Category Archives: On-bill repayment

Experts Unveil Plan To Double U.S. Energy Productivity By 2030

By | Published: February 7, 2013

Achieving Goal Could Cut Carbon Pollution By One-Third And Save $327 Billion Annually

The Alliance Commission on National Energy Efficiency Policy released a report today with recommendations that would put the U.S. on a path towards doubling its energy productivity by 2030. The Commission, which is chaired by U.S. Senator Mark Warner (D-Va.) and National Grid U.S. President Tom King, is a diverse coalition of energy leaders that includes representatives from energy utilities, academia, industry and environmental groups.  Fred Krupp, President of Environmental Defense Fund (EDF), serves on the Commission.

The Commission found that a doubling of energy productivity (or obtaining twice as much output from the energy we use) would reduce U.S. carbon dioxide pollution down to four billion tons per year by 2030, which is 33 percent below 2005 levels. The full report is available at energy2030.org.

“The Alliance Commission’s recommendations are an innovative approach to greatly increasing our nation’s use of energy efficiency, which represents a huge – and largely untapped – opportunity,” said Fred Krupp, President of EDF.  “Reducing wasted energy through efficiency is a true win-win solution that cuts harmful pollution and saves people money on their energy bills.”

The Commission’s recommendations are wide-ranging, covering multiple sectors of the economy.  The recommendations include: increased stringency of energy efficiency standards for buildings and appliances, creation of financing mechanisms that bring down the cost of energy efficiency projects, reform of utility regulatory policies to enable full use of cost-effective energy efficiency and greater support for research and development.

Achieving the Commission’s goal of doubling energy productivity by 2030 would:

  • Add 1.3 million jobs;
  • Cut average household energy costs by more than $1,000 a year;
  • Save American businesses $169 billion a year;
  • Increase gross domestic product (GDP) by up to 2 percent;
  • Decrease energy imports by more than $100 billion a year; and
  • Reduce CO2 emissions by one-third.

Source: www.energy2030.org

EDF is particularly encouraged by the Commission’s recommendations related to energy efficiency finance and smart grid policies, which are a high priority for EDF.  The Commission recommends that state and local governments work with utilities to create financing mechanisms, such as On-Bill Repayment (OBR) programs.  OBR provides a new route to funding clean energy investments at attractive terms, relying solely on private third-party financing.

OBR programs offer an opportunity for residential and commercial utility customers to finance energy efficiency projects with loans repaid through their utility bills and financed at no additional cost to ratepayers.  The Commission also recommends reforms to state utility regulatory policies that would break down barriers to utility investment in energy efficiency and enable greater use of advanced new technologies that create a smarter and cleaner electric power grid.

Though the U.S. currently lags behind other nations on energy productivity, the Commission believes there are more than $1 trillion in energy-saving opportunities with the right federal, state and local government support, and private-sector buy-in.

The Alliance Commission’s goal of doubling energy productivity by 2030 is ambitious, yet attainable, and it goes well beyond capturing the well-known, low-hanging fruit. I am confident that the solutions proposed by the Commission will drive innovation and technological advancements, which will modernize U.S. manufacturing and help us to compete globally.

Also posted in Energy Efficiency, Innovation, Smart Grid, Washington, DC | Comments closed

Hawaii Making Waves In Financing Clean Energy

By | Published: February 5, 2013

Public Utility Commission orders on-bill program to finance clean energy

Last Friday evening, February 1, the Hawaii Public Utilities Commission (PUC) issued a landmark decision and order to create an on-bill program, very much in line with EDF’s recommendations for on-bill repayment (OBR), that will provide access to low-cost financing for solar and energy efficiency projects for homeowners and small businesses.  This decision comes 18 months after the State passed legislation directing the PUC to investigate an on-bill program and authorized the Commission to implement the program (by decision and order or by rules) if the on-bill program was found to be viable.

The PUC decision determined that a statewide on-bill program is viable, and specified program design criteria that the Commission deems necessary to achieve viability.  EDF has been working to shape the proposal with key stakeholders including environmental groups, lenders and the Hawaii State Energy Office.

The specified criteria include the following components that EDF believes are critical for achieving both success and scale:

  1. bill neutrality (project savings exceed financing payment obligations)
  2. tariff-based obligation
  3. tariff is tied to the utility meter and therefore transferable
  4. standard collection procedures, including disconnection for non-payment of OBR obligation
  5. pro-rata allocation of partial payments

Since the terminology can be confusing, it is worth noting that this is not a typical ratepayer-funded on-bill finance program, despite having the same designation. The Hawaii program leverages private capital, and the PUC supports participation by multiple sources of capital rather than a single financing entity.  EDF believes both of these elements are critical to scaling the program and meeting the needs of a diverse set of property owners.

