The Dernogalizer

September 14, 2009

The Power of Energy Efficiency Loan Funds

Filed under: Energy/Climate,National Politics — Matt Dernoga @ 1:03 pm
Tags: , ,

The University of Maryland student group I’m part of, UMD for Clean Energy, is getting involved in the city of College Park’s City Council Elections by pushing a green platform and mobilizing students to vote for candidates that support it.  For an explanation of how much influence a student voting bloc can have in a local election, along with a description of the campaign, please see our FAQ here.

What I want to talk about here is the chief policy we are pushing in our platform, and how every part of the country should be finding ways to implement this financing mechanism.  That policy is an energy efficiency loan fund which utilizes a limited amount of public funds in order to leverage far greater private investment in order to finance the upfront cost of energy efficiency improvements for homes and businesses.  There are different ways these funds can be set up and structured, but the premise is the same.  We all know energy efficiency is the fastest and cheapest way to address rising energy demand, lower greenhouse gas emissions, and create green jobs.

The problem is that the cost of the initial investment deters many homeowners and businesses from making improvements.  At the same time, government money is limited, especially compared to the amount of money the private sector holds.  This is where the loan fund comes in.  The concept is pretty simple, where residents and businesses can borrow from this pool of money like they would a bank in order to pay for energy efficiency improvements in their home. Then, the loan can be repaid in payments roughly equal to the energy savings being realized by the improvements. We’ve been told in meetings with elected officials the best way to do this is through a modest property-tax surcharge. After the loan is paid back, residents will reap the benefits of substantially lower electricity bills.  At the same time, labor will be needed to do the energy audits and retrofits necessary to reduce energy usage, which means jobs.

This concept has already taken hold in other parts of Maryland.  The city of Annapolis has set up a loan fund where the funds and risk are all taken on by the private sector with no public money necessary.  Montgomery County recently passed a bill which sets up a green loan fund.  We think there’s no reason why this can’t be done in a way that works for a small city like College Park.

However, it appears this kind of financing can also be used at larger levels of government.  The New York Senate just recently passed a groundbreaking measure which will leverage $112 million worth of public funds in order to drive $5 billion of private investment into one million weatherization for homeowners across the state!  The article I linked also talks about how the legislation had bi-partisan support since it used free market solutions.  Here are a couple of excerpts of how this would work…

“the measure will finance upfront costs for one million homeowners to weatherize their houses, and let them repay the loans from the energy savings realized over time. The act, which makes funding available for job training, is also expected to create up to 16,000 new jobs.”

“All a homeowner will need to do to save on energy costs and increase property values is to call a state certified contractor to perform a free or low-cost energy audit. The audit would identify the repairs and upgrades (like air sealing, insulation, new boilers) that can pay for themselves through the energy savings they create. The program’s Residential Retrofit Investment Fund would pay the full upfront costs, with consumers required to pay back the retrofit through future savings on their electricity bill. If the home is sold before the loan is paid off, the new homeowner takes over the loan agreement.

Currently, homeowners must expend a lot of time and money to accomplish energy retrofits. They have to proactively find contractors they can trust to perform the audits and recommend a plan, then pay the full upfront costs of the work which could easily total tens of thousands of dollars. Few homeowners bother. Most cannot afford to.”

Interestingly, the $112 million in public money is coming from revenues from the Regional Greenhouse Gas Initiative(RGGI) in which 10 Northeastern and Mid-Atlantic states participate in a regional cap and trade program for carbon dioxide emissions.  The revenue comes from the purchase of pollution permits sold by the government to polluters.  I know that in my state of Maryland, our government has squandered our revenues of $70 million, by just sending it back to consumers in rebates.  Rebates that probably cover a months worth of electric bills.  One can only hope we will be as smart as New York in the future, and use the next round of funds to do some real rate relief, while creating green jobs and reducing our carbon footprint.

For all its criticisms, the Waxman-Markey bill which passed the House this summer and is being considered by the Senate actually uses public money to leverage private investment pretty well.  It has a clean energy bank, which will leverage $10 billion dollars in public money to drive an estimated $200 billion dollars for clean energy investment.  At the same time, it contains Sherrod Brown’s IMPACT ACT, which “would provide resources for small- and medium-sized manufacturers through a 2-year, $30 billion manufacturing revolving loan fund, which will provide much needed liquidity for domestic manufacturers to improve manufacturing processes and to retool and expand production of clean energy products. The Apollo Alliance estimates that, once enacted, the bill will create 680,000 direct manufacturing jobs and nearly 2 million indirect jobs over five years.”

