Author Archives: Brad Copithorne

The Missing Link: Energy Efficiency Data And The Capital Markets

By | Bio | Published: May 30, 2012

EDF And Bloomberg New Energy Finance Host A Successful Conference

Last week, Environmental Defense Fund (EDF) and Bloomberg New Energy Finance (“BNEF”) hosted 150 property owners, energy efficiency project developers, ESCOs, banks, institutional investors and other thought leaders to discuss how improved datasets could spur the market for energy efficiency (EE) investment.  Dan Doctoroff, Bloomberg’s CEO, kicked off the morning by discussing the company’s plans to provide this data and how similar efforts have spurred financial innovation in the past.

Three types of energy efficiency data were the basis of most of the conversation:

Project Performance Data – Accurately forecasting the energy savings from a retrofit project remains an elusive goal due to wide variance in benchmarking and forecasting standards.  Chris Lohmann of the Department of Energy discussed a large database that he is developing that will attempt to provide comparisons to historical projects.  Elizabeth Stein of EDF discussed a project that she is leading to develop a standardized methodology for estimating savings and pointed out that robust standards for comparing projects will substantially enhance the value of an EE project performance database.

Benchmarking Data – New York, San Francisco and other cities have taken steps to benchmark energy usage for commercial tenants.  Riggs Kubiak of Honest Buildings discussed how his company is publishing this data on the web and believes it will allow prospective tenants to compare properties and spur landlords to invest in EE projects.

EE Loan Performance Data – While several EE loan programs have shown strong repayment performance to date, the rating agencies will need a far longer history in order to provide the best terms for securitizations.  On-Bill Repayment (OBR) may be able to benefit from the long history of utility bill payments to create a data stream for the rating agencies.

EDF looks forward to working with Bloomberg and other market participants on each of these initiatives.

Posted in Energy Efficiency, General, New York, On-bill repayment | Comments closed

Big Banks Increase Focus On Energy Efficiency Finance

By | Bio | Published: May 11, 2012

Report from the American Council for an Energy-Efficient Economy (ACEEE) Energy Efficiency Finance Forum

This week, I had the pleasure to attend and speak at ACEEE’s annual conference on energy efficiency finance.  Almost 250 executives were in attendance from banks, ESCOs, project developers, venture capitalists, asset managers, property owners/managers, utilities, government officials and nonprofits. 

Key takeaways included:

Commitment from Banks – Despite a lack of meaningful revenue to date, senior bankers from JP Morgan, Wells Fargo, US Bank, Deutsche Bank, Bank of America and Citi all reiterated their commitment to develop low-cost financing solutions for energy efficiency retrofits.  Marshal Salant of Citi did lament that, to date, the number of conferences far exceeds the number of deals, but he was hopeful that we could soon reverse the situation as he, and others, have an attractive pipeline of projects that they hope to close in coming months.

On-Bill Repayment will play a key role – EDF has been working to establish an On-Bill Repayment (OBR) program in California to finance retrofits through the utility bill.  Several speakers expressed hope that OBR may provide the credit enhancement and flexibility necessary to provide low cost financing for the residential and commercial sectors.  I had a chance to speak with representatives from each of the large California utilities at the conference.  While the utilities still have substantial concerns about the OBR proposal, I was pleased with the constructive nature of the dialogue.

EE Financing will be Available – Citi shared a chart indicating a wide range of financing vehicles that they believe are workable and either available today or in the near future.

Posted in Energy Efficiency, On-bill repayment | Comments closed

On-Bill Repayment: Two Big Developments In California

By | Bio | Published: April 25, 2012

This commentary was originally posted on the EDF California Dream 2.0 Blog.

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 Energy Efficiency, On-bill repayment | Tagged | 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 is a Boston based EE project developer that offers ESA-style financings for customers.  To date they have been most active in the commercial and industrial space.  Groom 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 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.

Posted in Energy Efficiency, On-bill repayment | Tagged , , , , | Comments closed

California Finds Common Interests In Financing Energy Efficiency Upgrades

By | Bio | Published: February 14, 2012

This commentary was originally posted on the EDF California Dream 2.0 Blog.

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 California, Energy Efficiency, On-bill repayment | Tagged | Comments closed

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

By | Bio | Published: February 7, 2012

This commentary was originally posted on the EDF California Dream 2.0 Blog.

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 California, Energy Efficiency, On-bill repayment | Comments closed

California PUC Releases EDF On-Bill Repayment Proposal

By | Bio | Published: January 11, 2012

This commentary was originally posted on the EDF California Dream 2.0 Blog.

Source: US DOE EERE

Low-Cost Financing for Energy Efficiency Upgrades

The California Public Utility Commission today released a proposal by Environmental Defense Fund (EDF) that, if adopted, would create the nation’s first statewide on-bill repayment (OBR) program for energy efficiency and renewable energy upgrades to be financed entirely by third parties.

