Author Archives: Brad Copithorne

Clean Energy Market Poised for Rapid Growth in California

By | Bio | Published: March 1, 2013

This commentary was originally posted on EDF's Energy Exchange blog.

Environmentalists and other policy makers have long touted the economic benefits of investing in energy efficiency and renewable projects. For California, that vision is on course to being realized.

Yesterday, EDF, Citi and Wilson Sonsini held Innovations in Energy Efficiency Finance II, a sequel to the successful conference we hosted in 2011. That year, we discussed several interesting ideas about how we might finance projects. Yesterday we heard from sector leaders on how those ideas are being implemented in California and beyond.

Citi and EDF conceived of this event as an opportunity to bring the energy efficiency and renewable industries together to discuss these opportunities and to build momentum for increased transaction flow. Judging by the makeup of the audience, I think we succeeded. I attend quite a few conferences to discuss energy efficiency and most of them are dominated by fellow public policy types. Yesterday, however, was a different story. Of the 185 attendees, over 2/3 were representing private sector companies in the clean energy or financing business.

As former Governor of Colorado, Bill Ritter noted, “California continues to take bold steps toward clean energy and provide the private sector with clear opportunities to invest in energy efficiency and renewables, critical components of our nation’s economic growth. A key part of achieving our clean energy potential, and creating jobs in America, is ensuring access to quality financing for homes and businesses that want to participate in the new energy economy.”

John Kinney, CEO of Clean Fund, described how he used the recently enabled commercial PACE program to complete $1.4M of financing for Prologis’ corporate headquarters in San Francisco last year.

Commissioner Mark Ferron of the California Public Utilities Commission discussed his hopes for the upcoming On-Bill Repayment (OBR) program for commercial properties that EDF has been advocating. We heard from numerous lenders, solar project developers and energy efficiency vendors that will use this program to expand their businesses in California, which will create a robust marketplace for energy efficiency lending and save energy users money in the process.

Cisco DeVries, CEO of Renewable Funding described another program that the utilities are developing to provide low cost loans for residential retrofits. Citi is expected to provide funding for this effort and Cisco is working with networks of contractors to develop go to market strategies.

Senator Kevin de Leon (D-LA) reminded us we still have some public policy work to do as he is sponsoring bills to extend OBR to residential properties (SB 37) and to provide money for retrofits in schools (SB 39). On the other hand, he challenged the private sector to use the tools already in place to create jobs and reduce emissions. We look forward to helping industry meet that challenge.

I want to thank Citi and Wilson Sonsini, our partners in organizing this conference. In addition to their generous financial support for this conference, Citi has consistently proven their commitment to supporting clean energy finance, working to develop this market despite limited revenue to date. I am optimistic that their expertise in this sector will pay off as this nascent market develops into a viable new asset class. Co-sponsor Wilson Sonsini has been providing pro bono advice for EDF on OBR and I can heartily vouch for their skillset and experience in energy efficiency and renewable finance.

It’s dedication like theirs — along with environmentalists and policy makers — that have given California a leg up on developing clean energy financing solutions and provide a successful blueprint for the rest of the country to follow.

Posted in Clean Energy, Climate | Comments closed

On-Bill Repayment Bill Introduced In California

By | Bio | Published: December 7, 2012

Yesterday, California Senator Kevin de León introduced a bill, SB 37, which would create the first On-Bill Repayment (OBR) program entirely financed by private capital. OBR allows property owners to finance energy efficiency and renewable generation upgrades and repay the obligations through their utility bills.

Senator De León said that “every Californian should be able to participate in the clean energy economy, and OBR helps us achieve this goal.” He believes that “OBR will lower utility bills, reduce pollution from dirty energy, and put thousands of Californians back to work. I am proud to be working with a broad coalition dedicated to moving this bill forward."

This bill will authorize the California Public Utilities Commission (CPUC) to extend their groundbreaking commercial OBR program to residential properties. (The commercial program is expected to be effective by the end of March and was recently profiled in the New York Times.)  We expect the residential program to provide retrofit capital to consumers that might not otherwise have access to low-cost funding for retrofits. These retrofits are expected to save money for consumers after financing costs and in many cases allow for more comfortable, healthier homes.

