“On-bill financing” is a term typically used to describe loan programs for home energy efficiency improvements where the loan is paid back through an extra charge on a customer’s electricity bill. This is not a novel idea, as it has been implemented on various scales and in various forms by municipalities, electric cooperatives (“co-ops”) and even large for-profit utilities across America.
Additionally, loans for energy efficiency retrofits might not sound very exciting to the average American citizen who understands what a loan is, and more and more, what it is like to face debt for years on end. However, on-bill financing is not just another loan program.
The concept of on-bill financing has emerged as an effective and affordable way to help low- and middle-income residents overcome financial barriers to saving energy and money, improving the value of their home, and living a more comfortable life, while at the same time reducing the environmental impacts associated with burning fossil fuels to produce electricity and heat. The goal of such loans is to finance home energy improvements that result in a net savings for the resident, rather than a net cost.
For these reasons, Appalachian Voices, through our Energy Savings for Appalachia program has been hitting the road to promote on-bill financing as a way to help residents save energy and money while promoting economic development and environmental protection at the same time.
Model programs such as the “Help My House” pilot program developed by Central Electric Power Cooperative, Inc. (“Central”) and the Electric Cooperatives of South Carolina (ECSC) are gaining national attention and paving the way for all types of electric utilities to more efficiently develop and implement on-bill financing programs to benefit their customers. And in the example of Central and ECSC, which have committed to a goal of 10 percent by 2020, these programs can also help utilities or their representative organizations achieve their energy efficiency objectives.
Following a successful first year for the pilot program, Central and ECSC released a report on July 1 detailing the program and the final results of the pilot, results which, in Environmental and Energy Study Institute’s words, “further demonstrate that energy efficiency retrofits can be successfully implemented using an on-bill financing model.”
In general, the program involved participation by eight of Central’s 20 electric co-ops. A total of 125 low-income residents with inefficient housing received loans for high-impact energy efficiency improvements. The 10-year loans were provided at a low 2.5 percent interest rate, and the average loan amounted to nearly $7,700. So overall, just under $1 million in financing was leveraged through the pilot program.
The results of these loans are staggering. Of the 125 participating homes, nearly every participating home received savings that exceeded or fell within $10 per month of their loan payment, and every home will receive savings far in excess of their total loan payments long before the efficiency measures reach the end of their expected lifetime.
The numbers provide an even greater indication of how on-bill financing can benefit participating residents:
· An average reduction of more than 10,800 kilowatt-hours per home over the first year
· An average annual savings of $1,157 ($96 per month), of which $869 went toward repaying the loan and the remaining $288 was kept by the resident
· An average repayment period of 6.6 years, which is substantially less than the 10-year loan period
· A net average savings per home of more than $8,500 over 15 years
The participating electric co-ops have benefited as well, as the lower electricity consumption reduced peak demand by 27 percent in the summer and 46 percent in the winter. This means that, particularly with an expanded program, costs associated with managing and covering sharp increases in electricity demand can be drastically reduced for participating co-ops. The reduced demand can also prevent the need for new costs associated with expanding transmission and distribution capacity.
In addition to detailing the benefits of on-bill financing, the report also serves as a step-by-step guide and model for other electric cooperative associations or individual co-ops interested in developing their own program. Also, the success of “Help My House” has convinced some of the participating co-ops to initiate ongoing and expanded programs and now some non-participating co-ops to develop their own programs.
Altogether, these results show that on-bill financing works and that as more and more co-ops and other utilities are shown the benefits of on-bill financing they are beginning to develop their own programs. This is why Appalachian Voices is developing partnerships with EESI and other stakeholders to promote and help develop on-bill energy efficiency financing programs to rural electric co-ops and key municipal utilities across the Appalachian region.
The “Help My House” program was developed in collaboration with a group of key partners including both participating and nonparticipating co-ops; the Environmental and Energy Study Institute, which assisted with program design and outreach; Ecova, a firm that implements energy efficiency programs for utilities; and many others.
To learn more, read the “Help My House” report, and contact Appalachian Voices to learn what you can do to promote energy efficiency and on-bill financing in your community.