By: Brad Copithorne, EDF's Energy & Financial Policy Specialist
Earlier this week EDF and Citi co-hosted a successful conference on energy efficiency (EE) finance at Citi’s headquarters in Manhattan. This is the third similar conference that Citi has hosted. Four years ago, they had 10 people in a conference room. Two years back, it was 40 participants. This week, we were standing room only in a 200-seat venue. More importantly, however, was the diverse makeup of the audience, including bankers, real estate owners, EE project developers, financial sponsors, government agencies, foundations and nonprofit organizations. We are optimistic that this high level of interest indicates that we are close to a tipping point in toward the successful development of this market.
Some of the interesting transactions discussed included:
Public Buildings - Nobel Prize winner, John Byrne, explained an innovative structure that he developed and executed with Citi to aggregate, manage and finance $73mm of EE projects for public buildings in Delaware. Citi is looking to expand this approach in other states. (We hope to have a future blog post with many more details about this idea.)
Unsecured Loans - Cisco Devries of Renewable Funding discussed how he is working to aggregate a portfolio of unsecured consumer EE loans and how, to date, these loans seem to show much lower default rates than would be expected. Several speakers at the conference discussed the importance of getting data on EE loan performance and we understand that there are several efforts in place to collect this data.
Energy Services Agreements - Green Campus, Serious Capital, Transcend, Metrus and Sustainable Development discussed their efforts to further develop this market. We are hopeful for several favorable announcements in the near term.
Measuring and Managing EE Project Performance - Mary Barber of EDF described our project to create protocols to estimate future energy savings so that lenders and other investors can make informed investment decisions. Angela Ferrante of Energi talked about an insurance contract that will guarantee the energy savings for a project.
On-Bill Repayment - Jeff Pitkin of NYSERDA described New York’s innovative plan to provide low-cost loans to consumers for EE projects. The loans would be repaid through the customer’s utility bill. Credit would be improved because nonpayment would eventually result in shut off of power. Additionally, the obligation will stay with the meter if the customer moves. I discussed a similar plan that we hope to implement in California. We hope that the California strategy will work for commercial and multi-family in addition to single family homes.
Philanthropic Capital - Margot Brandenburg of Rockefeller Foundation, Jessica Boehland of Kresge Foundation and John Goldstein of Imprint Capital discussed how targeted investments for mission driven investors can help seed the market for EE finance.
Lessons for Solar Project Finance – Michael Mittleman of SolarCity and Marshal Salant of Citi described the very long effort that was required to make solar projects viable for financing. Currently, billions of dollars of solar projects are financed each year and the market is expanding rapidly. They (and we) are hoping that we will have similar near term success in EE finance.
We want to express appreciation to Citi for co-sponsoring this week’s successful event. Citi has committed significant resources to developing this market well before there is a likelihood of near term returns. We recognize that this type of commitment is not easy to make in a difficult economic environment with shareholders primarily focused on quarterly earnings releases.