In a preview post last month that featured the program details, EDF applauded the CPUC for its vision in taking this first step forward. A well-designed OBR program presents the opportunity to take energy efficiency to scale—in the billions of dollars—on all types of buildings without using taxpayer or ratepayer funds.

OBR is an innovative, cost-effective approach that will lead to a robust marketplace for energy efficiency lending, save energy users money, put people to work and avoid greenhouse gas pollution. It could also lower financing costs for distributed solar projects.

EDF is building a coalition of environmental groups, financial institutions, contractors and project developers that support and want to participate in on-bill repayment programs. The feedback and interest has been very encouraging.

The CPUC is accepting initial comments on the proposal through January 25 and will be holding workshops February 8-10. A final decision expected in April. California’s OBR program could start in early 2013. We have every reason to believe that other forward-thinking states looking to fight climate change and grow their economies will follow California’s lead. That would be a welcome sign that this country is moving in the right direction and responding to voter concerns.

Posted in California, Energy Efficiency, On-bill repayment | Comments closed

California PUC Previews Statewide On-Bill Repayment Program

By | Bio | Published: December 8, 2011

This commentary was originally posted on the EDF California Dream 2.0 Blog

Low-Cost Financing for Energy Efficiency Upgrades

At a hearing yesterday chaired by California State Senator Kevin de Leon that explored ways to expand energy efficient retrofit activity, Jeanne Clinton, Special Advisor for Energy Efficiency at the California Public Utility Commission (CPUC), announced that her agency is working with Environmental Defense Fund (EDF) to establish the first statewide on-bill repayment (OBR) program for energy efficiency and renewable energy upgrades to be financed entirely by third parties. The CPUC/EDF proposal is expected to be released later this month.

EDF applauds the CPUC for its vision in taking this first step forward. A well-designed OBR program present the opportunity to take energy efficiency to scale—in the billions of dollars—on all types of buildings without using taxpayer or ratepayer funds.

OBR is an innovative, cost-effective approach that will lead to a robust marketplace for energy efficiency lending, save energy users money, put people to work and avoid greenhouse gas pollution.

Here’s how it would work: banks and other investors would be allowed to provide loans to building owners and renters to fund energy efficiency upgrades and renewable electricity generation projects. The program can work for single-family, multi-family and commercial buildings and include a wide variety of financing techniques including loans, Energy Service Agreements, leases and Power Purchase Agreements. If all goes as planned, California’s OBR program is set to commence in early 2013.

Here are some of the key program features:

  • Residential projects will have to promise savings in excess of the loan repayments so participating customers see a net decline in utility bills.
  • Investments will be funded by third-parties such as banks and other financial institutions. Given that loans are repaid through utility bills, low interest rates and attractive terms are expected to be available from a variety of lending institutions, from local credit unions for residential upgrades to million-dollar bank loans for commercial building overhauls.
  • Utilities will benefit from fees paid by lenders for billing services and improved results from existing energy efficiency programs.

EDF has been building a coalition of environmental groups, financial institutions, contractors and project developers to support and/or participate in on-bill repayment programs. The feedback so far has been encouraging for many reasons. EDF believes this program could spur investments in the range of $3 billion per year, creating more than 20,000 jobs.  Having the program in place for only five years would decrease annual CO2 emissions by about 7 million metric tons, the equivalent of taking more than 4 million cars off the road.

Stay tuned for the CPUC announcement later this month.

Posted in California, Energy Efficiency, On-bill repayment | Comments closed

$4 Billion Of Private Investment In Energy Efficiency Projects Announced Today

By | Bio | Published: December 2, 2011

Source: Shutterstock

In an era of fiscal austerity, government’s options to create change are frequently limited.  The Obama administration did not let this roadblock slow them down today when they announced $4 billion of private sector investment in energy efficiency projects as part of their Better Buildings Challenge.  This builds on a $500 million financing commitment made in June by Abundant Power, Citi, Green Campus Partners, Metrus Energy, Renewable Funding and Transcend Equity.  The Clinton Global Initiative also played a key role in corralling these commitments.

Half of the $4 billion of investment will be in federal buildings using performance contracts.  Under the standard terms of a performance contract, an energy services company (“ESCO”) designs and executes an energy efficiency upgrade for a building.  The ESCO then provides a guarantee that this upgrade will reduce energy consumption by a certain amount per year and the building owner signs a long-term lease for the project where the annual lease payments are less than or equal to the guaranteed savings.  At the end of the lease, the building owner gets all of the future savings.  This is a win-win-win solution for taxpayers, our economy and the environment.

The remaining $2 billion commitment is divided between the six financial firms from the June announcement as well as several new participants.  These firms are using a wide variety of innovative financial techniques to infuse capital into attractive projects (I highly recommend reading the full White House press release). EDF is working closely with many of these firms to develop new innovations and we’ve been very impressed with the talent, energy and financial commitment currently focused on this issue.

Posted in Energy Efficiency, Washington, DC | Comments closed

Innovations In Energy Efficiency Finance Conference

By | Bio | Published: September 22, 2011

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.

Posted in Energy Efficiency, New York | Comments closed