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Selected tag(s): OBR

Financing Energy Efficiency Upgrades In Commercial Properties

By Brad Copithorne / 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.

“Good Jobs, Green Jobs” Explores Novel Financing For Energy Efficiency Upgrades

By Jamie Fine / Published: March 8, 2012

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

Increasing energy efficiency (EE) and renewable energy are two ideal ways to cut climate pollution. Yet financing for these types of projects is often limited.

California has proposed using on-bill repayment (OBR) to help close a financing gap for EE that some have estimated to exceed $10 billion annually. It would be the first statewide program of its kind in the country to use third-party financing to fund energy-related upgrades for any type of building.

The program allows private loans for building efficiency upgrades and renewable energy projects to be repaid through utility bills. Billions of dollars could be made available at attractive terms for a variety of buildings, including single-family homes where owners are upside down on their mortgages, small businesses, large commercial properties and multi-unit rental buildings.

At next week’s Good Jobs, Green Jobs Western Regional Conference in Los Angeles, a panel of experts will discuss how the program can make energy upgrades more affordable and create good, green jobs. This workshop will feature a description of OBR, provide a status update on regulatory developments, and consider program design tradeoffs.

The workshop, “On Bill Repayment Solves the Financing Puzzle,” will be hosted by Environmental Defense Fund (EDF) and moderated by our Chief California Economist, Jamie Fine. Brad Copithorne, EDF’s energy and policy specialist who designed the program will describe how it works and how energy users can take advantage of the program to save money on energy bills and hedge against higher energy prices.

Other panelists include: Gretchen Hardison, Environmental Affairs Officer, Los Angeles Department of Water and Power; John Rhow, Director, Barclays Capital; and Neil Alexander, Account Manager, Utility Solutions Group, TRANE. These experts will share their perspectives on the program, and how it can be designed to meet the unique needs of their constituencies.

EDF looks forward to hosting the panel and discussing ideal ways to shape the final program. We are expecting California’s Public Utilities Commission to soon decide whether to offer OBR to all utility customers as a way to reduce energy use, grow the economy and protect public health and our environment.

Posted in California, Energy Efficiency, Jobs, On-bill repayment / Tagged OBR | Read 1 Response

California Finds Common Interests In Financing Energy Efficiency Upgrades

By Brad Copithorne / 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 OBR | Comments are closed