Read More »

Also posted in Energy Efficiency, Energy Innovation Series, Renewable Energy | Tagged , , , | Comments closed

Do We Need Breakthroughs Or A Simple “Carbon Diet?”

By | Bio | Published: January 29, 2013

Over the weekend, The New Republic published an interview with President Obama, where he noted the following: "On climate change, it's a daunting task. But we know what releases carbon into the atmosphere, and we have tools right now that would start scaling that back, although we'd still need some big technological breakthrough."  How accurate is the call for breakthroughs and what do we really need?

First, let’s look at where we don’t need breakthroughs, but instead more deployment – energy efficiency, of course, being Exhibit A.  Creative financing, such as on-bill repayment (OBR), at scale can speed up deployment here.  Similarly, unlocking clean energy to reduce carbon emissions from the electricity sector hinges on affordability.  Wind energy is already competitive with fossil fuels, in large part because the cost of wind energy has come down around 65 percent in the last 20 years, according to the National Renewable Energy Laboratory (yes, declining natural gas prices provide new competition, but EIA projects that natural gas prices will begin to increase in 2018, and wind power purchase agreements are signed for around 20 years at a fixed price).  Residential solar is verging on the tipping point for “grid parity,” or the point at which a source of power becomes cost competitive with other sources.  Bell Labs first introduced solar cells in the 1950s.  Environment California’s Research & Policy Center recently reported that they expect solar to reach grid parity in mid-2014 to 2016 at the outset. 

Of course, progress in lowering costs and increasing efficiency comes on the heels of many smaller innovations.  For example, innovations in materials science underlie many of the most promising technology evolutions, such as the role of carbon fiber as a basic raw material for wind turbine blades or the use of Gallium Arsenide wafers to reduce manufacturing costs for solar cells.  But, nonetheless, given our country’s strength in materials science (think of our leadership with companies like Dow, Dupont and 3M), such innovations seem imminently feasible and in my mind don’t require a major “breakthrough.” 

We’ve also delivered numerous hardware and software innovations to transform our electric grid into a more resilient, smart, “green” grid.  Even carbon capture and storage, to some a high stakes technology bet, is actually just a new configuration or application of engineering equipment we have installed and used for decades, such as heat exchangers, chillers, absorbers, pumps and compressors.

Where would I wave a wand for a breakthrough?  A cheap, reliable and efficient energy storage system wouldn’t hurt, one that replaces the clunky compressed air systems or the size limitations of batteries.  But, overall, the declining cost curves for clean energy solutions, due to innovations large and small, tell us an important story:  solving the climate crises is not unaffordable or necessarily a drag on our recovering economy as many fear.  It is certainly not infeasible nor hinging on that one great technological breakthrough. 

We need non-technological breakthroughs.  Like the new head of the World Bank, Dr. Jim Kim, who in Davos described wanting to make “everything the Bank does aligned with the effort to slow down climate change.”  And it is certainly cheaper than repeating the $50 billion recovery price tags that we might face time and again as Superstorm Sandy becomes the new normal. 

Americans love the quick technical fix.  But, today we have affordable answers right in front of us, it’s the willpower we may be lacking.  So, just as most of us believe that rather than wait for a dieting breakthrough, the best answer to weight loss is reduced consumption and more exercise – we need to go on a carbon diet.  Our economic and environmental health depend on it.

Also posted in Carbon Capture and Sequestration, clean energy, Climate, Demand Response, Energy Efficiency, Energy Innovation Series, Innovation, Smart Grid, Solar, Washington, DC, Wind | Comments closed

On-Bill Repayment Bill Introduced In California

By | Bio | Published: December 7, 2012

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

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.

Also posted in California, Energy Efficiency | Comments closed

On-Bill Repayment: A Way To Eliminate The Upfront Costs For Energy Efficiency Projects

By | Bio | Published: December 3, 2012

When a state is facing electric resource shortages, like Texas is, it’s just common sense to explore all the ways to make our electric use more efficient. We know efficiency makes sense – in terms of grid reliability, lower emissions, and reduced costs to ratepayers. But there is a barrier to some ratepayers in implementing more energy efficiency: upfront costs. Several options currently exist to finance efficiency, such as home equity loans and incentive programs through utilities. But what about creating a market to allow private investors to invest in the market by offering lower rates for utility customers by ensuring some security through repayment on the utility bill? That’s what on-bill repayment aims to do.

On-bill repayment (OBR) offers an opportunity for home and building owners to finance energy efficiency and renewable electricity generation projects through cost-saving loans from third-party investors. The loans are repaid through customer’s utility bills.  The money comes from private sector lenders at no cost to ratepayers or taxpayers.  OBR also allows for longer term loans with lower interest rates.

