TexasIsHot – Energy Efficiency

Energy Savings

Sep 23 2011

Study: Energy Efficiency Loan Financing Proving to be a Low Risk Investment with Large-Scale Potential

Energy Efficiency Loan Programs Default Rates Range from 0–3% and Remained Largely Unchanged During Housing Bubble Collapse

Washington, D.C.—Energy efficiency loan financing is proving to be a stable, low risk investment with low default rates and large-scale potential, according to What Have We Learned from Energy Efficiency Financing Programs?, a study released today by the American Council for an Energy-Efficient Economy (ACEEE). A review of 24 energy efficiency loan programs finds extremely low default rates ranging from 0–3% throughout the life of the financing program. Default rates for efficiency loan programs have also remained largely unchanged, even during the near collapse of the real estate market over the past few years.

“Energy efficiency loans are proving to be a winning investment in a time of economic uncertainty. Based on these findings, now is the time to scale-up to serve many more homeowners and businesses,” said ACEEE Executive Director Steven Nadel.

Energy efficiency loan programs finance building upgrades by providing funding directly to building owners or managers. These projects lower energy bills and reduce annual energy costs by an average of 12–17%. Small commercial banks and credit unions have led in offering these energy efficiency loan products, often working with utilities as well as local and state governments. The programs evaluated by the ACEEE report have loaned out over $1.5 billion. Through the use of subsidies and energy program funds, interest rates for borrowers averaged 3–5% annually.

Existing loan programs have only begun to scratch the surface of the potential market. The programs reviewed represent the largest energy efficiency financing efforts in the nation yet participation rates are most often less than 0.5% of the targeted customer class. “These low participation rates indicate there is a vast untapped customer base still available in this market. I think we’ll see increased private investment as big banks adopt the model that community banks and credit unions have found so profitable,” observed Sara Hayes, lead author of the report.

The reasons for the lack of investment by large banks up to this point appears to be a lack of centralized information on how the loans are performing and the inability to evaluate default risks. Furthermore, each loan tends to be small, averaging approximately $9,000 for residential projects and $73,000 for commercial/industrial/public projects. The low dollar amounts of these loans suggests that in order to attract the interest of large financial institutions, the loans would need to be packaged for resale on the secondary market.

“The financial sector has shown itself to be extremely adept at scaling programs that serve customer needs well. Consider, for example, the growth in the performance contracting and green building finance markets,” said Joel Freehling, Senior Energy Finance Consultant at Shaw Environmental & Infrastructure and author of the first paper in ACEEE’s series on energy efficiency financing.  “It’s finding the right place to start and locating the right partners that often stymy further growth in the energy finance field. If these hurdles can be overcome, we could see huge growth in these programs.”

Click here to read the report.


The American Council for an Energy-Efficient Economy acts as a catalyst to advance energy efficiency policies, programs, technologies, investments, and behaviors.

Tagged , , , ,

Related Posts

Leave a reply

Your email address will not be published. Required fields are marked *

*

Testimonials
  • "“As the Texas population continues to grow, so will our energy consumption needs. We must have tools that empower the consumer to choose their products and monitor their usage wisely. TexasIsHot.org is a great resource, which is exactly what Texans need in today’s deregulated market.”" - State Rep. Burt Solomons (R-Carrollton), Chairman of House State Affairs Committee
  • "In order to meet our goals, we need programs like the TexasIsHot campaign to help change the way people think about energy." - State Sen. Troy Fraser (R-Horseshoe Bay), Chairman of Senate Natural Resources Committee
  • "Texas leads the nation in wind power because it makes money, not because it makes us feel better. Texans are a practical, penny-wise people who I think will be happy to learn how to save a few bucks on their power bills with the common-sense advice at TexasIsHot.org."-Jerry Patterson, Commissioner of the Texas General Land Office
  • "If every Texas household adopted just a few of the dozens of energy efficiency strategies referenced on TexasIsHot.org, our air would be cleaner, our limited supply of natural resources would be better protected, and our wallets would be heavier..." Kip Averitt (R-Waco), Former State Senator and Chairman of Senate Committee on Natural Resources
  • ”The TexasIsHot campaign targets an important piece of the clean energy effort -- educating Texans on the way we use electricity and quantifying the financial and environmental costs associated with our use. By just reducing the amount of electricity we use and waste, TexasIsHot.org can show people how to save money..." State Sen. Kirk Watson (D-Austin)
  • "Fluctuating energy costs are really hurting Texas families and businesses, but by just making a few easy changes, Texans can cut down on energy waste. TexasIsHot.org is a tremendous resource which arms consumers with the information they need to save themselves money by becoming more energy efficient, and help our environment." State Sen. Rodney Ellis (D-Houston)
  • "Texas is the third fastest growing state in the nation with a net growth of 1,000 people each and every day. This brings many challenges including providing clean and affordable electricity. That is why I'm excited about TexasIsHot.org. This website is an instructional resource that will help Texans save on their energy bills at home and in the workplace..." State Rep. Phil King (R-Weatherford)
  • "Now, more than ever, Texans need to work together to conserve energy and to make more efficient use of the energy we consume. The TexasIsHot.org website is an extraordinary resource for people who want to save money and help conserve our precious natural resources..." State Rep. Rafael Anchía (D-Dallas)
  • "By partnering with the TexasIsHot Coalition we can extend our effort’s reach, leverage our resources, and ensure that Austin’s energy grid continues to be a test-bed for technologies, products, and services that will transform our state’s energy system." Brewster McCracken, Executive Director, Pecan Street Project
  • "The City of Houston is working harder than ever to make Houston green and energy efficient, but we need the help of every citizen. I would encourage everyone to take a moment to explore the TexasIsHot website to learn what we can all do to make Houston, and the rest of Texas, the green and energy efficient example for the rest of the nation." Mayor Annise Parker, Houston
  • "Energy efficiency is one of our top priorities. Partnering with the TexasIsHot Coalition will help us educate citizens and local businesses about energy-efficient practices in order to meet our goal of reducing residential and commercial electric use." Gavin Dillingham, Chief of Sustainable Growth – General Services Department, for the City of Houston
  • "We are excited about the new partnership that the City of Corpus Christi has entered into with the TexasIsHot Coalition. TexasIsHot.org provides a platform to educate policy makers, city employees and citizens on how to save money and help the environment by conserving energy..." Mayor Joe Adame, Corpus Christi
  • "I am excited that the City of Corpus Christi has joined the TexasIsHot Coalition and look forward to working with them to help Texans become smarter energy users. Energy efficiency is by far the best way for people to reduce their bills and help the environment, but we need education and outreach to make this happen." State Rep. Solomon Ortiz, Jr (D-Corpus Christi)
  • "Because of its fast growth and hot summers, Texas has to get smarter about energy conservation. I applaud the efforts of Corpus Christi and TexasIsHot to help businesses and residents reap the benefits of increased efficiency." Senator Juan “Chuy” Hinojosa (D-McAllen)
  • "Energy efficiency is the cleanest, quickest and cheapest way to get smart about energy use, saving both money and the environment. I applaud the TexasIsHot Coalition in their effort to educate Texans about the benefits of energy efficiency..." Luke Metzger, Director, Environment Texas
Get Connected

Enter your email address and receive tips and helpful info from Texasishot.org