U.S. Department of Energy - Energy Efficiency and Renewable Energy
WIP – Technical Assistance Resources
Sources of Funds
There are many possible sources of capital for a financing program. For most existing energy efficiency loan programs, capital has been provided by banks or utility general funds, and is often supplemented by utility-collected funds from a public benefit charge. A public benefit charge is a small fee attached to each utility bill to create a pool of funds to use for a public purpose. Other sources include manufacturers who help finance their equipment, leasing companies, municipal bonds, state treasuries, pension funds, and housing and economic development agencies. Loans originated by some of these sources can also be sold on a secondary market.
- Federal funds: New federal funding can be used to support clean energy loan programs. Milwaukee is using stimulus funds from the Energy Efficiency and Conservation Block Grant (EECBG) program to capitalize its loan program. Boulder, Colorado is using EECBG funds to offset a portion of loan program administrative costs. The state of California is offering SEP funds to local communities to support the creation of PACE programs.
- Banks: Banks are often willing to participate to simply get new business. In some cases, they are also able to receive Community Reinvestment Act (CRA) credit for clean energy loans.
- Bonds: Several types of bonds may support loan programs.
- Private Activity Bonds (PABs) are bonds issued pursuant to federal statute and IRS regulations that are federally tax-free. PABs must typically be used to support projects that benefit lower income borrowers and are allocated to states and local governments on the basis of population.
- Revenue Bonds are bonds tied to the revenues from specific projects.
- General Obligation Bonds are tied to the creditworthiness of the entity that issues them. The interest on these bonds is typically taxable and therefore comes at a higher interest rate than the rate for private activity bonds.
- Tax Credit Bonds, known as Qualified Energy Conservation Bonds (QECBs) may offer a new source of funding to support energy efficiency loan programs. Like a PAB, QECBs are volume-capped for each state according to its population as well as for local governments with populations greater than 100,000 and tribal entities. Total QECB allocations nationwide are $3.2 billion through a one-time allocation.
- For more information see the following resources
- General municipal funds: Tax revenues can sometimes capitalize an energy efficiency or renewable energy loan program. The Palm Desert and SMUD loan programs are supported through general funds. However many jurisdictions are now experiencing reduced tax revenues and budget cuts, and are not able to capitalize loan programs with general funds at this time.
- Public authority, utility or public benefit fund capital can capitalize or support a loan program. The Connecticut United Illuminating program has access to the state's public benefit fund to cover loan defaults. The Pennsylvania Keystone HELP program has access to a 5% loss reserve through funds put up by the Pennsylvania Energy Development Authority. Midwest Energy capitalized its loan program with internal utility capital and subsidized funds from the state.
- State Treasury Funds: The Pennsylvania Keystone HELP program began with an initial capitalization of $20 million over a three-year period from the State Treasurer. The Colorado S.B. 184 program will begin operations with a $4 million annual capital pool from the State Treasurer.
- Other private investor capital: The Berkeley FIRST PACE program is capitalized in part through a private investor, Renewable Funding.
Past Webcast Presentations
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