Enable Financing for Residential Efficiency Upgrades

Even when homeowners have good information about how to improve their homes’ efficiency, high first costs often prevent them from investing in energy efficiency improvements. Local governments can support financing opportunities for residents through a variety of mechanisms. You can partner with credit unions, your local housing authority, or development finance authority to offer unsecured, below-market/low-interest loans. Consider subsidized financing for low-income residents, who are often hardest hit with disproportionately high energy costs in cities and rural areas. You can partner with local and/or national financial institutions to offer a range of energy efficiency financing products and services. Local utilities may also be able to offer on-bill financing where customers pay for energy upgrades through their utility bills. Additionally, Weatherization Assistance Program and LIHEAP funds can be leveraged at the local level with utility programs.

Revolving loan funds, loan loss reserves, interest rate buy-downs, and other credit enhancements can be used to defray the costs of these financing mechanisms. Work with local lenders and the real estate community to promote existing lending products that incentivize the purchase of energy efficient homes or that provide a mechanism for financing energy upgrades. Consider creating a green bank (or partnering with your state to establish a green bank) to leverage public funding to attract private capital to finance energy efficiency improvements and renewable energy projects.   << Back to Main Page

TOOLS

Clean Energy Finance Tool: This tool is intended to be a starting point for state and local government staff interested in developing or revising a financing program to support energy efficiency and clean energy improvements for large numbers of buildings (including residential) within their jurisdictions. 

RESOURCES

Current Practices in Energy Efficiency Financing: An Overview for State and Local Governments: This report provides an overview and key insights into the use of specific types of customer-facing financing products, i.e., financing between a lender or program administrator and the customer.

Energy Efficiency Financing Program Implementation Primer: This primer provides an overview of key considerations for state and local policymakers, utility energy efficiency program administrators, and program partners such as financial institutions and contractors in designing and implementing successful energy efficiency financing programs for existing buildings in the residential and commercial sectors. It is intended to serve as an introductory resource that provides a foundational understanding of key issues related to the topic, and guides readers to existing resources to assist with more in-depth financing program design and implementation.

Low-Income Household Energy Burden Resource Summary: This resource summary discusses energy burden and describes how energy efficiency measures hold the potential to reduce energy burden by eliminating energy waste in low-income households.

Leveraging Weatherization Assistance Program Funds for Greater Impact

Energy Savings Performance Contracting Resources for State and Local Governments: Three new resources were released to assist public sector ESPC customers and program administrators to ensure verified savings from ESPC projects: 

Energy Efficiency Financing for Low- and Moderate-Income Households: Current State of the Market, Issues, and Opportunities: This report offers state and local policymakers, state utility regulators, program administrators, financial institutions, consumer advocates and other LMI stakeholders with an understanding of:

  • The relationship between LMI communities and financing for energy efficiency, including important considerations for its use such as consumer protections,
  • The larger programmatic context of grant-based assistance and other related resources supporting LMI household energy efficiency,
  • Lessons learned from existing energy efficiency financing programs serving LMI households, and
  • Financing products used by these programs and their relative advantages and disadvantages in addressing barriers to financing or to energy efficiency uptake for LMI households.
     

The Future of Green Banks: A presentation from the 2017 Better Buildings Summit. 

DOE’s Best Practice Guidelnes for  Residential PACE Financing Program: The DOE guidelines outline best practices in residential PACE that can help state and local governments, PACE program administrators, contractors, and other partners develop and implement programs and improvements that effectively deliver home energy and related upgrades.

PACE Resources for Municipalities: This webpage provides information on the benefits of PACE for municipalities, along with a number of resources for municipal leaders.  

EPA’s Green Banking Strategies for Local Governments: This primer provides a basic explanation of green banks, the benefits they offer, issues local governments might consider when deciding whether to create a green bank, and several case studies. 

Federal Housing Administration’s Energy Efficient Homes Policy: Borrowers can qualify for higher debt-to-income ratios for purchasing an energy efficient home or by committing to making energy improvements. 

Fannie Mae’s HomeStyle Energy Mortgage: Help homebuyers finance energy efficiency through a HomeStyle Energy mortgage. 

