Energy Efficiency Financing
Financing is one of several linked strategies to drive and enable customer demand for energy efficiency. Financing alone does not lead to energy savings, but it may be an effective tool for helping customers overcome the high up-front costs of a range of energy efficiency investments.
Key Focus Areas
Broad customer access to attractive capital can enable widespread adoption of energy efficiency improvements by scaling and leveraging secondary markets, reflecting a true assessment of risk, providing more liquidity, and reducing borrowing costs. SEE Action has identified four key focus areas in financing:
- Improve Data Access. Improve data collection practices and access to quality data on energy efficiency financing product performance.
- Improve Program Design. Help energy efficiency financing program administrators align program strategies with customer needs, and share lessons learned from experiments in energy efficiency financing program design.
- Support Effective Financing Tools. Explore whether novel financing tools and capital sources are more effective than conventional ones in addressing the unique barriers of energy efficiency financing.
- Clarify Regulatory Treatment of Financing. Identify how state public utility commissions are treating financing initiatives under the regulatory framework, share successful approaches.
SEE Action is currently working on several initiatives that will provide state and local entities and their partners with the tools and information they need to design and implement effective energy efficiency financing programs. These include:
- Developing a series of primers for state decision makers and financial institutions on fundamental energy efficiency financing topics, including program design and credit enhancements
- Identifying and addressing regulatory challenges that must be overcome in order for ratepayer-funded EE financing initiatives to deliver on their potential
- Reviewing existing practices for data collection for energy efficiency financing programs, and identifying high-priority needs and uses for finance program data
- Reviewing existing on-bill programs and program design choices including disconnection and meter attachment, sources of capital, underwriting criteria, and eligible measures.
Ensuring that low- and moderate-income (LMI) households have access to energy efficiency is equitable, provides energy savings as a resource to meet energy needs, and can support multiple policy goals, such as affordable energy, job creation, and improved public health. Although the need is great, many LMI households may not be able to afford efficiency improvements or may be inhibited from adopting efficiency for other reasons. Decision-makers across the country are currently exploring the challenges and potential solutions to ramping up adoption of efficiency in LMI households, including the use of financing.
This report lays the groundwork for a dialogue to explore regulatory and policy mechanisms for ensuring that efficiency financing initiatives provide value for society and protection for consumers. Featuring case studies of Connecticut, New York, Massachusetts, California, and Maryland, Making it Count explores emerging questions that jurisdictions will need to answer when considering an increased reliance on financing, including:
Can financing be placed in a regulatory context that preserves accountability while providing sufficient flexibility to program administrators and customers?
Can the tools that have been used to screen traditional energy efficiency programs for cost-effectiveness and assess potential savings and impacts be adapted in ways that make them work for energy efficiency financing programs?
Efficient access to capital from secondary markets—reselling energy loans to investors to replenish program funds—is being advanced as an important enabler of the energy efficiency industry “at scale.” However, the role that secondary markets can play in bringing energy efficiency to scale is largely untested. Only a handful of secondary market transactions of energy efficiency loan products have been executed to date, and it is too soon to draw robust conclusions from these deals. At the same time, energy efficiency program administrators and policymakers face near-term decisions on whether and how to access secondary markets as part of their energy efficiency deployment strategy.
Provides key considerations for policymakers, energy efficiency program administrators, and program partners om implementing successful energy efficiency financing programs for existing buildings.
Provides considerations for state and local policymakers and energy efficiency program administrators designing and implementing successful credit enhancement strategies for residential and commercial buildings.
Provides an overview of the current state of on-bill programs and provides actionable insights on key program design considerations for on-bill lending programs. States and utilities are increasingly turning to on-bill financing to stretch their limited efficiency program dollars and to overcome a number of barriers to the uptake of energy improvements in residential and non-residential properties.
This report takes a foundational step toward the establishment of common data collection practices for energy efficiency lending. The authors reviewed existing practices for data collection for energy efficiency financing programs and, based on discussions with various stakeholders, identified high-priority needs, characterized potential uses for finance program data, and identified use cases that describe how stakeholders use data for key objectives and actions.
A practical document that presents established policy and program “pathways” to advance demand-side energy efficiency, including:
- Ratepayer-funded energy efficiency
- Building energy codes
- Local government-led efforts, such as building performance policies
- State-led efforts, such as energy savings performance contracting
- Commercial and industrial private sector approaches, such as strategic energy management and combined heat and power.
The guide presents case studies of successful regional, state, and local approaches to energy efficiency with sources for more information, resources to understand the range of expected savings from energy efficiency, and common protocols for documenting savings.