Blog by Silvia Zinetti: International perspectives and best practices from “Community Choice Energy” in providing financing for energy efficiency upgrades at the local level

The past two weeks I was busy traveling around Europe. By coincidence and good fortune, I was in Brussels for the EU Sustainable Energy Week and was invited to be part of a panel at PUBLENEF & Energy Advice Exchange policy roundtable “Think local first: designing an EU building policy framework centered on consumers, local authorities and energy advisory services to deliver on Europe’s renovation challenge”. The event was held at the Renewable Energy House in Brussels, a place very familiar to me as I used to work there while living in Brussels.

The roundtable brought together key actors players in the energy efficiency policy area from the Brussels arena as well as from several European countries. Throughout the first panel there was an active discussion on the role of the EU directives against the national and local policy in making the energy efficiency transformation happening faster.

During the second policy roundtable I was asked the question “What is the role and potential of local authorities and local energy advisory services in attracting private sector finance and investment for building renovations?”

I brought an international perspective to the table, and particularly cities and local governments’ experience in California with Community Choice Energy – CCE – business model. CCEs are not only focusing on developing renewable energy locally, but also implementing energy efficiency measures to reduce their overall energy requirements.

The role of local authorities

With this respect, I found it interesting to talk about Marin Clean Energy (MCE) best practices in this area. MCE, the first CCE created in California in 2010, set a long-term goal to reduce by 2% its overall annual energy consumption and capacity requirements through energy efficiency and distributed generation programs (1). In 2013, MCE launched a portfolio of energy efficiency programs, available to all ratepayers within its service area, that ranges from technical assistance and financial incentives for multifamily properties (with a particular focus on low-income property owners), to free energy assessment and rebates on lighting, heating, HVAC, refrigeration, and building envelope upgrades for commercial properties.

In term of financing MCE offers the following:

  • An on-bill repayment loan through a public-private partnership with a local commercial bank to provide a source of funding to residential and small commercial property owners to complete energy efficiency projects on their properties. The loans vary from 2 to 10 years at 5% interest rate, while MCE further provides a 20% loan loss reserve.
  • A liaison with the state PACE – Property Assessed Clean Energy – program focusing on energy efficiency, renewable energy, and water upgrades to residential and commercial buildings (2).
  • A consumer-friendly online tool, sortable by city and zip code, to help consumers and contractors navigate a variety of financing options, including PACE financing, secured and unsecured loans, and solar-specific options.

For the multifamily program, MCE uses a point system. Measures that achieve greater savings or directly impact tenants receive more points that are later converted to a dollar amount and the total rebate is calculated by multiplying that dollar amount by the total number of treated units. According to MCE, this incentive system is “much easier to communicate to program participants and allows property owners to more easily estimate the amount of the program rebate before committing to a project” (3).

MCE EE program achievements

MCE’s energy efficiency programs have already reduced the equivalent of 1,441 tons of greenhouse gas emissions. EE program achievements (4) from January 2013 to September 2015 are summarized as follows:

The following table shows the 2014 Annual Gross Savings by Program:

The following table depicts the 2014 Annual Net Savings by End-Use:

MCE calculated the cost effectiveness of its EE programs using the Total Resource Cost (TRC) Test (5) ratio, and the Program Administrator Cost (PAC) (6) Test ratio as follows:

The role of grassroots organizations

What is noteworthy mentioning is the role of grassroots organization in California, and in the US in general. From international organization like the Sierra Club or the 350.org, to local established groups such as the Oceanside Climate Action Planners, aka O’side CAPers, which I personally chair, those grassroots organization have a strong voice in public and citizens’ education and awareness, and lobbying efforts towards the local authorities for 100% clean energy goals, GHG emissions reduction, and energy efficiency improvements.

Some recommendations

Concerning the role of local authorities in attracting private sector finance and investment for building renovation, I would recommend cities and local authorities to (a) take a more active role in providing solutions that encourage the demand at the local level, as for instance the MCE public-private partnership example with local banks, (b) ensure more public educational outreach efforts, and (c) stimulate the market through regulations and new ordinances, and streamlined processes for energy measures (e.g. rooftop PV installation).

What is of utmost important, and also discussed during the roundtable, is the process of building trust in the public sector, and the importance to establish a closer relation with the customers, and the contractors. Universities also play a fundamental part in this process and can provide benefits to cities and local governments by educating the future generations for the energy transition while conducting research on innovative solutions and new business models. Local authorities, together with local energy advisory services and related stakeholders, have the power to create the right framework at the local level to make the energy efficiency revolution faster.

The next day I continued my journey to Berlin to attend the 1st MBA Renewable Alumni Conference, but that will be discussed in another post. So stay tuned!

 

Notes:

(1) MCE 2017 Integrated Resource Plan, February 2017

(2) Property assessed clean energy, or PACE, financing allows property owners to fund energy efficiency, water efficiency and renewable energy projects with little or no up-front costs. Property owners can get 100% upfront funding that they repay as a tax assessment on their property taxes. The new owner upon property sale, and under most leases may assume the assessment obligation.

(3) 2015 MCE Energy Efficient Annual Report

(4) https://www.mcecleanenergy.org/program-results/

(5) The TRC test is the measurement of the net benefits and costs that accrue to society, which is defined as a program administrator (usually a utility) and all of its customers. It compares the benefits, which are the avoided cost of generating electricity and supplying natural gas, with the total costs, which include program administration and customer costs. The TRC does not include the costs of incentives. Source: http://www.cpuc.ca.gov/General.aspx?id=5267

(6) The PAC test measures the benefits and costs that accrue to the program administrator, which is usually, but not always, the utility. The PAC test does not include the costs incurred by participating customers but does include incentives paid to participating customers. Source: http://www.cpuc.ca.gov/General.aspx?id=5267

 

About the Author: Silvia Zinetti, a regular contributor to EiD, is a sustainable energy expert and policy advisor, based in California.

 

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