The Benefits of Outsourcing Solar Servicing Solutions for Loan, Lease, and PPA Originators

As the renewable energy market thrives, especially with solar energy’s steady growth, the financing framework that supports this transition becomes increasingly vital. Solar loans, leases, and Power Purchase Agreements (PPAs) are the backbone of solar financing. However, the effective management of these financial instruments requires specialized servicing capabilities that many loan and lease originators may not possess in-house. This article elaborates on the benefits of outsourcing servicing, emphasizing advantages for solar financing originators.

Solar financing covers a variety of instruments, including loans, leases, and PPAs. Each comes with unique characteristics and servicing requirements. For instance, loan repayments often hinge on fixed schedules, while leases and PPAs call for distinct management strategies to optimize consumer satisfaction and maintain financial health. Loans, such as those for solar panel installations, are similar to traditional home improvement loans but secured by a UCC (Uniform Commercial Code) filing on the solar equipment and include tracking in the payment stream of investment tax credits. Leases allow consumers to use solar panels without ownership, with regular payments often including performance guarantees and payment escalators. PPAs involve the sale of electricity generated by solar panels, often with fixed or variable monthly payments based on energy consumption.

The success of solar financing depends on specialized servicing expertise. It’s not enough to simply find any servicing company to handle these financial assets; the company must have expertise and experience specific to solar financing. Unlike other consumer financing solar financing requires specific attention to the equipment, the equipment’s performance, installer support and the customer’s overall experience. Servicing companies must understand how equipment performance can impact consumer satisfaction. This is important because if solar panels fail or underperform, or if there are installer issues prevention Permission to Operate, it can severely impact the customer’s experience. Servicing companies must be able to deal with questions, provide relevant support, and take care of those problems, if any, to keep the customers happy. Furthermore, the servicing company needs to manage these loans/leases/PPAs with the appropriate understanding of the consumer’s rights and the originating company’s responsibilities. This includes handling equipment maintenance or replacement, dealing with billing complexities specific to solar energy, and making sure the customer understands the terms of their financing. In addition, servicing company personnel should have advanced knowledge of solar financing instruments to properly manage them.

Solar finance servicing companies play a critical role in addressing the operational complexities associated with solar financing. These entities manage day-to-day interactions with consumers, ensuring that concerns such as billing, equipment performance, and contract intricacies are handled efficiently. Effective servicing companies provide support for inquiries from customers and also third parties such as Title Companies involved with home sales and refinancing, proactively address system performance, and maintain a positive relationship with the solar originators and their point-of-sale network.

Outsourcing solar finance servicing to specialized companies provides a range of strategic and operational advantages that can significantly enhance the performance and profitability of a solar asset. These specialized firms bring focused expertise, advanced technology, and economies of scale that are often difficult and costly to replicate in-house. The benefits are multifaceted and impact various aspects of the business, from regulatory compliance to customer satisfaction. Here’s a breakdown of the key advantages:

• Expertise in Compliance and Regulations: The solar financing domain is subject to a host of regulations that demand expert navigation. Outsourcing to experienced servicers ensures compliance and mitigates risks associated with regulatory changes. These companies stay abreast of federal, state, and local regulations affecting solar financing, including those related to consumer protection, financing disclosures, system deactivation notices, and equipment standards. This reduces the risk of non-compliance and potential penalties for originators.
• Enhanced Consumer Support: Outsourced servicing partners come staffed with dedicated teams trained specifically in solar financing support. This leads to higher levels of customer care, vital for retaining clients in a competitive market. Specialized staff can efficiently address billing inquiries, explain payment breakdowns, and provide prompt responses to consumer concerns. This personalized support enhances the overall customer experience and fosters positive relationships.
• Improved Operational Efficiency: By delegating servicing tasks, originators can redirect their focus on their core business functions—growing their consumer base and enhancing their product offerings. Originators can streamline operations by offloading functions such as payment processing, customer support, and lease administration, allowing them to focus on sales, marketing, new product development, and growing market share.
• Cost Savings: Managing an in-house servicing team can lead to substantial overhead costs. Outsourcing provides cost benefits with specialized companies that can manage these operations at scale more economically. These savings are realized by eliminating the need to hire, train, and manage a servicing staff, and by avoiding the costs associated with developing and maintaining a servicing infrastructure, including technology, office space, and regulatory compliance resources.
• Technology Integration: Many solar servicing companies utilize sophisticated platforms designed for efficient management of solar accounts. Advanced servicing partners have their own proprietary servicing platform that allows for customization to meet different client, consumer, and product needs. This allows originators to benefit from high-tech solutions without the burden of significant upfront investments. These platforms enable automated payment processing, online portals for customers, and data analytics to improve operational efficiency and customer satisfaction.
• Scalability and Flexibility: With fluctuating demands in the solar market, outsourcing offers the flexibility to scale services up or down. This adaptability is crucial in an industry characterized by rapid growth. Originators can quickly adjust the number of accounts serviced without incurring the costs of hiring or laying off employees, making it easier to respond to market fluctuations and growth opportunities, including the shifts in demand between different financing products such as solar loans and leases.

In addition to the array of benefits outlined above, a comprehensive solar servicing solution should encompass all core aspects of traditional servicing including billing, payments, credit reporting, and more. A specialized one-stop shop for solar servicing can streamline these processes, ensuring that solar loan, lease, and Power Purchase Agreement (PPA) originators can manage every phase effectively and efficiently.

Key Components of a Single Source Servicing Company:

1. Billing and Payments Management: An all-inclusive solar servicing company will manage all aspects of billing, including the accurate calculation of monthly payments, setup of payment plans, and processing of transactions. Automated systems can handle recurring payments while providing consumers with flexible options, such as online payment portals, mobile payments, and reminders to ensure timely collections.
2. Credit Reporting and Monitoring: It is essential for any financial servicing solution to include comprehensive credit reporting services. Specialized servicers will regularly report consumer payments to credit bureaus, helping consumers build and maintain their credit scores. This feature not only benefits consumers but also enhances the financing company’s reputation and standing in the market.
3. UCC Filings and Maintenance: Managing UCC filings is critical in securing interests in solar financing. A one-stop servicing solution will handle UCC filings efficiently, ensuring that all security interests are appropriately filed and maintained. This minimizes risk for originators and protects their investments.
4. System Shut-off Capabilities: In cases of non-payment or default, having the ability to manage system shut offs is a servicing partner value add. Next level servicers implement processes to disable the solar system in a timely manner while following regulatory guidelines. This capability not only protects the fiscal interests of the originators but also encourages timely payments from consumers.
5. Post-Default Collections: A comprehensive servicing solution will also include post-default collections capabilities to effectively manage delinquent accounts. Dedicated collection teams trained in solar financing will work to recover outstanding amounts while maintaining positive customer relations. This includes implementing tactful collection strategies that encourage consumers to become current on their obligations while preserving the potential for future business relationships.

By establishing a one-stop shop that handles every aspect of solar servicing—from billing and collections to compliance and customer support—solar loan, lease, and PPA originators can streamline operations and reduce operational risks. Managing a single servicing partner minimizes complexity and enhances accountability compared to juggling multiple unique servicing partners. Such comprehensive solutions not only enhance internal efficiencies but also improve customer satisfaction and retention, leading to higher profitability. As the solar market continues to evolve, the adoption of these specialized, all-encompassing servicing solutions is essential for originating firms looking to thrive in this dynamic industry. Embracing a holistic solar servicing approach enables businesses to focus on their core competencies, innovate, and remain competitive in the evolving solar financing industry.