EDF is committed to working with consumer groups to make sure that this bill includes appropriate consumer protections. We will also be working to expand a coalition of supporters from the environmental, labor, business and financial communities.

Posted in Clean Energy, Smart Grid | Comments closed

On-Bill Repayment Approved by California Public Utilities Commission

By | Bio | Published: November 12, 2012

Last week the California Public Utilities Commission (CPUC) approved energy efficiency programs and budgets that include an innovative On-Bill Repayment (OBR) program.  The OBR program will allow commercial property owners to finance energy efficiency or renewable generation upgrades for their buildings and repay the obligation through the utility bill.  The program is ‘open-source’ and is designed to allow a wide variety of contractors, solar installers, and energy efficiency project developers to work with a range of financial institutions to design offerings that best meet the needs of their customers.

The CPUC approval was highlighted today in the New York Times.

In the decision, the CPUC reiterated their intention to have the OBR program operational by March 2013.  We understand that some of the utilities have expressed concern that this timeline is aggressive, but were pleased that the CPUC decision noted that the utilities have been aware of this timeline since the original CPUC decision last May. 

A predictable timeline for OBR implementation is critical as EDF is working closely with multiple market participants to create a pipeline of projects that can be executed as soon as the program is operational.  A successful launch will allow us to demonstrate to other states that OBR can create private investment and new jobs at no cost to ratepayers or taxpayers.  We believe that this is a message that will resonate across the political spectrum.

Posted in Clean Energy | Tagged , , , | Comments closed

California Utilities Announce Innovative Financing For Energy Efficiency Retrofits

By | Bio | Published: October 3, 2012

On-Bill Repayment

Yesterday, the California investor-owned utilities (Sempra, SoCalEd and PG&E) announced several financing programs including the first On-Bill Repayment (OBR) program using third-party capital to finance energy efficiency retrofits in commercial properties. Property owners would be able to access low-cost capital to finance upgrades and repay the investment through their utility bill.  The OBR program will contain three design elements that EDF believes are critical to success: 

  1.  The obligation will ‘run with the meter’ upon change in ownership or occupancy including via foreclosure.  This both improves the credit quality of the obligation and allows investment in longer-payback retrofits.
  2. Partial payments will be allocated pro rata between energy and financing obligations.  The utilities will also use all standard collection procedures for unpaid obligations.  These features insure that the obligation will be treated similarly to existing utility bills.
  3. The program will provide flexibility for vendors, contractors, project developers, lenders and other investors to design retrofit solutions, go-to-market strategies and financing products that meet the needs of their customers.

Over the next 10 years, EDF estimates that OBR could generate $6 billion of private sector investment in commercial energy efficiency investment.  During the next few years, EDF hopes to expand this initial program to additional states, and to cover residential properties.

EDF has been assuming that the California OBR program would only cover energy efficiency retrofits.  In a sidebar conversation with a senior California Public Utilities Commission (CPUC) staff member, yesterday, I learned that it may be possible to extend OBR to renewable and demand response projects.  We expect to be working closely with relevant stakeholders and the CPUC to make this a reality.

OBR is expected to be operational in California by the end of March 2013.  EDF will be working closely with energy efficiency project developers, energy services companies, lenders and other investors to develop a robust pipeline of OBR projects that can be executed soon after program initiation.

Posted in Clean Energy | Tagged , , | Comments closed

Commercial On-Bill Repayment Program In California Expected To Be Announced On October 2

By | Bio | Published: September 27, 2012

Next week, the California investor-owned utilities – Sempra, Southern California Edison and Pacific Gas & Electric – will be hosting a workshop to announce their proposals for energy efficiency financing programs as mandated by the California Public Utilities Commission (“CPUC”) in their May decision.  The proposals are being developed by Harcourt, Brown and Carey (“HBC”) and are expected to include an On-Bill Repayment (OBR) program for commercial and other non-residential properties. 

As I’ve mentioned before, OBR programs allow property owners to finance energy efficiency and/or renewable energy projects with third-party banks or other investors. Property owners repay their loan via their utility bill and that obligation stays linked to the meter upon a sale of the property. 