The bill will also provide $65 billion in allowances to local and state governments for energy efficiency programs across the county from 2012-2020.  If local and state governments are smart, they will sey up energy efficiency programs like New York has set of theirs.

Yes, hating on the status of Federal climate legislation has become an environmental pastime, but it would actually be a good idea to advocate for these financing mechanisms and more like them that apply to energy efficiency at the local level to be in the Senate legislation, which is what my group told Senator Ben Cardin’s energy aide last Friday.  As Mckinsey recently found…

“the U.S. economy has the potential to reduce annual non-transportation energy consumption by roughly 23 percent by 2020, eliminating more than $1.2 trillion in waste – well beyond the $520 billion upfront investment (not including program costs) that would be required. The reduction in energy use would also result in the abatement of 1.1 gigatons of greenhouse gas emissions annually – the equivalent of taking the entire U.S. fleet of passenger vehicles and light trucks off the roads.

Such energy savings will be possible, however, only if the United States can overcome significant sets of barriers. These barriers are widespread and persistent, and will require an integrated set of solutions to overcome them – including information and education, incentives and financing, codes and standards, and deployment resources well beyond current levels.”

That’s why my group is looking to get an energy efficiency loan fund going in our city of College Park.  Won’t you join us?

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12 Comments »

  1. […] cross-posted from: here […]

    Pingback by The Power of Energy Efficiency Loan Funds « It’s Getting Hot In Here — September 14, 2009 @ 1:06 pm | Reply

  2. […] Matt Dernoga, The Dernogalizer, The Power of Energy Efficiency Loans […]

    Pingback by Stop the Presses: Bipartisan sanity on Green Jobs and Helping American Homeowners — September 14, 2009 @ 4:53 pm | Reply

  3. […] the original here:  The Power of Energy Efficiency Loan Funds « The Dernogalizer Tags: energy-efficiency, Finance, finance-the-upfront, greater-private, loan, loan-fund, […]

    Pingback by GlfBook - Financial News Daily » Blog Archive » The Power of Energy Efficiency Loan Funds « The Dernogalizer — September 15, 2009 @ 4:49 am | Reply

  4. […] The Power of Energy Efficiency Loan Funds « The Dernogalizer […]

    Pingback by Mesothelioma News - Asbestos Abatement Scheduled for Provincetown, MA Town Hall — September 16, 2009 @ 2:40 am | Reply

  5. how do i get the free ep grades to save energy to my home

    Comment by rhonda — September 24, 2009 @ 8:01 pm | Reply

    • could you elaborate please?

      Comment by Matt Dernoga — September 24, 2009 @ 9:20 pm | Reply

  6. […] in September, I wrote about the the power of energy efficiency loan funds, and how they could be utilized by local and state governments to eliminate the barrier of upfront […]

    Pingback by Cash for Caulkers should use Energy Efficiency Loan Fund Model « The Dernogalizer — December 13, 2009 @ 4:12 pm | Reply

  7. […] in September, I wrote about the the power of energy efficiency loan funds, and how they could be utilized by local and state governments to eliminate the barrier of upfront […]

    Pingback by Cash for Caulkers should use Energy Efficiency Loan Fund Model | CCAN Blog — December 13, 2009 @ 4:17 pm | Reply

  8. […] in September, I wrote about the the power of energy efficiency loan funds, and how they could be utilized by local and state governments to eliminate the barrier of upfront […]

    Pingback by Cash for Caulkers should use Energy Efficiency Loan Fund Model « It’s Getting Hot In Here — December 13, 2009 @ 5:19 pm | Reply

  9. […] called it our bottom line. This was the energy efficiency loan fund, which you can read more about here, or from our platform. It was the first demand everyone saw, and the only one we went into […]

    Pingback by Media and Messaging: The Multiplier Effect « The Dernogalizer — January 13, 2010 @ 2:14 pm | Reply

  10. […] called it our bottom line. This was the energy efficiency loan fund, which you can read more about here, or from our platform. It was the first demand everyone saw, and the only one we went into […]

    Pingback by Media and Messaging: The Multiplier Effect « It’s Getting Hot In Here — January 13, 2010 @ 2:19 pm | Reply

  11. […] again been extended, this time through 2012.  Meanwhile New York is using these funds to leverage $5 billion in energy efficiency investment.  Below is the story.  The title says it […]

    Pingback by Annapolis Botches Energy Efficiency, Again « The Dernogalizer — April 11, 2010 @ 1:46 am | Reply


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