VERGE 17, GreenBiz’s premier sustainability conference, recently brought together 2,000 attendees to Santa Clara, California, to learn, share and be inspired to create a better future. The conference converged leaders from the corporate, tech, government, nonprofit and art sectors to accelerate sustainability solutions and forge connections.
Dr. Hummel’s main-stage presentation makes the case for widespread adoption of inclusive finance starting with accelerating electrification of bus transit.
“For years, utilities have resisted the distributed energy revolution already underway. Yet, electrification of the transportation sector presents a historic opportunity for growth, and it is a critical path for climate stabilization. What’s new? In the last year, plummeting battery costs have helped the some vehicles — specifically, long-range electric transit buses — finally approach cost parity on a lifecycle basis when compared to diesel buses. At the same time, an innovative finance mechanism is gaining traction in the utility sector that would allow utilities to invest and recover costs for the on-board batteries. With these developments, utilities could drop the upfront cost of all-electric vehicles, set off a surge in sales, and rapidly capture the prize of market share for transportation fuels. But will they?”
After considering more than 500 ideas from 89 countries over the course of eight months, the Climate Strategies Accelerator selected an innovative financing concept raised by Dr. Holmes Hummel for a top award. Specifically, Dr. Hummel proposed to cut the upfront cost of EVs by applying a successful utility tariff for distributed energy solutions, starting with bus fleets that provide the most compelling business case.
For the final round, the Accelerator hosted a Silicon Valley-style Innovation Showcase attended by an invited audience of more than two dozen leading funders and field leaders for climate action. Criteria for selection included judging on the merits of potential for breakthrough impact, breakthrough strategy, leadership, field-wide perspective and capacity to execute.
Final decisions were made by representatives of the Packard Foundation, Oak Foundation, and Good Energies, the sponsors of the Climate Strategies Accelerator Fund. The Silicon Valley Community Foundation, which hosts the Fund, will process the Accelerator’s recommendation of a two-year award to advance the strategy to drive down oil demand with innovative utility financing for EV, starting with clean transit.
“Think a world without oil is possible? Here’s your chance to prove it.” That was the challenge posed by the Climate Strategies Accelerator when they announced the Oil Breakthrough Lab, a worldwide challenge that drew more than 500 candidates from 89 countries. Among the 8 Fellows selected is Dr. Holmes Hummel, whose work on inclusive financing for building energy efficiency upgrades shows even greater potential for rapid uptake in the transportation sector.
The Climate Strategy Accelerator’s announcement includes recognition for Clean Energy Works along with luminaries in the field such as Nnimmo Bassey (Nigeria) and Fuiquing Yang (China). Fellows will draw on the resources of the Accelerator to fast-track the development of their ideas into working prototypes for initial application. Sponsors of the Accelerator include Good Energies, the Oak Foundation, and the Packard Foundation, and Fellows will have the opportunity to present their opportunities for impact to funders later this year.
Through the Accelerator, Clean Energy Works will be able to advance the application of tariffed on-bill programs to transit buses, which are essential infrastructure in cities around the world. Dozens of major cities have already pledged to move toward zero emission fleets, yet financing has proven to be a key constraint slowing the transition. Once applications to transit fleets are well underway, additional vehicle classes can be covered as can upgrades to buildings with additional distributed energy solutions.
An excellent article, How $mart is Energy Efficiency?, was recently featured on the National Rural Electric Cooperative Association (NRECA)’s website America’s Electric Cooperatives.
The article highlights How $martKY, an inclusive finance program offered by six Kentucky utilities for energy efficiency building upgrades. NRECA highlights the economic development effects of the program:
“Each retrofit creates an average net cash flow of just over $132 a year, which creates an economic ripple effect of almost $40,000 per year…”
Kassy joined the HELP PAYS® program offered by Ouachita Electric, and with thanks to the upgrades they received, the Starrs were able to expand their farm and invest in their future.
“The whole process to get started was so easy,” Starr says, “and the next thing I know they’re calling to set up the upgrades: insulation, installing the new HVAC system, then Ouachita Electric came out to confirm it was all done correctly.” The upgrades were completed in September 2016, and energy use dropped nearly 23 percent compared to the year before, even though September 2016 was hotter (and required more air conditioning power) than 2015. “It immediately made a huge difference in our home’s comfort,” Starr says. “The new air conditioning was so much better at the end of the summer—before, we were running our air conditioning nonstop, and the house was still too warm.”
The Alliance to Save Energy, the largest national energy efficiency coalition in the U.S., invited our own Holmes Hummel to make the case for inclusive finance on its Blog to Save Energy, publishing a concise article that explains the concept and its importance in the field.
Founded in 1977, the Alliance to Save Energy is a bipartisan alliance of business, government, environmental and consumer leaders advocating for enhanced energy efficiency across all sectors of the economy. Its mission is to promote energy efficiency to achieve a healthier economy, a cleaner environment and enhanced energy security.
