Financing energy efficiency in buildings – the American way

Financing energy efficiency in buildings is a challenge to policy makers, to consumers and to the energy efficiency industries (services and products). Two innovative approaches have recently been discussed in the US.

SolarCity

SolarCity, a national provider of clean energy services, on March 27th unveiled a Home Energy Loan for energy efficiency upgrades that will make cleaner indoor air, greater comfort and lower energy bills more accessible to American homeowners.  SolarCity estimates homeowners lose approximately $40 of every $100 spent on air heating and cooling to duct and air leakage alone.

SolarCity has set the standard for making solar simple, giving thousands of homeowners using solar panels the ability to pay less for solar electricity than they pay for utility power. Similarly, SolarCity’s new energy efficiency financing option can reduce or eliminate the upfront cost of energy efficiency upgrades. SolarCity’s energy efficiency services include a comprehensive on-site home energy evaluation to diagnose the cause of high utility bills and energy loss, paired with a range of upgrades that lower energy costs and improve indoor air quality and comfort.

SolarCity is enabling customers to finance energy efficiency upgrades through Admirals Bank with a new Home Energy Loan to make energy efficiency as convenient and accessible for customers as possible. Admirals Bank is a federal savings bank, headquartered in Boston, with a history as a home improvement lending leader. The Home Energy Loan will allow eligible customers to finance their home energy efficiency upgrades either with a one-year “Save Now, Pay Later” option, or a three- or 10-year “Pay As You Go” option

California

According to Forbes magazine, California is poised to launch a new programme that will eliminate the upfront cost of energy efficiency and solar upgrades.  At a panel discussion convened by the California Public Utilities Commission (CPUC) on March 8, Brad Copithorne, a specialist with the Environmental Defense Fund (EDF), presented a proposal that would eliminate the upfront cost of energy improvements.  The proposal would create the nation’s first state-wide on-bill repayment (OBR) programme for energy efficiency and renewable energy upgrades to be financed entirely by third parties.

After performing an energy audit of the home or commercial building, or assessing the suitability of the rooftop for solar, a contractor recommends improvements to the building owner. Improvements could include attic and wall cavity insulation, high-efficiency windows and appliances, duct-sealing, or rooftop solar. The contractor presents an estimate of the upfront cost of the improvements. If the building owner agrees to the upgrades, the contractor sends a loan request to participating banks for approval. The loan is repaid through the customer’s monthly utility bill.

Copithorne said that each of the state’s investor-owned utilities has an on-bill repayment programme but they are available only to small businesses and generally oversubscribed. He said that the third-party lenders want a big market, which means homeowners. Copithorne wants homeowners in the pool, too, so the programme’s consumer and environmental benefits appear to mesh with the banks’ needs.

Assuming that the utilities will participate, EDF foresees a host of benefits – among them, no or limited direct cost to taxpayers and ratepayers, jobs in the construction industry, and pollution reduction. “We’ve estimated that if we get only 1% of residential participation that this would generate $2.7 billion of investment per year, and, after 5 years, reduce CO₂ emissions by 7 million tons,” said Copithorne.

A final decision is expected from the CPUC in April. If approved, California’s on-bill repayment programme could launch early in 2013.  Texas is also considering such a scheme.