On-bill financing gains ground but faces barriers to wider adoption

(ACEEE blog, 18 Apr 2019) More rural cooperatives and cities are now paying for energy efficiency upgrades with on-bill financing, which adds a small, monthly line item to a customer’s utility bill as the repayment vehicle. Yet this financing has not scaled up quickly, prompting efforts in several states to break down its remaining barriers.

On-bill financing programs can bring the up-front costs of energy efficiency upgrades down to zero, particularly when paired with rebates and incentives. They help customers make comprehensive energy improvements, with immediate savings on their energy bills. Because these loans are backed by a utility’s borrowing power, they often have lower interest rates than market-rate lending options.

Recent progress

Rural cooperatives have been leaders in leveraging on-bill approaches to provide their members with guaranteed bill savings from energy efficiency improvements. Electric cooperatives in Kentucky, North Carolina, South Carolina, Arkansas, and Kansas have launched successful on-bill programs. In Arkansas, Ouachita Electric Cooperative reported that in the first nine months after launching its program, more than 90% of customers who were offered the option signed up. In one year, its HELP PAYS program accounted for more than $1.5 million in investment, with multifamily housing accounting for about one-third of the total.

States also see a clear need for on-bill financing programs. As part of major legislation expanding and extending energy efficiency programs in 2016, the Michigan legislature allowed for financing terms of up to 15 years, paving the way for the rollout of on-bill financing programs. To date, however, only the city of Holland’s municipal utility has launched a program. It rolled out the program as one strategy to achieve its long-term energy plan. The state convened a series of workshops in 2018 to discuss scaling on-bill financing, using Holland as a key example. In addition, Hawaii just announced a major on-bill program intended to expand the accessibility of clean energy investments for residents, small businesses, and nonprofit organizations .

Other cities have also embraced on-bill financing to expand the reach of energy efficiency programs to all residents. In 2018, Fort Collins, Colorado, won a $1 million grant from the Bloomberg Philanthropies Mayors Challenge to develop an on-bill financing program targeted at the city’s renters. The EPIC program helps rental and owner-occupied property owners invest in energy-and water-efficiency improvements through a streamlined assessment-to-upgrade process. The program offers low-interest financing for up to 20 years. Fort Collins emphasized accessibility in the program design, requiring no money down, structuring loans to cover up to 100% of project costs, and developing a simple application open to both single-family homes and multifamily properties. The city is now partnering with the Colorado Energy office to develop an EPIC toolkit for other cities that want to adopt the model.

External link

ACEEE blog, 18 Apr 2019: On-bill financing gains ground but faces barriers to wider adoption