Energy Efficiency Financing in
the Residential Sector
Margaret Walls
Resources for the Future
RFF First Wednesday Panel, October 5, 2011
Outline
• The residential EE financing
marketplace today
▫ Surveying the landscape
▫ Some results from RFF auditor/contractor
survey
• Why is the market so small?
• Answering these questions in a vacuum:
▫ The need for detailed data and analysis
Availability of Financing in Residential
Sector
• Some private activity but very limited (mostly as
partners with govt/utilities)
• Government and utility programs:
▫ 223 residential programs
 Money from ARRA, utility ratepayer funds, RGGI (in
Northeast), state funds, local bonds
 Revolving loan funds, LLRs, interest rate buydowns,
PACE, on-bill financing
 Utilities, state govt, local govt, non-profits, private
lenders – many programs have multiple parties involved
Results from Selected Programs
Program
Name
Lender
SMUD
142,000
$447.4
Viewtech
21,423
$188.9
1998 - 2011
5,800
Keystone HELP
AFC First
(PA)
7,434
$58.0
2006 - 2010
5,900
910
$10.1
2010 - 2011
1,350
SMUD
SoCalGas Home Energy
Upgrade
Financing
CT Home
Energy
Solutions
AFC First
Loan Value Loan Period
(millions)
Customer
base
(thousands)
No. of
Loans
1977 - 2011
594
Results from Selected Programs (cont.)
Findings from a subset of 33 programs
▫ >241,000 loans; $1.2 billion
 w/o SMUD, 99,000 loans; $743 million
▫ Some of these programs have been around a long
time (>20 yrs)
▫ Average loan size = $4,900
Results from Selected Programs (cont.)
Participation rates: <1% of eligible consumers
Default rates low, by most accounts
• Keystone HELP: 0.6%
▫ 84% of loans are to people with FICO > 700
▫ 1.51% default rate for FICOs 650-699
The RFF Energy Auditor Survey:
Availability of Financing
41% act as a gateway to financing
9% offer financing themselves
7% do both
68% said the interest rate was “below market”
The RFF Energy Auditor Survey: How
Do Homeowners Pay for Retrofits?
The RFF Energy Auditor Survey: How to Get
More Homeowners to Retrofit
A Laundry List of Issues
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Small loans not profitable
Unsecured so risky
Nonstandard so can’t get institutional investors
Need secondary market in order to scale up, leverage
private funds
Need better marketing to homeowners
Contractor problems (training, communication)
Many programs too burdensome for homeowners (high
transaction costs)
Reactive consumers
Mortgage markets
Solving Problems in a Vacuum
• Need systematic evaluation of existing programs
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Participation
Retrofit and investment choices made
Loan performance (delinquencies, defaults)
Energy consumption before and after and in
comparison to control group
Even the most basic information is hard to get,
much less raw data for analysis
Benefits, Costs and Market Failures
• Empirical analysis of savings can
▫ improve future predictions
▫ provide better estimates of CO2 reductions
▫ enable targeting for better cost-effectiveness
• Measuring cost is important
▫ Using public dollars cost-effectively
Ultimately need to understand nature of market
failure to better target EE policy
Audit paper available at www.rff.org/ccep
Forthcoming white paper on financing
Contact walls@rff.org or palmer@rff.org