the same old tools ... term financing structures composed of principal and interest, fully amortizing over the useful life of the equipment (5-10 years).  This is equipment finance traditionally constrained by capital equipment used in the everyday operations of going concern businesses. 
The gap comes in our uncertainty regarding the production capacity of this equipment, or retrofit system solution.  What happens if the spring turns out to be colder and darker that we would otherwise expect.  The equipment generates less power and that power generation translates into reduced income to service debt.
Government subsidies defined by the PUC compound the issue.  For example, the current Feed In Tariff  (FIT) was calculated so as to pay for the cost of solar PV systems over 15 years.  Within that calculation, the PUC included the cost of financing, but did so assuming a fixed rate, 15 year, fully amortizing loan facility.
Again., the gap is that this particular loan facility is seldom used, and when it is used, banks tend to add a loan pricing premium as a hedge to rising cost of funds and a generally escalating interest rate environment.
We need to think about renewable energy in a new light.  I would like to throw out an idea that I think holds water as supporting vehicles for a growing EERE market.
First - when financing solar PV in concert with the FIT program, a reasonable structure for loan service would be monthly interest payments with an annual leveling payment.  What I mean by this is for banks to take assignment of the FIT revenue stemming from energy production of a Solar PV system and apply that revenue to the interest portion of the loan on a monthly basis.  During the winter months, the loan, consisting of an interest account and a principal account, would self service the interest portion of the debt, but would likely not reduce the principal balance of the loan.  This "issue" would self correct over the Summer and fall months when the sun shines longer and the days are longer.  I would expect that the interest portion of the loan would self correct over the summer months and the principal portion of the loan would be reduced.  In the event that the production of the system exceeded projections, the loan would amortize faster than expected ... a good situation for the bank and for the system owner.  In the event that the system failed to generate a minimum production capacity over the year's time, a leveling payment would be required by the system owner.  This leveling payment could come from a pre-determined cash reserve account required by the bank at loan inception.  This type of approach would mitigate payment and amortization risk to the bank and keep the investment of the system owner at a minimal level, thereby preserving the owner liquidity.
Wind systems could be addressed in a similar way ... monthly interest payment with scheduled principal balance reductions in order to keep the loan performing to the expectations of the bank or financing entity.
With some creative thinking and a willing finance community, EERE projects can be a profitable and predictable market sector. 

Ecological Banking

Ecology is the study of the natural environment. It goes to reason then that Eco-banking should be banking that takes into consideration the natural environment in how financial services are offered to businesses and individuals who operate within the natural environment.
So how would a bank change the products and services it offers in order to benefit the local ecology? That is a good question. The reason that is a good question is because as bankers we have always looked to improve and increase the ROI / ROE value to our shareholders and our depositors first. By doing this, we preserve the integrity of the bank and provide a safe place to store funds while preserving the financial soundness of the institution. Seems to be the way to do business now and into the future.
Eco-banking asks us to consider additional criteria in our business dealings. How do the services we provide help to preserve and grow the communities in which we are entrusted with our customer's hard earned money? Can we do this any better than we are now? I think we can. Communities are similar to farms. They require fertile soil, attention to the weather, discerning seed activities, and careful nurturing of the resulting growth. Banking services and bankers take on a complimentary role to the farmer - they are the tools in which these activities can be accomplished more efficiently.
There are various methods - each with intrinsic strengths and weaknesses. Some would say that the best banks are those that nurture the mature plantings - they deal with existing businesses and support the continued growth and expansion of those businesses. In my opinion, and ecology oriented bank considers the entire system in its dealings; from start-ups and home-based endeavors to soundly established going concerns.
Each stage in the cycle requires specific care and attention. Attention to soil conditions prompts us to consider public policy and how we might influence our local representatives to take action which promote growth in our communities.
Seed activities involve micro-lending and the growth of the venture capital sector, while also promoting skills development and education of the local single-person service provider to help them avoid common business pitfalls and to accomplish controlled growth and sound fiscal management. As those seedling businesses begin their growth, banks can provide continued education in best business practices, and counsel regarding the broader economy and pending storms and opportunities. Small business lending and treasury services can provide both useful tools and objective oversight of trends and ratios within the growing seedling business. As established businesses expand - providing seed opportunities to the broader Eco-system, while supporting supplier businesses with capital needed to grow as well - Mutuality becomes increasingly important. Finally, at the end of the business life-cycle, an Eco-banker can help with succession planning and help to insure the continuance of the business, thereby promoting the growth of the larger community.
We live in dependent systems and rely on the health and success of the broader business, personal, and natural environments in order to remain resilient and vital. I believe all of us benefit from a vital and growing local and regional economy - no to mention the grander vision of the nation and world. If we can always look outside our small piece of the larger picture, and recognize the numerous ways we can help to create a healthier system, we all benefit from the small efforts of each one of us. Eco-banking, the notion of looking to the greater ecological landscapes around us and endeavoring to promote, sustain and grow that environment, provides a way to accomplish this very noble goal.

Letting go

Been approaching life a bit different lately ... letting go of expectations and desires for specific outcomes and finding much more joy in the present. A co-worker asked me today what my preference would be for the department of one that I currently head up. After thinking about the question, I responded that the best outcome, in my opinion for the bank would be for the department to be absorbed as part of the corporate culture - meaning there would be a consideration of environmental issues in all that we do as a bank. But that would mean that my position would no longer be necessary - unless they kept me on as a content expert or knowledge officer... which at this bank would be unlikely.
The best outcome for me professionally would be to grow a division around environmental lending initiatives. But then that would turn me into a manager, limiting my public contact and making my focus more on reports than on business development or outreach. I don't have much interest in reports.
So, in total, the preferred outcome would be for me to become expendable ... the follow on question was, "so, are you okay with that?" My response ... sure ... I am not overly tied to either outcome ... just enjoying what I am doing today and working on growing the philosophy and approach within the bank and out into the community. The experience and visibility are both good for me from a resume perspective. My hope is that I will be able to leverage this time into international travel. I think I am starting to get it ... Buddhists call this compassionate objectivity ... feeling without taking possession. I like that message.