Inclusive financing advances ASE’s mission by accelerating investment, especially in underserved market segments. Hummel recapped the breakthrough that has opened the clean energy economy to all by using a utility tariff rather than other financial instruments:
“…with an on-bill tariff based on the PAYS system, the utility makes an investment that is qualified by the cost effectiveness of the upgrade rather than the creditworthiness of the individual customer. Therefore, all customers are eligible regardless of income, credit score, or renter status.”
The California Energy Commission has issued the landmark SB350 Low Income Barriers Study ordered by state law SB350 because too few of the billions of dollars in rate-payer and taxpayer funded programs for energy efficiency and renewable were actually reaching people in disadvantaged communities.
The CEC study recognized the majority of low-income residents in the state are renters, and it identified the split incentive between landlords and tenants as a primary barrier to investment in cost effective energy efficiency upgrades. In its consideration of solutions, the CEC wrote:
“Under this model [tariffed on-bill investments], the utility finances the energy installation and recovers the cost by fixing a charge to the utility bill that is less than the projected energy savings. The major advantage of this approach is that it is debt-free for the customer, as well as it eliminates obstacles for low-income renters to submit to and pass a credit check. The Existing Buildings Energy Efficiency Action Plan calls for evaluating the potential for on-bill financing pilots.
“This program would require the utility to finance the upgrade investment cost or facilitate capital commitments for those investments. A reserve fund established by the State could be useful to insure utilities against charge-offs of uncollectible program service charges billed to participants for cost recovery. Any upgrades would likely require permission from the landlord, but there would be no landlord debt obligation or property lien.”
And in its final recommendations, the California Energy Commission concluded that every type of energy utility in the state (for-profit IOUs, municipal utilities, public utility districts, and cooperatives) should introduce a pilot program for tariffed on-bill investment:
“The State should continue developing a series of energy upgrade financing pilot programs to evaluate a variety of models to improve access and participation of low-income customers, including those in disadvantaged communities. The pilot programs would include the cost of health and safety measures required to accomplish energy efficiency upgrades. Possible pilots include:
The CPUC should consider developing a tariffed on-bill pilot for investments in energy efficiency that targets low-income customers regardless of credit score or renter status, and that do not pass on a debt obligation to the customer. Utilities could use the program to make energy upgrade investments and recover the cost through the bill, so long as the recovery charge is less than the estimated savings. The Energy Commission should encourage and provide technical assistance to POUs and other load-serving entities seeking to implement a tariffed on-bill pilot.”
The CEC’s full report, SB350 Low-Income Barriers Study, and documentation of extensive stakeholder consultation that informed their deliberations are posted online.
If you’ve seen these webinars and want to explore in depth the adoption of inclusive finance, consider joining SEEA’s Learning Circle, with five additional sessions once a month on topics ranging from consumer protections to sourcing capital. Contact Wesley Holmes at firstname.lastname@example.org to apply for participation in the Learning Circle!
Are you interested scaling up financing solutions for energy efficiency that can reach all market segments, including low-income communities?
The Southeast Energy Efficiency Alliance invites you to learn more about inclusive financing solutions for energy efficiency. Beginning in 2017, SEEA and Clean Energy Works is offering a comprehensive webinar series based on the experience of eight utilities in three Southern states that have already put millions of dollars to work right in the communities they serve.
Participants who attend both January and February sessions will be eligible to join a SEEA Learning Circle for six monthly sessions in 2017 that delve into deeper detail. This series is specifically designed to support stakeholders and practitioners exploring a specific application of inclusive financing to open the clean energy economy for all. For more information, contact SEEA Director of Strategy and Development, Wesley Holmes at wholmes (at) seealliance.org
Eight months ago, the Arkansas Public Service Commission voted unanimously to approve Ouachita Electric’s filing of an opt-in tariff for cost effective energy efficiency investments.
Once approved, Ouachita Electric Cooperative replaced its existing on-bill loan program, called HELP, which had been recognized as a best practice model at the U.S. Department of Energy’s Better Buildings Summit. Ouachita implemented its program using the Pay As You Save® (PAYS®) system, and named the program HELP PAYS®.
Previously, the utility had released data comparing the market response in the first quarter of the HELP PAYS® program compared to the best quarter of the HELP program at Ouachita Electric.
Now the utility has released preliminary analysis of program activity for the first four months of the program. The results show the market response is validating the benefits of the switch from a debt-based on-bill financing program to a tariffed on-bill investment program.
Compared to the same four months of the prior year with the HELP program in Ouachita Electric Cooperative’s service area, the utility is reporting that HELP PAYS® achieved:
Increased participation with approximately triple the number of participants.
Immediate net savings of at least 20%, compared to zero in the prior bill-neutral loan program.
Renters accounted for approximately half of the participants, whereas they previously were not eligible for the on-bill loan program.
Average investment in the tariffed on-bill program was more than double the project size under the loan program, reaching deeper savings.
Scale of total investment surged by more than a factor of 10 in the first four months.
Ouachita Electric is releasing the preliminary results of the HELP PAYS program due to inquiries of interest in the field, as they explained in a public statement. Monthly performance will be monitored to provide feedback for continuous improvement in program implementation. Ouachita Electric will undertake a full evaluation of the program after they have collected one year’s worth of data.
For a two-page summary of key findings from Ouachita Electric’s full report, click here.