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June 18, 2024
Buddy De Lozier (right), of Central Electric Cooperative inspects a new heat pump with a homeowner participating in the Help My House program.
On-Bill Financing
A mechanism that allows the costs of clean energy improvements to be repaid over time as a utility bill line-item.
For over a decade, the Environmental and Energy Study Institute (EESI) has run an on-bill financing (OBF) program to help households and small businesses access and afford clean energy upgrades to cut their energy bills and reduce greenhouse gas emissions. EESI offers no-cost technical assistance to rural electric cooperatives (co-ops), public power utilities, green banks, and state energy offices nationwide to implement inclusive OBF programs for energy efficiency, beneficial electrification, and clean energy upgrades.
EESI has helped more than three dozen utilities and green banks set up OBF programs nationwide. These efforts have resulted in more than 25 utilities launching inclusive OBF programs in more than 13 states, including Colorado, Hawaii, South Carolina, Vermont, and Washington. Since 2010, EESI-supported OBF programs have financed over $77 million in clean energy upgrades, helping thousands of families experience lower energy bills and enjoy a more comfortable home while reducing greenhouse gas emissions. At present, EESI is actively assisting a dozen rural utilities, green banks, and state energy offices to set up programs and secure low-cost capital.
It all started in 2010 when the Electric Cooperatives of South Carolina asked EESI to assist in designing and launching an OBF pilot program. With this program, members would gain access to cost-effective energy efficiency upgrades to reduce their energy costs and live more comfortably in their homes. The Help My House program began as a pilot in 2011 and was launched as a full program in 2013. Now encompassing seven rural electric co-ops, the program has financed more than $11 million in energy efficiency upgrades for over 1,100 households. The success of the Help My House program helped inspire the U.S. Department of Agriculture’s (USDA’s) Rural Energy Savings Program (RESP).
There are more than 900 rural electric co-ops and 2,000 public power utilities in the United States, all operating on a not-for-profit basis. Combined, they deliver power to 26% of U.S. households. Rural utilities face challenges when implementing on-bill financing programs because of a lack of resources, staff, and expertise. But OBF programs have shown, time and time again, to be popular with co-op members who see the value of installing cost-effective energy efficiency measures to reduce energy costs and improve comfort. When surveyed, EESI-supported on-bill financing program participants have expressed very high (95%) satisfaction with the program and the utility for offering it.
Rural households face significant challenges related to energy affordability and access to capital. Due to particularly inefficient housing stock in rural areas, rural families face energy burdens up to 40 percent higher than their urban counterparts. Those burdens are particularly acute for low-income Black, Latino, and Native American households, which spend 20 percent to 45 percent more on energy than the average white household. The availability of low-cost, long-term financing through inclusive OBF programs is key for rural families to access affordable energy efficiency and clean energy upgrades that will lower their energy bills and burdens.
Weatherizing buildings and installing clean energy upgrades offers multiple benefits, including reducing energy burdens, increasing resilience, and creating economic development opportunities, particularly for rural communities. Tightening a home’s building envelope increases resilience against extreme weather events, which are more intense and frequent due to climate change.
When designed appropriately, OBF programs improve energy affordability, expand access to capital for clean energy, and promote equity by providing financing to borrowers regardless of income or credit score. Program participants benefit from lower energy bills (even with repayments included), energy-efficient equipment, and a more comfortable home. Participating utilities benefit from lower and more predictable energy demand, leading to lower costs as it spares them the need to build new power plants or pay for additional electricity from outside producers at peak times.
OBF programs expand clean energy adoption through four primary program features:
1) no upfront costs
2) the obligation to repay is assigned to the meter, rather than the individual, and is shown as a line item on the utility bill
3) applicants are screened using on-time utility bill payment history rather than credit scores
4) positive cash-flow experiences for participants, even while paying for the upgrades
Program capital can come from different sources, including the utility itself, credit unions, community development financial institutions, green banks, capital market investors, or from the federal government (i.e., RESP).
The upfront cost of clean energy upgrades poses the biggest obstacle for families and small businesses, which often lack the capital to pay for what traditional utility rebates do not cover. Low- and moderate-income households have traditionally faced barriers to accessing capital due to below-average credit scores and the frequent inability to meet other traditional loan requirements. Because of these barriers, low-income households are slower to adopt energy efficiency and clean energy upgrades for their homes, although they would benefit from them the most.
