20 SEPTEMBER / OCTOBER 2023 PSP SHOWCASE Joshua C. Miller CEO The KeyState Companies JMiller@Key-State.com In recent years, community banks have emerged as key players in financing renewable energy projects, challenging the dominance of large national banks. With the extension and expansion of investment tax credits (ITCs) and government guarantee programs, such as the U.S. Department of Agriculture’s Renewable Energy for America Program (REAP), community banks are rapidly increasing their involvement in financing renewable energy projects. If your institution isn’t taking advantage of these opportunities, you’re missing out on the benefits of tax equity investments and renewable energy lending for community banks. Shifting Landscape in Renewable Energy Financing Until recently, large national and super regional banks held a monopoly on financing renewable energy Fueling the Green Economy The growth of renewable energy financing by community banks projects. However, the demand for small and mid-size renewable energy projects, driven by state and local governments, corporations with renewable energy targets and incentives like the ITC, has created an opportunity for community banks to enter the market. Community banks are well-suited to finance smaller projects that align with their local communities’ needs. The Power of Tax Equity One avenue for community banks to engage in renewable energy financing is through tax equity investments. By investing in a solar tax equity fund, community banks can reduce the developer’s reliance on debt and capital, making projects more feasible. Solar tax equity investors benefit from a 30% (or higher) ITC, tax losses from project depreciation and stable cash returns over a 5-6 year holding period. The recent extension of the ITC for at least 10 more years ensures that investors KeyState is a Preferred Service Provider of the Indiana Bankers Association.
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