Upfront costs are a major barrier to implementing energy efficiency projects in homes and businesses.  An important goal of efficiency policies and programs is to help minimize these upfront project costs so owners are encouraged to invest in energy efficiency improvements and significant retrofits.  Several financing strategies are being pursued to achieve this goal.  Examples include on-bill financing, property tax financing (also known as Property Assessed Clean Energy or PACE bond financing), energy service performance contracting (ESPC), and energy efficiency mortgages (EEMs).

Various entities may offer these types of financing for energy efficiency upgrades, including utilities, federal, state and local governments, and energy service companies (ESCOs). In addition, private equity entities have become increasingly interested in funding packages of energy efficiency projects. The success and prevalence of the financing programs, however, has ebbed and flowed over the past few decades due to their complexity and challenges.  For example:

• Financing programs for homeowners have typically drawn low participation rates and tend to attract educated and motivated homeowners who are the least in need of financing opportunities.  Financing for those who are most in need – people with low or fixed incomes and poor credit – has had low success.
• The private-sector ESCO market for energy efficiency services in commercial buildings and institutions has enjoyed greater success recently, and has grown significantly over the past several years.
• A wave of interest in Property Assessed Clean Energy (PACE) bond financing has swept through states and localities since 2008.  Implementation of the program has been largely stalled, however, partly due to the learning curve of an innovative program and because of issues interacting with the credit market.

ACEEE seeks to better understand effective financing opportunities as a critical aspect of improving energy efficiency in our homes and businesses. Our annual Energy Efficiency Finance Forum, designed for investors, financiers, utilities, and policymakers, surveys the energy efficiency financial landscape including the latest innovations in financial structures and models.