U.S. Department of Energy Energy Efficiency and Renewable Energy

State Law Requirements for Residential Clean Energy Programs

States must contract with recipients of American Recovery and Reinvestment Act funds to ensure that the funds are used in accordance with federal guidelines. Under U.S. Department of Energy (DOE) guidelines, in order to ensure that a given use of Energy Efficiency and Conservation Block Grant (EECBG) funds furthers the purposes of the EECBG Program, the activities must comport with those listed as eligible in the EECBG statute. The statute [42 U.S.C. 17154(4); Title V, Subtitle E of the Energy Independence and Security Act, as amended (P.L. 110-140, H.R. 6)] allows for the establishment of financial incentive programs for energy efficiency improvements.

Recent DOE guidelines state that a grantee cannot use more than 50% of its EECBG funds for a loan loss reserve fund and go on to stipulate that:

  • The grantee can review and monitor loans.
  • The grantee must ensure that it is not liable for losses beyond the amount of the reserve.
  • Any funds that were part of the loan loss reserve but were not used to pay losses must be used by the grantee for an “eligible use” under the EECBG Program. 
  • Funds can only be released to a lender for purposes pertaining to loan losses.

Contracts between states and city/county recipients of EECBG funding will include provisions addressing those and other requirements of the EECBG Program. An issue has arisen regarding item (c) above and the disposition at the end of the contract period of loss reserve funds that were not used to pay loan losses.

By this Guidance (see SB 5649pdf), city and/or county recipients of EECBG funding that used those funds to create loan loss reserve programs—but did not use all of those funds to pay loan losses—may use the funds at the end of the contract period with the state for any other eligible use under the EECBG Program.

If the loan loss reserve program is successful, the city/county grantee may continue the loan loss reserve program, thereby furthering the objectives of the DOE State Energy Program, “not only to support current energy efficiency and renewable energy projects but also to seed sustainable programs and put in place long-term funding mechanisms.” For more information, see DOE’s funding opportunity announcement, DE-FOA-0000052,pdf pg. 23.