OBF addresses these issues. These programs do not require a down payment, and are designed to ensure positive cash flow: the cost savings from reduced energy usage are greater than the loan repayment costs. Because the repayment is attached to the utility meter rather than the individual, it can be transferred to the dwelling’s next occupant. This is key for allowing renters to participate because they only pay for the upgrades while they realize their benefits. Multifamily buildings can also participate in these inclusive OBF programs, expanding their reach.
By installing cost-effective, whole-house energy efficiency measures, Help My House program participants experienced average annual energy savings of 35%. Manufactured home families participating in the program experienced energy savings of up to 50%, as manufactured homes tend to be less efficient and benefit more from the same improvements. Help My House participants save up to $300 on average annually on their utility bills, when accounting for the repayment. While the Help My House program does not collect income or racial data from participants, the co-ops serve rural areas where about one-third of households are Black or Latino households, and 25% have incomes below poverty levels.
In 2019, EESI’s OBF technical assistance took a big leap forward when Orcas Power and Light Cooperative (OPALCO), a rural electric co-op in Washington state, launched Switch It Up! to finance beneficial electrification. EESI’s assistance was the culmination of several years of work determining how best to assist co-ops in launching programs that help their members switch to more efficient electric equipment to save energy and reduce greenhouse gas emissions.
Beneficial electrification includes applying electricity to end-uses where doing so satisfies at least one of the following conditions without adversely affecting the others:
OPALCO’s OBF program helps its members adopt more efficient equipment like heat pumps and heat pump water heaters. Switch It Up! also finances energy efficiency measures like attic insulation, air sealing, and duct sealing; smart thermostats; fiber-to-the-home; on-site solar; community solar; electric vehicle charging equipment; and battery storage devices.
With EESI’s assistance, OPALCO secured $46 million in zero-percent capital through RESP. Because RESP is a no-interest loan, OPALCO can offer 2% financing for up to 10 years to its co-op members.
Beneficial electrification has become a hot topic as utilities and households switch from fossil fuels to electricity to reduce their energy consumption and greenhouse gas emissions. In 2022, EESI launched the Beneficial Electrification Toolkit, a free online resource to help utilities and stakeholders turn a general interest in beneficial electrification into programs. The Toolkit is full of information about a wide range of electrification technologies, including heat pumps, vehicles, and battery storage. It is structured to help utilities and stakeholders understand beneficial electrification technologies and devise programs for their members and customers. Additionally, the Toolkit offers several case studies to help rural utilities set up beneficial electrification programs that feature OBF for their customers.
In 2019, for the first time, a green bank launched an inclusive OBF program. The Hawai’i Green Infrastructure Authority (HGIA)—Hawai’i’s Green Bank—launched the Green Energy Money $aver (GEM$) program with EESI’s assistance. GEM$ finances clean energy upgrades such as solar energy, battery storage, and beneficial electrification for low- and medium-income residential and commercial customers (including nonprofits, multi-family projects, and small businesses), regardless of income, credit rating, or renter status. GEM$ helps increase the adoption of clean energy upgrades in a group of islands where 70% of energy production comes from fossil fuels.
HGIA became the first green bank to receive a RESP loan in 2022, with support from EESI. The $20 million zero-interest loan is helping the green bank continue to offer low-interest clean energy investments for rural communities in Hawaii.
Inclusive OBF programs continued to expand in 2024. The Colorado Clean Energy Fund, in partnership with the Tri-State Generation and Transmission Association and with EESI’s assistance, developed an OBF program for energy efficiency, beneficial electrification, and battery storage devices. To capitalize the program, Tri-State secured $75 million in zero-percent RESP loans from USDA. In May, the Electrify and Save on-bill program became available to all 42 rural electric co-ops Tri-State provides power to across Colorado, Nebraska, New Mexico, and Wyoming. The first two distribution co-ops to offer Electrify and Save to their members are the San Luis Valley Rural Electric Cooperative in southern Colorado and Sangre de Cristo Electric Association in the south-central part of the state.
Author: Miguel Yañez-Barnuevo
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