Conservation Update: Texas Revolving LoanSTAR
This article was featured in the January-February 2005 edition of the State Energy Program's bimonthly newsletter, Conservation Update.
by Theresa Sifuentes, Texas State Energy Conservation Office
Local government agencies are lining up for energy financing in the Lone Star State. Texas is big on program performance, so it is not hard to envision the Texas State Energy Conservation Office running the largest revolving loan fund for energy efficiency and conservation in the country.
Public agencies that participate in Texas LoanSTAR have to follow strict guidelines to verify their energy savings. As a result, actual savings outstrip estimates by 20%. This statistic is the envy of other energy programs and proves that public facilities in Texas are becoming more energy efficient. With the cumulative energy savings achieved to date and as new loans are funded, LoanSTAR is expected to save Texas taxpayers more than $250 million in energy costs over the next 20 years.
How LoanSTAR Works
Texas LoanSTAR — Loans to Save Taxes and Resources — began in 1988 as a $98.6 million retrofit program for energy efficiency in buildings. The loans are targeted toward public buildings: state agencies, local governments, and school districts.
The original funding came from Petroleum Violation Escrow (PVE) funds that states and other parties received from oil companies for alleged overcharges in the 1980s. These funds are managed by the Texas State Energy Conservation Office (SECO) through the U.S. Department of Energy's (DOE) State Energy Program. The size of the original investment — $98.6 million — makes LoanSTAR the largest state-run energy efficiency and conservation program in the United States.
LoanSTAR began in 1988 as a statewide demonstration project, and DOE required SECO to provide extensive oversight and documentation. This meant LoanSTAR had to use solid data to establish its claims for savings, particularly in the early years. Today it is among the best documented and most successful energy efficiency programs in the United States.
The initial loans between 1989 and 1994 were made for a period of 4 years, and the simple paybacks on projects averaged 3.4 years. In 1995 DOE allowed SECO to remove the demonstration label from LoanSTAR.
Early on SECO developed procedures and guidelines that would allow LoanSTAR to prove that the financed energy retrofits would pay for themselves. As part of its quality control, LoanSTAR:
- Issued energy assessment guidelines.
- Trained energy engineering consulting firms on audit techniques and LoanSTAR guidelines.
- Developed protocols to have each LoanSTAR project metered and monitored to track pre- and post-retrofit energy consumption.
- Developed new methods of analyzing energy savings from retrofits.
In fact, measured energy savings exceed audit estimates by more than 20%. We believe these unusually high savings are due to:
- Good audit guidelines.
- Technical training.
- Metering and monitoring.
- Follow-up with the borrowing agencies to ensure the retrofits were working properly and to provide building commissioning assistance for improved operation and even greater efficiency.
Metering and Monitoring
In the beginning of the program loans had to be paid back within four years, and all major projects had to be metered and monitored to verify energy savings. In 1995 the loan period was lengthened to eight years. Furthermore, metering and monitoring are now optional parts of the loan — the cost rolls up into the loan total.
In 2001, SECO received approval from DOE to allow LoanSTAR to finance projects through energy service companies (ESCOs) and to include water conservation retrofits. Now loan recipients can choose between a traditional three-part process — design, bid, and build — or a streamlined two-part process — design and build.
Public agencies in Texas are experiencing substantial savings on their energy bills through LoanSTAR. As measured since the beginning of the program through December 2004, total savings amount to $152,410,130 (see chart). This amount reflects measured savings from 1989, when the first loan was funded, through 2000 and stipulated savings from 2001 though December 2004. Total savings are calculated directly from metered and monitored energy consumption data collected before and after the energy retrofits. Stipulated savings take place on buildings where the energy-saving measures contribute year after year at an established level but where monitoring equipment is no longer in place.
For the first time since program inception, Texas LoanSTAR recently expended all available funds for new loans and has requests of more than $20 million worth of energy projects. SECO, which is located in the Texas Comptroller's Office, administers LoanSTAR under the guidance of Director Dub Taylor. For more details, see SECO's online LoanSTAR program description.
Texas LoanSTAR Financial Savings through 2004
Loan Totals and Emission Reductions
Between January 1989 and December 2004 Texas LoanSTAR issued 177 loans that totaled more than $223 million to public agencies to become more energy efficient.
Loans and Loan Amounts
The LoanSTAR program has truly "revolved," since the total dollar value of the loans exceeds the original $98.6 million by 2.3 times. As of early this year, LoanSTAR has financed 182 projects.
There have been long periods, such as January 1993 to March 1994 and January 1995 to July 1996, when few loans were made. Not all the PVE funds became available to LoanSTAR at once, and subsequent funding releases required the concurrence of the Texas Governor, the Lieutenant Governor, and the Speaker of the Texas House of Representatives.
Cumulative Loan Amount as of December 2004
There are significant environmental benefits from the program as well. The increased efficiency and reduced demand decrease energy consumption and emissions because electricity and fuels do not need to be produced and delivered at the same levels. Nevertheless, the reduction of environmental pollutants such as nitrogen oxides (NOx), sulfur dioxide (SO2), carbon dioxide CO2, and particulates are not parts of the "credits" obtained from LoanSTAR.
Emissions Savings from Texas LoanSTAR 1990 - 2004
About the Author
Texas State Energy Conservation Office
Theresa Sifuentes has worked with the LoanSTAR Program for the past 13 years and has served as the program manager for the past 7 years. LoanSTAR is a revolving loan program created in 1989 and funded by petroleum violation escrow dollars. Legislatively mandated to be funded at a minimum of $95 million, the program has saved more than $152 million through energy efficiency projects financed for state agencies, institutions of higher education, school districts, and local governments. LoanSTAR is the largest program of its kind in the United States. Under Theresa's oversight, the program has doubled in funding and in total cumulative energy savings.