Repayment for Energy Efficiency Improvements through Utility Bills a Growing Trend
On-bill financing, an innovative tool that allows customers to pay for energy efficiency investments though their utility bills, is becoming more widely available across the country and extending opportunities to historically underserved markets, according to a study released Dec. 8. The study, On-Bill Financing for Energy Efficiency Improvements: A Review of Current Program Challenges, Opportunities, and Best Practices, was released by the American Council for an Energy-Efficient Economy (ACEEE) and profiles 19 existing on-bill financing programs in 15 states. The study finds that these programs are poised to address financing gaps that have not been historically addressed by other energy efficiency financing mechanisms.
On-bill financing generally refers to a financial product that is serviced by, or in partnership with, a utility company for energy efficiency improvements, and repaid by customers on their monthly utility bills. In many cases, energy savings are sufficient to cover the monthly payments for the financing so that the total monthly charge on utility bills is less than or equal to the pre-investment amount. Programs can be tailored to meet the needs of industrial, commercial and residential customers.
“The great thing about on-bill repayment is that it can serve a broad array of markets with diverse needs. It is a versatile financing tool that can be combined with a variety of different sources of capital and implementation strategies,” observed Casey Bell, lead author of the report.
“On-bill financing programs can leverage a utility’s unique relationship with energy customers improving access to funding for energy efficiency investment, especially for historically underserved markets such as rental, multifamily buildings and small businesses,” said ACEEE Executive Director Steven Nadel. There is also potential for traditionally credit-constrained customers to gain access to financing through modified underwriting that takes bill payment history into account.
Energy efficiency loan programs are a low-risk investment according to a recent ACEEE report, and on-bill financing is no exception. Default rates for on-bill programs are frequently less than 2 percent. There is evidence to suggest that customers tend to prioritize the payment of utility bills, which contributes to low default rates, and some program administrators are exploring the potential of bundling on-bill loans with other financial products and creating a secondary market for capital. Creating a secondary market could help bring programs to scale, since many of these programs have participation rates of less than 1 percent of eligible customers.
On-bill programs are still generally in their infancy. These programs are facing some challenges to adoption and scalability, including funding the upfront costs for utilities with a need to modify their billing systems, a perception by some that utilities need to behave like a financial institution to participate in on-bill financing, and the need for more information on the performance of energy efficiency financing as an asset class.
“As the number of on-bill programs grows, we anticipate many opportunities to learn from experience,” said Bell. Important considerations for augmenting and implementing on-bill programs include understanding underlying financial incentives, and applicable laws and regulations, as well as how risks are distributed amongst stakeholders.
This report is the third in an ACEEE series on energy efficiency financing. Prior reports include Energy Efficiency Finance 101: Understanding the Marketplace and What Have We Learned from Energy Efficiency Financing Programs? This report can be downloaded by clicking here.
For more information, click here.
The American Council for an Energy-Efficient Economy acts as a catalyst to advance energy efficiency policies, programs, technologies, investments, and behaviors.
By Brett Wilkins
One hundred seconds to midnight. That's how close humanity is to the apocalypse, and it's as close as the world has ever been, according to Wednesday's annual announcement from the Bulletin of the Atomic Scientists, a group that has been running its "Doomsday Clock" since the early years of the nuclear age in 1947.
EcoWatch Daily Newsletter
- Scientists Discover New Population of Endangered Blue Whales ... ›
- Endangered Blue Whales Make 'Unprecedented' Comeback to ... ›
- Endangered North Atlantic Right Whale Calves Spotted Off Coast ... ›
- Only 366 Endangered Right Whales Are Alive: New NOAA Report ... ›
By Yoram Vodovotz and Michael Parkinson
The majority of Americans are stressed, sleep-deprived and overweight and suffer from largely preventable lifestyle diseases such as heart disease, cancer, stroke and diabetes. Being overweight or obese contributes to the 50% of adults who suffer high blood pressure, 10% with diabetes and additional 35% with pre-diabetes. And the costs are unaffordable and growing. About 90% of the nearly $4 trillion Americans spend annually for health care in the U.S. is for chronic diseases and mental health conditions. But there are new lifestyle "medicines" that are free that doctors could be prescribing for all their patients.
Taking an unconventional approach to conduct the largest-ever poll on climate change, the United Nations' Development Program and the University of Oxford surveyed 1.2 million people across 50 countries from October to December of 2020 through ads distributed in mobile gaming apps.
- Guardian/Vice Poll Finds Most 2020 Voters Favor Climate Action ... ›
- Climate Change Seen as Top Threat in Global Survey - EcoWatch ›
- The U.S. Has More Climate Deniers Than Any Other Wealthy Nation ... ›
By Tara Lohan
Fall used to be the time when millions of monarch butterflies in North America would journey upwards of 2,000 miles to warmer winter habitat.
A monarch butterfly caterpillar feeds on common milkweed on Poplar Island in Maryland. Photo: Will Parson/Chesapeake Bay Program, (CC BY-NC 2.0)