The general concept of OBR is not new. Several utilities around the country have instituted on-bill finance programs. However, there is a key difference. On-bill finance programs use utility money to finance the program, thus creating an additional cost for the ratepayers. On-bill repayment would use new money from third parties, such as banks, to create a new market that is secure, cost effective, and enables more bang for the buck in terms of what the ratepayer receives.

OBR is a flexible program that works for a wide variety of properties and vendor business models.  In some programs, contractors are told what solutions can be offered to each customer.  OBR, on the other hand, allows each contractor or vendor significant latitude to design solutions that meet the needs for their customers.  This could include everything from insulation upgrades for residential customers or lighting upgrades for restaurants all the way to deep retrofits of commercial or industrial properties.  All of these would be delivered by the private sector and would be completely voluntary to each property owner.

Benefits of OBR include:

  • Job growth: We estimate that it could generate 100,000 new jobs to install energy efficiency and renewable electricity.
  • New market creation: We estimate that OBR could generate $13.5 billion over a decade in private sector investments in energy efficiency, renewable generation, and demand response projects.
  • Ratepayer and state savings: OBR would promote energy efficiency and distributed energy resources that avoid the cost of expensive new power plants and other high-cost generation—saving ratepayers $4.8 billion in energy bills.
  • Flexibility for contractors and vendors: Program participants would have considerable discretion to design product offerings and go-to-market strategies to meet their customers’ needs.

In a state like Texas that prides itself on making its economy attractive to investors and creating markets, especially in the energy sector, OBR could be an effective tool to opening up the state to a private sector solution that can ameliorate our Texas energy crunch. Efficiency is an investment that makes sense for Texas. As utilities face increasing demands on their energy resources, and fewer dollars to spend on efficiency for their customers, giving them another tool, energized by funds from the private market, will benefit the entire state.

Also posted in Energy Efficiency, Texas, Texas Energy Crunch | Comments closed

On-Bill Repayment Approved By California Public Utilities Commission

By | Bio | Published: November 12, 2012

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

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.

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California Utilities Announce Innovative Financing For Energy Efficiency Retrofits

By | Bio | Published: October 3, 2012

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

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.

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Leveraging Data To Move Markets

By | Published: September 27, 2012

Recently, I blogged here about the fact that significant improvements in the efficiency of existing buildings – a critical and potentially cost-effective part of our carbon reduction strategy – are not easy to achieve, and described how doubts about the likely success of energy upgrade projects are a barrier to “scaling up” efficiency in buildings.  I also touched on EDF’s efforts to change that.

Today I’m happy to report further on some of the progress being made toward a future in which energy efficiency (EE) project originators and funders will have greater reason to expect success in energy upgrades involving existing buildings.

Last week, EDF partnered with Bloomberg New Energy Finance to host ‘Leveraging Data to Move Markets,’ a half-day discussion among government, real estate, Wall Street, real estate entrepreneurs and NGOs, with participation from the Department of Energy (DOE) and the White House Center for Environmental Quality (CEQ).  The discussion focused on DOE and EDF efforts to address key data and standardization requirements to meet the needs of private capital markets to facilitate comprehensive energy efficiency projects.

It was clear based on the conversation throughout the day that investors and other market players are looking for accurate, reliable, and transparent forecasts of savings from EE projects and related loans in order to manage risk associated with investing.  The lack of standards for data and for the various practices that make up the lifecycle of an EE retrofit are not only affecting the ability to rely on the savings being delivered, but also impeding the origination of projects and creating significant transaction costs to all players. 

As Jonathan Powers described at the opening of the meeting, the White House’s CEQ is keenly interested in stimulating discussions among private market actors and parties in possession of data, with an eye toward how data sets can be leveraged to achieve purposes above and beyond the capabilities of the entity that collected it in the first place.  The DOE is actively engaged in creating data sets with the potential to change the landscape in which energy efficiency projections are made.

Ron Herbst of Deutsche Bank observed during the day’s opening panel that “Data informs where you should hunt for opportunity.”  He also noted that auditable energy performance data would be a substantial step forward, and emphasized the power of transparency to correct malfunctioning markets.  Jeff Pitkin, of the New York State Energy Research and Development Authority (NYSERDA, a New York State authority with a mandate to run energy efficiency programs), seconded the need for transparency. Mr. Pitkin noted that the ability to ground projections in something that is “seen as a credible process,” and transparency with respect to the distinct track records of different market actors, would be powerful levers for building better programs and making prospective projects more attractive to property owners.  Angela Ferrante of Energi, an insurance company seeking to underwrite performance risk in energy upgrade projects, similarly stressed that the variability among project proposals is itself a real barrier to efficient underwriting. Read More »

Also posted in Investor Confidence Project | Tagged | Comments closed

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

By | Bio | Published: September 27, 2012

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

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).

Also posted in California, Energy Efficiency | Tagged | Comments closed

On-Bill Repayment In California

By | Bio | Published: August 30, 2012

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

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.

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