May 24, 2023

EPA Distinguishes Inclusive Utility Investment from Loan Programs

By: Matt Flaherty
The U.S. Environmental Protection Agency’s (EPA) recent update of its Clean Energy Financing Toolkit for Decisionmakers helps state and local governments better understand the reach, limitations, and key attributes of clean energy financing programs and policies.

The tool, which allows users to filter policies by criteria like target sector or funding source, provides needed clarity for decisionmakers by distinguishing inclusive utility investment from all forms of loans, including on-bill loan programs.

Inclusive Utility Investments: Tariffed On-Bill Programs” is now one of twelve categories of financing policy presented for stakeholders to consider. Others include various loan program designs, equipment leases, green banks, and municipal or green bonds. Each policy type has a dedicated page highlighting program characteristics, examples from the field, and more.

Unlike most loan programs, an inclusive utility investment program incorporates key consumer protections by design, including: site-specific energy savings based on building characteristics and historic billing data; estimated cost savings that exceed cost recovery charges; insulation from high-pressure sales; consumer choice of installation contractor; verification of quality and completeness of upgrades; and extended equipment warranties and repair obligations.

EPA’s ENERGY STAR Inclusive Utility Investment web page describes these consumer protections in greater depth, while also highlighting the many barriers to accessing clean energy upgrades that the policy can overcome. This Clean Energy Works chart synthesizes key differences between inclusive utility investment, on-bill loans, and residential property assessed clean energy (R-PACE) financing, demonstrating the latter are significantly less accessible and less protective policy designs. This new EPA Toolkit offers a broader scope of comparison and enables decisionmakers to avoid investigating clean energy funding models that cannot serve their objectives.

The Toolkit combined with the resource website represents a further definition of the scope and parameters of inclusive utility investment. Importantly, it underscores that this is a form of utility investment, and that investments in distributed energy resources (i.e, a virtual power plant) can be treated just like traditional utility investment in a power plant to deliver capacity and grid flexibility to manage peak load while simultaneously producing substantial customer benefits. 

Inclusive utility investments provide customers with improved health, safety, comfort, and resilience. The direct funding and turnkey assessment and installation services address barriers including individual creditworthiness, renter status, income level, and consumer aversion to debt because the site-specific investment is not based on a customer’s personal financial characteristics, but rather on the cost-effectiveness or energy savings potential of the clean energy upgrades. 

EPA’s toolkit demonstrates how inclusive utility investment is unique in its breadth of applications—from residential buildings of all kinds, to municipal and commercial buildings, to the transportation sector. For instance, filtering by “Residential: Renters” shows the relatively few policies (highlighted in green) that can serve renters.


Notably, EPA’s toolkit retains the term “tariffed on-bill” (TOB) in its title for the inclusive utility investment policy category. TOB is a reference to the fact that cost recovery charges for a utility’s investment are dictated by a tariff, which specifies a utility’s terms for a particular service. 

Clean Energy Works prefers the term “inclusive utility investment” (by itself) for two main reasons.

First, a program using a tariffed on-bill investment structure could be designed without the important consumer protections that are a hallmark of the inclusive utility investment system. These protections are an important equity feature of the policy design, thus “inclusive utility investment” is preferred.

Second, the use of “on-bill” has led to persistent confusion in the field, with various stakeholders conflating on-bill loans with inclusive utility investment, despite foundational differences in design and investment mechanism. An on-bill cost recovery charge is an ancillary attribute of inclusive utility investment, not its defining characteristic. As such, adhering to the term “inclusive utility investment” can help avoid confusion while highlighting the inclusive nature and financial characteristics of the policy (i.e., utility investment).

Despite this minor terminology issue, Clean Energy Works applauds EPA’s recognition of inclusive utility investment as a fundamentally different design from loan programs, a welcome point of clarification.

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