Based on conversations with HBC and other stakeholders, EDF is optimistic that the program will be the first on-bill program in the country that funds energy efficiency retrofit projects entirely with private capital at no cost to ratepayers or taxpayers.  The program will be flexible enough to accommodate a wide variety of property types, retrofit measures, financing structures and customer acquisition models. 

The workshop will be open to the public and held from 9:00am-5:00pm on Tuesday, October 2nd in the Auditorium at the California Public Utilities Commission (505 Van Ness Avenue, San Francisco, CA).

Posted in Clean Energy | Tagged , | Comments closed

On-Bill Repayment In California

By | Bio | Published: August 30, 2012

Moving Forward with OBR for Commercial Properties

Earlier this year, the California Public Utilities Commission (“CPUC”) issued a decision requiring the state’s investor-owned utilities to establish several financing programs, including an On-Bill Repayment (“OBR”) program for commercial properties. OBR programs allow property owners to finance energy efficiency and/or renewable energy projects with third-party banks or other investors. Property owners repay their loan via their utility bill and that obligation stays linked to the meter upon a sale of the property.

EDF has been working closely with the utilities, environmental groups, financial institutions, project developers and other key stakeholders to craft a program that provides low-cost financing for retrofits, does not require ratepayer subsidies and has maximum flexibility to allow vendors and investors to decide how best to serve their customers’ needs.  We are cautiously optimistic that the utility proposal will meet these objectives when it is released to the public on October 1, 2012.

The CPUC, however, believes that they currently do not have the regulatory authority to extend the OBR program to residential properties.  EDF has been pursuing legislation to grant this authority to the CPUC, but, at this time, we do not expect that it will pass in the 2012 legislative session.  EDF plans to re-introduce the residential-focused legislation in 2013 with a broad range of supporters, including several key members of the legislature. 

EDF has also begun work to establish OBR programs in Ohio, North Carolina and Texas.  So far, the reception has been quite positive in each state and we are hopeful that OBR may be a market-based, clean energy solution that has appeal across the political spectrum.

Posted in Clean Energy | Tagged , , | Comments closed

On-Bill Repayment: Two Big Developments in California

By | Bio | Published: April 25, 2012

The California Public Utilities Commission (CPUC) recently released a Proposed Decision that included rulings on energy efficiency financing.  One ruling directs the state’s three largest utilities–PG&E, Southern California Edison and San Diego Gas & Electric–to develop an On-Bill Repayment (OBR) program for commercial properties that is based on a proposal developed by Environmental Defense Fund (EDF).

The Proposed Decision notes that the agency lacks the full necessary legal authority to implement an OBR program for residential customers. To address that, EDF is sponsoring legislation introduced by California Senator Kevin de Leon that would provide the CPUC with the necessary authority.

Senator de Leon and EDF have been working together to assemble a broad coalition of supporters including labor, contractors, building owners, banks and other investors, solar installers, energy efficiency project developers, environmental advocacy and environmental justice groups. 

We are excited to report that yesterday the bill passed the California Senate’s Energy, Utilities and Communications Committee. While we have a long way to go, this is another key step toward establishing a program that can invest billions of dollars of private capital in energy efficiency and renewable energy projects in California at no cost to taxpayers or ratepayers.

EDF will continue working with a broad range of stakeholders to successfully create the nation’s first statewide OBR program that is entirely financed by third parties. This landmark approach will enable project developers and building owners to use both conventional and innovative financing options to invest in energy efficiency and renewable energy projects.   

The CPUC is expected to vote on its proposed decision on May 10, 2012. The bill will continue being heard and voted on over the coming months. Once the final votes are in, California aims to have the commercial OBR program up and running by January 2013.

 

 

 

Posted in Clean Energy | Comments closed

Financing Energy Efficiency Upgrades In Commercial Properties

By | Bio | Published: March 14, 2012

An Update

Last September, I wrote about some of the barriers that commercial building owners face when they want to finance energy efficiency upgrades for their properties.  The post also discussed an innovative new strategy called an Energy Services Agreement (ESA) that removes several of these barriers.  Since that time, several of the companies mentioned in that post have continued to innovate and make great progress.  I thought it would be useful to provide an update on some of their key accomplishments.