Freddie Mac’s GreenCHOICE Mortgage: Help homebuyers finance energy efficiency through a GreenCHOICE Mortgage. 

LOCAL GOVERNMENT EXAMPLES
  • Connecticut Local Governments:
    The Connecticut Green Bank – the nation’s first green bank – offers a number of opportunities to cities and towns, including pooling their demand for clean energy projects and helping them market clean energy finance products to local residents and businesses. The bank has raised an additional $6 of private capital for every $1 of public funds used. Local governments can use the bank’s financing to establish commercial PACE programs in their jurisdictions. The bank also provides financing and technical assistance to help local governments enter into power purchase agreements at reduced rates, or engage in no-money-down methods of hosting solar projects on certain public buildings.  The bank formed a 501(c)(3) nonprofit organization called Inclusive Prosperity Capital, which will provide capital for clean energy investments in low- and moderate-income communities and other underserved market segments.
     
  • Florida Local Governments:
    The Solar and Energy Loan Fund (SELF): SELF is a Florida non-profit organization working in communities throughout the state using the community development financial institution (CDFI) model. SELF provides energy expertise and favorable financing to underserved residents and small businesses in order to yield sustainable community development and economic development opportunities, enhanced quality of life, greater efficiencies and clean energy alternatives, and energy independence. SELF clients are reducing their energy consumption and using the energy savings to help pay off the loans over time. Rebates and tax credits may also apply to many of the energy saving products financed through this program. St. Lucie County provided several small grants and in-kind support to SELF, where SELF has completed $3.26 million of projects. SELF was able to leverage the county’s support by a ratio of 40:1 with non-governmental grants and investments. The City of Stuart, where SELF has completed nearly $350,000 in projects, provided seed grants to help SELF cultivate the “Rebuilding and Empowering Underserved Communities” program in the local community and provided additional funds for home energy audits. SELF also worked with Palm Beach County to deploy $50,000 from the County’s Revolving Energy Fund in low- and moderate-income communities using Energy Efficiency and Conservation Block Grant (EECBG) funds that the County earmarked for energy efficiency and resilience in underserved communities.
  • New York, NY:
    The New York City Energy Efficiency Corporation (NYCEEC) offers flexible, innovative financing solutions for small and large energy efficiency and clean energy projects. NYCEEC underwrites projected energy savings and can finance up to 100% of project costs. Their loans cover both hard and soft costs (e.g. equipment, upgrades, and energy assessments) and are financed on average at a rate of 6% to 7.5% over an average term of 5 to 7 years. They provide loans from $50,000 to $6 million. Fifty-eight percent of NYCEEC’s finance portfolio by total project cost is multifamily. NYCEEC’s multifamily financing accomplishments include upgrading 5,415 units in 63 multifamily buildings covering 4.1 million square feet, saving 3,544,414 MMBtus of source energy, and avoiding 353,909 MTCO2E of greenhouse gas emissions. For more information, see the full case study.  
     
  • Seattle, WA:
    Seattle City Light, Seattle’s municipal utility, offers on-bill loan repayment of energy efficiency upgrades through a partnership with the city’s Office of Sustainability and Environment and Craft3, a non-profit community development finance institution. Craft3 provides and services the loans, which utility customers can repay through their Seattle City Light bill. These home energy loans can finance up to 100% of eligible measures, feature competitive interest rates with no rate increase for lower credit scores, have no up-front loan fees or prepayment penalties, and can incorporate utility incentives that may be available. The Craft3 loan program is part of the city’s broader Community Power Works (CPW) energy-efficiency program, which includes efficiency rebates and free weatherization grants for low-income households.
     
  • Sonoma County, CA:
    The County of Sonoma provides PACE financing through the Sonoma County Energy Independence Program (SCEIP) and is available to property owners within the geographic boundaries of the county. SCEIP is the longest running PACE program in the nation and offers the lowest interest and fees when compared to other PACE providers with equivalent terms. The county later opened up the “PACE Marketplace” to allow other PACE providers to also operate PACE programs within the county.