Utility On-bill Financing an Added Option for Energy Efficiency Projects

By Greg Zimmerman, Executive Editor  
OTHER PARTS OF THIS ARTICLEPt. 1: Finding Best Financing Options for Energy Efficiency ProjectsPt. 2: ‘Threshold Questions’ Help Find Path to Energy Efficiency FinancingPt. 3: Financing Tools Include Energy Performance Contract, Energy Service AgreementPt. 4: This PagePt. 5: PACE Financing an Option for More Extensive Energy Efficiency Projects

In trying to decide on the financing options for an energy efficiency project, if facility managers would rather accept the performance risk for themselves or are unable to partner with a third-party, they have a few further options that allow financing in convenient ways, with no initial capital outlay. One that is really gaining momentum is called utility on-bill financing, though facility managers should check at the outset of project planning to see if this is available in their areas.

Goulding describes on-bill financing thusly: The utility makes a loan for the energy efficiency project, and the organization repays the loan through a monthly payment added on to the utility bill. The financing is structured such that the monthly payment is less than the savings derived from the energy efficiency project. On-bill repayment is a similar type of financing, only in this type, a bank (instead of the utility) makes the loan, and through an arrangement with the utility, the organization repays the loan on the utility bill. The difference is simply where the loan comes from.

One of the advantages of on-bill financing/repayment, says Audin, is that it can be done for small-scale projects — a $10,000 lighting upgrade for instance. Another advantage, says Goulding, is that, "Repayment should be economically painless since the property owner's monthly outlay essentially remains constant." A third is simple convenience — a billing structure is already in place, as owners are paying utility bills monthly anyway. And finally, says Goulding, on-bill financing/repayment is a good choice for projects that need to move quickly — if a piece of equipment has failed, for instance. That's because credit decisions can come almost instantly and the money is available soon after.

One potential downside to on-bill financing/repayment "is that programs are usually limited to prescribed measures such as lighting and HVAC. If any construction is required, it might not be eligible for the program," says Goulding. As well, a caution with on-bill financing in particular is that facility managers may be able to get money cheaper with their own credit rather than the utility's — a factor that should definitely be considered before entering into an arrangement.

For More Information on Financing Options for Energy Efficiency Projects

  • To search for utility incentives and rebates in your state or city, visit the Database of State Incentives for Renewables and Efficiency:
  • To learn more about property assessed clean energy financing (PACE), including whether there is a PACE program available to you, visit: www.pacenow.org

— Greg Zimmerman

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  posted on 3/30/2015   Article Use Policy

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