Transcend Equity

Yesterday, Transcend Equity (Transcend) announced that they are being acquired by SCIenergy, a leading energy management solutions company.  This acquisition should provide Transcend with access to additional technology, customers, capital and marketing resources.  EDF is excited to see what the combined company can accomplish.

Transcend recently made a commitment to fund $100 million of energy efficiency (EE) projects as part of the Better Buildings Challenge and broke ground on an ESA transaction in New York City.  Transcend is partnered with Mitsui to provide equity capital for their projects.

Abundant Power

Abundant Power is a diversified EE finance firm that works on a variety of products including Property Assessed Clean Energy (PACE), On-Bill Finance and revolving loan funds in addition to the ESA structure.  Recently, they have helped Alabama establish a $60 million revolving loan fund and Washington, DC establish a commercial PACE program that could finance up to $250 million of EE upgrades.  Abundant Power has also committed $100 million of financing as part of the Better Buildings Challenge.

Green Campus Partners

Green Campus Partners (GCP) has arranged over $350 million in EE financings for public sector properties and completed two ESA transactions in 2011 for private universities.  GCP committed to Better Buildings Challenge $100 million of EE financings in 2011 and another $200 million in 2012.  The firm exceeded its target in 2011 and expects to do the same in 2012.

GCP has also worked with EDF on the Clean Heat NYC campaign and recently signed a major development agreement with St. Barnabas Hospital to finance their conversion away from dirty heating oil.

Groom Energy

Groom Energy is a Boston-based EE project developer that offers ESA-style financing options for customers.  To date they have been most active in the commercial and industrial space.  Groom Energy is also a thought leader in the Enterprise Smart Grid, which uses advanced technology to monitor and reduce energy usage behind the meter.  This morning, Groom Energy published a comprehensive report on the topic.

Metrus Energy

Metrus Energy (Metrus) has had a very productive start to 2012 including a recent high-profile ESA project selection and a pipeline of advanced stage projects that totals $50 million. Metrus has broadened the geographic diversity of its pipeline which now spreads across the commercial, industrial and institutional markets, with active projects under development in the financial institutions, media and entertainment, telecommunications, hospital, higher education and non-profit sectors. Metrus is on-pace to exceed its $75 million investment commitment under the Better Buildings Challenge program. On the project implementation front, Metrus is actively advancing its existing ESA program with BAE systems with the addition of several multi-million dollar projects at new BAE sites. BAE Systems is a global company engaged in the development, delivery and support of advanced defense, security and aerospace systems.  Metrus has also expanded its base of Energy Services Companies (ESCOs), contractors and energy utility channels by adding 25 new partners.

Carbon Lighthouse

Since launch in 2010, Carbon Lighthouse (CL) has completed projects at 70+ office towers, schools, community centers and industrial facilities in California and Oregon. CL achieves its mission by combining energy efficiency, retro-commissioning, demand response, solar and competition for pollution permits into one simple package for customers.  CL primarily provides projects on a deferred compensation basis similar to an ESA, and can also provide customers with third party direct ESAs or utility On-Bill Finance and Repayment programs.

Conclusion

EDF has worked with each of these five firms and we are encouraged by their energy, focus and innovation.  Each firm has a somewhat different business strategy and mix of products, but the EE market should be large enough to support a variety of business models.  We look forward to continuing to work with these firms and others as this critical market grows in the coming years.

 

This commentary was originally posted on the EDF Energy Exchange Blog.

Posted in Clean Energy | Comments closed

California Finds Common Interests in Financing Energy Efficiency Upgrades

By | Bio | Published: February 13, 2012

OBR Moves Forward

Last week, the California Public Utilities Commission (“CPUC”) held a well-attended three-day workshop to discuss a potential On-Bill Repayment (“OBR”) program and other statewide financing solutions for energy efficiency upgrades. 

