Market Transformation Project Team: Financing

A major barrier to implementing energy-saving measures in the commercial buildings market is access to low-cost, third-party capital to help offset high up-front costs. The Market Transformation team is working to identify and develop resources to overcome these financing barriers. Where existing solutions are available, the team works with members to share information and to connect them to resources, such as the Better Buildings Challenge Financial Allies.

Search for Financing Assistance in your Area

The Database of State Incentives for Renewables and Efficiency (DSIRE) maintains a list of state, local, utility, and federal financial assistance programs available for commercial buildings. Search for assistance in your area.

Energy Efficiency Investment Roundtables

The Market Transformation Project Team hosted two Energy Efficiency Investment Roundtables in August and September of 2011. The goal of the roundtable discussions was to identify tangible actions that Alliance members could take to increase the flow of financing for energy efficiency upgrades. Following the roundtables, participants prioritized the following activities related to efficiency financing:

Share lease language that makes it easier for tenants and owners to share efficiency benefits
Develop specifications for high efficiency building technologies
Explore opportunities to collaborate with rating agencies and examine the relationship between re-leasing rates, efficiency, and risk
Support utility on-bill financing efforts
Develop tools that use real-world data to provide a range of efficiency savings from any given upgrade

Download the roundtable presentations and notes.

Utility On-Bill Financing and On-Bill Repayment

Utility on-bill financing (OBF) and on-bill repayment (OBR) are innovative methods to finance energy efficiency projects. Both OBF and OBR utilize the utility billing system to facilitate loan repayment; however, OBR is primarily used for repayment of third-party loans, while OBF is defined for repayment of loans originating from the utility.

OBF and OBR allow commercial sector customers to pay for retrofits or equipment upgrades through monthly charges included in their utility bill
Funding for these energy efficiency loans can come from a variety of sources, including public benefit or ratepayer funds, state and local efficiency programs, or federal grants (such as the American Recovery and Reinvestment Act of 2009)
Repayment is spread over time to ensure that loan payments are less than the project's monthly savings
Once customers have fully repaid the loan, they continue to realize the benefits of lower electricity bills and a more energy-efficient property

CBEA members have identified three primary barriers to market implementation of innovative financing (specifically OBF and PACE financing): 1) lack of financing program availability, 2) unawareness of programs where they exist, and 3) lack of demand from the ownership community.

For example, a barrier to increased availability of OBF in the market—which has the potential to address these high costs—is a lack of awareness and understanding of the benefits to building owners at the utility level. In the limited number of markets where programs are available, small- to medium-sized buildings are targeted that often lack the resources to evaluate this financing option.

A third barrier is lack of stated demand from the ownership community, due to the unavailability of reliable data that can highlight the financial benefits to an owner that result from conducting an energy upgrade. Without a clear link between improved energy performance and building value, owners may be reluctant to take on extra debt or financial obligations in order to improve a building's energy performance.

Currently Available Commercial Sector On-Bill Financing and On-Bill Repayment Programs

Pacific Gas and Electric Company (PG&E) (California)
Southern California Edison (California)
San Diego Gas and Electric (SDG&E) (California)
National Grid Small Business Program (Massachusetts, New York, Rhode Island)
How$mart (Kansas)
Connecticut Light & Power Small Business Program (Connecticut)
United Illuminating Small Business Energy Advantage (Connecticut)
New Hampshire Electric Co-Op (NHEC) SmartStart (New Hampshire)
Alliant Energy Shared Savings program (Minnesota, Wisconsin)

If you know of additional programs that should be added to this list, email BBA@ee.doe.gov.

Additional Resources

The American Council for an Energy-Efficient Economy (ACEEE) published a toolkit called "On-Bill Financing for Energy Efficiency Improvements" that offers insight into the benefits of and barriers to OBF. The resource provides an in-depth examination of program structure, design, and implementation, along with an overview of leading programs from various states.

The Environmental Defense Fund (EDF) promotes an on-bill repayment program in California. OBR is based on the OBF model, but it relies exclusively on funding from third-party financial institutions. This provides a broader pool of funds, allowing for larger-scale retrofits. California aims to offer OBR through its major investor-owned utilities beginning January 2013. EDF provides a wide range of resources for members interested in learning more about the program specifics and benefits of OBR.