Beyond the broad advantages that all businesses can realize, solar originators stand to gain a number of targeted benefits when they choose to outsource their servicing functions. These benefits help them streamline their specific processes and improve how they manage the unique aspects of solar financing products, leading to increased efficiency, consumer satisfaction, and bottom-line profitability. The advantages include:

• Streamlined Payment Management: Providers can ensure timely collections and adherence to loan terms, thereby reducing defaults and enhancing revenue stability. The servicer will monitor payment schedules to ensure timely collection and adherence to loan terms. They will also establish payment reminder processes, which are automated and leverage omni-channel communication to reduce delinquency risks and enhance consumer awareness. For any consumer accounts not already on automatic payments, servicers should have proactive omni channel enrollment outreach, online prompts, and call scripting where agents are actively seeking to help consumers establish worry free automatic payment plans.
• Effective Handling of Inquiries and Complaints: Specialized support enhances the handling of consumer inquiries, fostering loyalty and reducing churn in a competitive environment. The servicer’s dedicated, trained staff will have advanced procedures in partnership with the origination to efficiently hand both system and installer complaints in addition to support for billing inquiries, to quickly address any inquiries and concerns that consumers may have.
• Clear Communication on Lease Terms and Ownership: Good servicing relationships reduce confusion about customer obligations, leading to improved purchasing and leasing experiences. The servicing company will clearly communicate with solar lease customers regarding their rights and responsibilities for leased solar equipment. This includes explaining that the customers do not own the solar panels but have the right to use them for the lease duration, as well as outlining ownership transfer conditions, lease renewals and options for purchasing the equipment.
• Efficient Management of Transfers and Assumptions: Handling property sales can be complex, but specialized solar servicers streamline these processes, making transitions smoother for consumers and third party organizations. The servicer can smoothly and efficiently facilitate the transfer of loan and lease agreements in the event of a property sale or transfer of ownership, ensuring the obligations are understood by all parties involved.
• Tracking Tax Incentives for Consumers: Experienced solar servicers will ensure that consumers fully understand the Investment Tax Credit (ITC) and how it impacts their solar financing payment during and after the ITC period. Effective communication during the first 18 months of their loan is crucial to avoid surprises in payment changes following the ITC period. As amortization approaches, it’s essential for servicers to deliver clear messaging that outlines the benefits of the ITC, reinforcing how it can substantially reduce overall financing costs. By effectively communicating these incentives, servicers can help consumers navigate the complex financial implications of tax benefits associated with solar investments.
• Servicers Reputation Within the Financing Ecosystem: Experienced servicers have a positive relationship with Rating Agencies, investors, and warehouse providers. The servicer should have the ability to support public and private ABS transactions and the flexibility to efficiently support numerous flow buyers. This may include complex contractual relationships for special and backup servicing and ability to administer the complexities of advanced monthly investor reporting for holders of solar portfolios.

One real-world example highlights how a residential solar and home improvement loan originator overcame operational hurdles. This originator, after a few years of internal servicing, realized it was becoming overly costly and resource-intensive, diverting focus from their core business goals. Seeking to invest time in growth and innovative product development, they sought an experienced servicing partner with the infrastructure and scalability they required.

They transitioned all servicing operations to Goal Solutions, a partner who specializes in managing solar financing. Goal had invested in innovations in solar finance servicing, financial controls, overall compliance governance, best in class portfolio collections performance, along with servicing a number of public and private rated ABS transactions. The specialized servicing model helped to reduce billing disputes and improved loan performance, allowing the originator to redirect internal resources to their most productive activities, marketing and originating. Furthermore, Goal served as their strategic partner in multiple securitizations. This case underscores the practical benefits of outsourcing, allowing the originator to optimize resources, improve financial controls, and drive significant business growth.

Given the complexities associated with solar financing, leveraging specialized servicing solutions is crucial for loan, lease, and PPA originators looking to thrive in the competitive solar market. Outsourcing servicing not only mitigates operational challenges but also allows providers to focus on core strategic initiatives, ultimately driving growth and customer satisfaction. Embracing these solutions could well position originators as leaders in the robust and evolving solar financing landscape.