We thought it would be helpful to highlight some of the key takeaways:

The Funding Gap is Large – Jeanne Clinton of the CPUC used charts to show that the annual need for energy efficiency upgrades in California exceeds $10 billion but that current ratepayer spending was about $1 billion. In this economic environment, it is unlikely that ratepayers or taxpayers will make up the difference. EDF believes that addressing this gap will require active engagement from a wide variety of investors ranging from large banks to local institutions.  Additionally, demand generation must come from a variety of sources ranging from the largest contractors and Energy Service Companies (ESCOs), home improvement retailers and appliance retailers down to the smallest contractors.  Fortunately, the workshops drew participants from all of these groups. Wells Fargo, Deutsche Bank, Citi, Trane and SolarCity were among the attendees, each of which committed multiple person-days to the proceedings.

Setting a Goal – Cisco Devries of Renewable Funding identified the auto loan market might provide some attractive benchmarks for energy efficiency lending offerings..  Auto loans are offered by a number of financial institutions, are usually originated seamlessly in the dealer’s office and are currently available at a rate of 3.7% for five-year loans.  Cisco said that much of the low cost is driven by standardization and the ability of banks to finance large pools of loans in the capital markets. EDF, however, hopes that an OBR program would offer better consumer protections than the auto loan market.

Publically Funded Credit Enhancements are a Good First Step – Christine Solich of the California Treasurer’s office and Angie Hacker of Santa Barbara each discussed how they have been able to entice local credit unions to participate in energy efficiency lending programs through loan loss reserves ranging from 5-15%.  Alfred Griffin of Citi explained that banks would either need a much larger reserve (possibly more than 30%) or 10+ years of loan performance data in order to satisfy the needs of rating agencies and institutional investors.  On the other hand, Alfred said that the California OBR proposal would likely provide sufficient data because it uses utility bill payment records that go back for decades..This opportunity, however, would not be available for an OBR program that did not use all of a utility’s standard collection procedures for delinquent payments.

OBR can Work – The utilities raised numerous legal concerns while consumer advocates questioned whether residential customers would be adequately protected. Proponents of the OBR program heard these concerns and can only support it if it doesn’t expose utilities to significant increased liability or provide adequate consumer protection.  Fortunately, Jeff Pitkin of New York discussed how his state has managed to overcome these obstacles to establish an OBR program.  From the perspective of the utilities and residential customers, the New York OBR program is virtually identical to the California proposal and we are hopeful that we can incorporate many of their best practices to address these problems.  (The California OBR proposal differs from New York in that it is initially open to a broad range of lenders and investors and has a much broader range of projects, financing structures and building types.)

I had the opportunity to spend time with representatives from most of the key constituencies and believe that there is genuine interest in working together to provide a low-cost financing solution for Californians. 

EDF is excited that large statewide contractors such as Trane and SolarCity were willing to take time out of their busy schedules to attend. These firms will need flexible, statewide solutions from leading financial institutions to finance their customers’ projects. We believe that an OBR program that fully benefits from utility bill collection policies will be able to meet their needs, increase investment in energy efficiency and create jobs for Californians.

Posted in Clean Energy | Comments closed

California’s On-Bill Repayment Program Takes Two Steps Forward

By | Bio | Published: February 7, 2012

Last month, the California Public Utilities Commission released for comment EDF’s proposal to create the first statewide on-bill repayment (OBR) program that pays for energy efficiency and renewable energy upgrades for residential and commercial properties using third-party financing. The proposal is taking two important steps forward this week.

The first step: Senator Kevin de Leon (D-LA) and Senator Lou Correa (D-Orange County) today introduced enabling legislation for the program. Based on preliminary conversations, we are optimistic that this proposal will receive support from members of both political parties.  This bill is designed to deal with questions regarding the agency’s authority to develop an OBR program.  It also provides a mechanism for property owners to disclose OBR projects to prospective renters or buyers. This disclosure will enable a building occupant to see how the money saved by the efficiency project will be used to pay back the OBR investment tied to their property.   

The second step: the CPUC is hosting workshops in San Francisco on February 8-10 to discuss the OBR proposal and other aspects of energy efficiency finance. More than 200 stakeholders and other members of the public are expected to participate in the workshops, including several contractors, lenders, Energy Services Agreement (ESA) companies and building owners that see an attractive economic opportunity in the program.

EDF looks forward to working with all interested parties, to construct a successful program that can begin financing projects early next year.

Posted in Clean Energy | Comments closed