Alternative Energy Loan Program
What is it?
The Alternative Energy Revolving Loan Program (AERLP) was established by the 57th Montana Legislature in 2001 with amendments dating from 2005. Its purpose is to provide a financing option to Montana homeowners, small businesses, non-profits and government entities to install alternative energy systems. The program is funded by air quality penalties collected by the Department of Environmental Quality (DEQ).
Energy from these renewable systems is intended for use by the owner. Net-metering is allowed (see More Details). Energy conservation measures installed in conjunction with an alternative energy project may be funded through the program, limited to 20 percent of the loan amount.
What are Alternative Energy Systems?
Alternative energy systems are defined by law as "the generation system or equipment used to convert energy sources into usable sources." The types of systems most commonly financed include: solar panels that generate electricity (photovoltaic systems); solar panels for hot water and/or space heating; small wind generators; small hydropower plants (under 1 megawatt); biomass (wood) heating appliances; and ground-source heat pump systems for space and water heating.
Other recognized non-fossil forms of energy generation may qualify. DEQ provides technical review and approval of all systems proposed for the loan program and can be consulted for details.
How much can I borrow?
Loans can be made up to a maximum of $40,000 and may be repaid in up to 10 years, depending on the loan amount. Interest rates are set annually and are fixed for the term of the loan.
How does the process work?
DEQ generally accepts and processes loan applications throughout the year. It usually takes three to four weeks for the approval process, and up to two weeks for loan funds to be deposited to the borrower's bank account. Technical and financial analyses take place simultaneously.
1. DEQ analyzes the request and reviews the project's technical merit and then sends the application packet to the financial contractor for financial review.
2. DEQ's financial contractor, Montana Business Assistance Connection (MBAC), analyzes credit and repayment history, debt-to-income ratio, and loan security. The contractor may request additional information needed to process the loan application. (The application process will be suspended until any requested information is received.)
3. The financial contractor recommends qualified applicants for loan approval to DEQ.
4. Technical aspects of the project are reviewed in greater detail by DEQ. DEQ approves loans that qualify both technically and financially.
5. The Montana Environmental Policy Act (MEPA) requires a review of the proposed project's impact on surrounding environmental and cultural resources. This review will be provided by DEQ.
6. Upon approval by the financial contractor and DEQ, qualified applicants are issued loan and security documents. A listing of items needed for loan closing is provided. For example, permits and insurance documentation are normally required.
7. Final loan documents are signed and MBAC deposits loan proceeds into the borrower's bank account.
8. Borrowers are required to keep records of expenditures and to document phases of construction and installations. Photographic records are required.
9. Loan payments are made to MBAC and returned to DEQ to revolve out to new loans.
What can loan funds be used for?
Loan funds are restricted to qualified purchases and services, including: equipment; engineering and consulting; installation costs; energy conservation measures; other qualifying items as approved by program managers. Loan funds may not be used to purchase land or buildings. See Frequently Asked Questions for more details.
Will AERLP insure the project is a good one?
No, the Montana Department of Enviornmental Quality may not:
1. Act as an attorney, engineer, financial or tax consultant. The applicant should hire any professionals or professional services needed.
2. Guarantee the project is a good investment.
3. Endorse any product, manufacturer, contractor, or component. All evaluations are made only for loan purposes. The applicant should shop for competitive bids and use professional help if necessary.
4. Compel a contractor or engineer to remedy defects in construction or to live up to any contracts they make with you.
5. Insure that any project is safe.
Can AERLP recommend installers?
No; however, various organizations maintain lists of recommended or qualified installers. The Montana Renewable Energy Association (MREA) maintains a list of its member installers on its website. Applicants in NorthWestern Energy's service area may wish to consult the utility's listing of approved installers through its Renewable Energy Program.
How are Energy Tax Credits received?
Many projects funded by AERLP are eligible for state and federal renewable energy investment tax credits (ITCs). Additional insulation, efficient windows, doors, and fixtures may be eligible for the Montana energy conservation investment credit. See the More Details page for more specific information about these credits.
Some utilities provide cash incentives for installed energy conservation or renewable energy projects. Always contact your local utility to see what incentives are available.
So, You're Ready to Apply for a Loan?
The Frequently Asked Questions page and More Details about the program should be your next stop. The loan application materials can be accessed through the links in the right-hand bar at the top of this page.
