Step 1: Assess the Market
A Market Snapshot
In 2010, the University of North Carolina (UNC) at Chapel Hill's Environmental Finance Center conducted a market assessment for North Carolina and found that lending options to fund energy efficiency upgrades posed many problems for residential borrowers:
- Interest rates were too high.
- Bank application processes were cumbersome.
- Underwriting criteria were restrictive.
Most existing loan products were charging between 14% and 26% per year, making many projects too expensive for the average homeowner. However, the assessment also showed that there was, in fact, market potential for new, innovative financing programs to address a large cross-section of customers in the state.
Review the North Carolina market assessment report―Expanding North Carolina Energy Efficiency and Renewable Lending Programs: Market Snapshot.
By assessing your local market, you will find out if there is enough demand in your community for energy efficiency upgrades and a need for affordable loans to finance them.
Understand Available Financial Products
The first phase of market assessment involves:
- Identifying financial institutions that provide loan products for energy efficiency upgrades
- Understanding their financial products
- Determining whether existing financial products are adequately helping customers undertake efficiency projects.
With this information, you can determine whether existing financial products need to be adjusted or whether new products are needed.
Your local utility and state energy office can help you assess your market. They can provide information on the number of energy efficiency finance programs in the community, who is operating them, the number of participants, what is preventing people from taking advantage of them, and what the potential is for additional programs.
Contact local bank managers as well to see if they have information on existing energy efficiency upgrade programs or would be interested in supporting a new one in the community.
More information on the various types of financial products is available via the DOE Solution Center.
Assess Customers' Capacity to Repay Loans
The second phase of the market assessment involves assessing your potential customers' ability to repay loans. To do this, you will need to conduct research, possibly with a local financial institution, to better understand the characteristics of your target customers. You should review:
- Profiles of customer credit scores in your target market(s)
- Home equity levels
- Previous participation in efficiency programs.
Learn more about assessing the repayment capacity of potential customers in Chapter 5 of DOE's Clean Energy Finance Guide for Residential and Commercial Building—Basic Concepts for Clean Energy Unsecured Lending and Loan Loss Reserve Funds.