{"id":1652,"date":"2011-09-15T15:56:26","date_gmt":"2011-09-15T15:56:26","guid":{"rendered":"http:\/\/blogs.edf.org\/energyexchange\/?p=1652"},"modified":"2011-12-06T21:42:30","modified_gmt":"2011-12-06T21:42:30","slug":"using-financial-innovation-to-break-down-barriers-to-energy-efficiency-retrofits-%e2%80%93-part-2-residential-buildings","status":"publish","type":"post","link":"https:\/\/blogs.edf.org\/energyexchange\/2011\/09\/15\/using-financial-innovation-to-break-down-barriers-to-energy-efficiency-retrofits-%e2%80%93-part-2-residential-buildings\/","title":{"rendered":"Using Financial Innovation To Break Down Barriers to Energy Efficiency Upgrades \u2013 Part 2: Residential Buildings"},"content":{"rendered":"

Energy Efficiency Financing Blog Series <\/strong><\/p>\n

By: Brad Copithorne, EDF’s Energy & Financial Policy Specialist<\/p>\n

\"\"<\/a>In Part 1 of this blog series, we examined how several innovative companies have developed a structure to finance energy efficiency projects in commercial buildings.\u00a0 This structure, an Energy Services Agreement (ESA), provides building owners access to capital, solves the split incentive issue and eliminates exposure to performance risk on the project.\u00a0 In Part 2, we examine another innovative financing solution that will provide capital to residential projects.<\/em><\/p>\n

McKinsey recently estimated that there is over $225 billion of available cost effective energy efficiency investment opportunities available<\/a> in the residential sector.\u00a0 If these investments are made, energy consumption in the residential sector will decline by 28% by the end of this decade.\u00a0 Unfortunately, most homeowners do not have access to low-cost sources of capital to pay for the upfront costs of the retrofits.<\/p>\n

On-Bill Repayment<\/strong><\/p>\n

On-bill repayment (OBR) programs<\/a> allow customers to repay third-party loans for energy efficiency and renewable energy investments through their utility bills.\u00a0 Utility bills generally have very low default rates because nobody wants their power turned off.\u00a0\u00a0 Loans tied to the utility bills should also have low default rates which will allow lowered costs for borrowers and increased availability of credit.<\/p>\n

During the past decade, various utilities have successfully piloted more than a dozen on-bill finance programs.\u00a0 These programs have used utility, ratepayer, public or mission-driven capital which has greatly limited scalability.\u00a0 An OBR program, on the other hand, uses entirely third party capital from profit motivated investors such as banks.\u00a0 Since this is a much larger pool of capital, the supply of funds will increase to meet demand.<\/p>\n

Based on extensive consultation with key stakeholders, including banks, the three California investor-owned utilities, project developers and others, EDF believes that an OBR program can be successfully launched statewide in California using entirely private capital, and provide building owners with low-cost funding for energy efficiency and renewable projects.\u00a0 \u00a0EDF is currently in discussions with California utilities and regulators on creating an OBR program for the state.<\/p>\n

EDF estimates that a statewide OBR program that would generate $2.7 billion of annual investment in energy efficiency and renewable projects.\u00a0 Over 20,000 installation jobs would be created and after 5 years, annual CO2 emissions would decline by 7 million tons.<\/p>\n

On-Bill Repayment: Step By Step<\/strong><\/p>\n