Southeast Energy Efficiency Alliance Starts Financing Network

July 8, 2014
The Southeast lacks energy efficiency financing opportunities. But the Southeast Energy Efficiency Alliance is out to turn things around. Kat Friedrich explains.

Kat Friedrich, Yale University’s Clean Energy Finance Forum

The Southeast lacks energy efficiency financing opportunities. But the Southeast Energy Efficiency Alliance is out to turn things around. Kat Friedrich explains.

Building relationships is one of the essential ingredients of developing a nationwide framework of energy efficiency programs. On May 13, the Southeast Energy Efficiency Alliance (SEEA) and the Environmental Finance Center (EFC) at the University of North Carolina at Chapel Hill announced the beginning of the Southeast Energy Efficiency Finance Network (SEEFN), which will aid this traditionally underserved region in creating financing programs.

The blueprint for the network is both ambitious and flexible. SEEFN may offer pilot programs, contractor training, financial models, standardized documents, online calculators, measurement and verification tools, government program information, performance data, best practice guidelines, credit enhancements, and/or other resources.

“There’s power in numbers,” said Tim Block, director of programs at SEEA. “We see the membership of the network as being multifaceted.”

No financial commitment is required to join the network. SEEA plans to invite contractors, banks, utilities, community development financial institutions (CDFIs), nonprofits, credit unions, government agencies, and trade associations to participate.

“It serves really as a pilot project to test out some creative ideas,” said Mandy Mahoney, president of SEEA. “People need to have connections to see how the world can change. All of that is dependent on people having strong, high-trust relationships. That doesn’t exist now.”

Regional Development

The Southeast has traditionally lacked energy efficiency financing infrastructure. There are over 300 comprehensive energy efficiency financing programs in the nation but only around 12 of these are in the Southeast, according to a white paper by SEEA, the EFC, and Clean Energy Solutions.

“Utility household expenditures relative to income in the Southeast are some of the highest in the country and disproportionately impact low- and mid-income families, according to the American Council for an Energy-Efficient Economy,” the white paper said.

“In the Southeast, because we’re still a growing area for energy efficiency finance, finding dedicated financial resources to continue to move the needle is somewhat problematic,” Block said.

“This results in a classic chicken-and-egg dilemma,” the white paper said. “The absence of demand for energy efficiency lending inhibits conventional lenders from offering and aggressively marketing energy efficiency financing that includes attractive interest rates and longer loan repayment periods. The shortage of attractive programs, in turn, dampens demand.”

Like the Northeast, the Southeast often has older housing stock, Block said. Many of these homes are outside urban areas. “We have a lot of rural areas in the South. That is a significant factor for needing more upgrades or improvements.”

Block said the barriers that exist in the Southeast also exist elsewhere in the United States. These obstacles include the absence of a contractor network, the lack of financial resources, and a shortage of marketing for energy efficiency finance.

In the Southeast, there are few contractors who can both promote energy efficiency and recommend financing programs, Block said.

Mahoney said the solution to this lack of infrastructure is a bottom-up approach – seeding energy efficiency programs throughout the region by connecting trusted organizations and encouraging them to spread the word.

Success Recommendations

The white paper, titled “The Opportunity for Energy Efficiency Financing Programs in the Southeast,” also includes a summary of the key factors underlying the success of some residential and commercial energy efficiency financing programs. This summary is based on the authors’ research and observations rather than a national data analysis.

For programs to achieve a high total loan dollar volume, high participation rates, comprehensive offerings, and attractive participant loan sizes, the authors recommend the following approaches:
1. Interest rates that are attractive and below-market;
2. Loan terms of seven years or longer;
3. An application process that operates seamlessly;
4. Debt payments that are linked to an existing bill payment system;
5. Marketing partners that are credible and reliable;
6. A connection to additional financial incentives such as utility grants and subsidies;
7. Marketing strategies that are multi-channel, customized, and organized by geography and market sub-sector;
8. Program administrators and managers who are competent and credible;
9. An infrastructure of competent and experienced auditing and installation contractors;
10. A full suite of services that allows one-stop shopping;
11. A program design structure with incentives for comprehensive measure investments and utility savings of 15 percent or greater;
12. An information technology platform that can accurately track post-retrofit savings on utility bills.

“The programs featuring these bundled attributes exist primarily in states with high utility rates, robust utility incentive programs, and regulatory commissions and governments with aggressive energy efficiency objectives,” the white paper said. “This set of associated elements [is] generally limited to the Northeast, the West Coast, and a few Great Lakes states.”

One exemplary program in the Southeast is at Jax Metro Credit Union in Jacksonville, Florida. According to Block, this program has a loan loss reserve. Over two years, it has issued 225 loans and disbursed $1.6 million. This program’s success, Block said, was due to its engaging a contractor network and training staff on energy efficiency loans.

“They have a leader and a board that see the value in energy efficiency finance,” Block said. “They have all the pieces together that we want to be able to replicate in other places.”

“The marketing only succeeded on a fairly small community level,” Mahoney said. She said communication from trusted messengers was much more effective for this program than large-scale advertising, such as bus wraps, proved to be.

Gradual Expansion

SEEFN originated via SEEA’s participation in the United States Department of Energy (DOE)’s Better Buildings Neighborhood Program (BBNP). BBNP developed residential energy efficiency programs that took place in 13 southeastern cities between 2010 and 2013. SEEA is still supporting these programs now.

“While the financing deployed through the BBNP is evidence of impressive leveraging and a commendable overall investment, it represents only a ‘drop in the bucket’ when considering the low participation rates among the affected communities,” the white paper said. “It represents far less than one percent of eligible building owner opportunity.”

However, the authors of the white paper said they consider BBNP to be one of the DOE’s top-performing grantees. More than 6,200 energy efficiency retrofits took place due to this program.

SEEA managed $20 million of funding for financing programs as part of BBNP. Some of the remaining money from this project is being used to fund the new network.

SEEFN also has around $1 million of targeted support from the DOE. SEEA is seeking more funding to expand upon this support and is applying for other grants.

After the white paper’s completion, Block said, SEEA is now pursuing five projects – SEEFN, an on-bill financing initiative, property-assessed clean energy, relationships with financiers, and green practices for real estate agents.

This article was originally published by the Clean Energy Finance Forum at the Yale Center for Business and the Environment, whose newsletter is available here

A former mechanical engineer with graduate training in journalism and environmental studies, Kat Friedrich is a self-employed energy journalist and the editor of Yale University’s Clean Energy Finance Forum.

About the Author

Kevin Normandeau | Publisher

Kevin is a veteran of the publishing industry having worked for brands like PC World, AOL, Network World, Data Center Knowledge and other business to business sites. He focuses on industry trends in the energy efficiency industry.

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