National Lab Report on Energy Efficiency Financing Helps Illustrate the Reasons Large Market Segments are Locked Out

Researchers at Lawrence Berkeley National Labs have released a study of energy efficiency financing practices that provides a clear basis for illustrating how large market segments are virtually locked out of efforts to help utility customers install energy efficiency upgrades. That also provides a useful basis for exploring what can be done about it.

The report by lab experts on “Current Practices in Efficiency Financing” prepared for the U.S. Department of Energy undertakes the ambitious exercise of describing “all customer-facing financing products.”

All renters (commercial and residential), customers in all sectors that are unable or unwilling to take on more debt, and customers uncertain of how long they will remain at the premises are chronically underserved by the suite of energy efficiency financing products reviewed in the report, even where all of those products are available. For example, among the approaches that are suited for residential customers, virtually every one that the LBNL team covered requires the customer to be a homeowner and/or be able and willing to take on a debt obligation. This includes at least half of all Americans below median income.

Tariffed on-bill programs are not recognized in the report as a distinct type of energy efficiency financing instrument, possibly due to the relatively small scale of aggregate investments through tariffed on-bill programs to date ($20 million).

While discussion of tariffed on-bill programs does appear in a sidebar in the section on-bill financing, the placement does invite confusion because the LBNL team defines on-bill financing as involving consumer loans – yet tariffed on-bill investment programs do not involve consumer loans.

Because LBNL produces significant contributions to the literature specifically on energy efficiency financing nearly every year, there will surely be an update to the collection of current practices in the future.

In the meanwhile, state and local government officials need not wait to gain some clarity about their option to join states like Kansas, Kentucky, Arkansas, and New Hampshire and introduce inclusive financing through tariffed on-bill investment programs that are opening access to energy efficiency financing for all.