On-Bill Repayment: A Way To Eliminate The Upfront Costs For Energy Efficiency Projects

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"On-Bill Repayment: A Way To Eliminate The Upfront Costs For Energy Efficiency Projects"

by Kate Zerrenner, via Environmental Defense Fund

When a state is facing electric resource shortages, like Texas is, it’s just common sense to explore all the ways to make our electric use more efficient.

We know efficiency makes sense – in terms of grid reliability, lower emissions, and reduced costs to ratepayers. But there is a barrier to some ratepayers in implementing more energy efficiency: upfront costs. Several options currently exist to finance efficiency, such as home equity loans and incentive programs through utilities. But what about creating a market to allow private investors to invest in the market by offering lower rates for utility customers by ensuring some security through repayment on the utility bill? That’s what on-bill repayment aims to do.

On-bill repayment (OBR) offers an opportunity for home and building owners to finance energy efficiency and renewable electricity generation projects through cost-saving loans from third-party investors. The loans are repaid through customer’s utility bills.  The money comes from private sector lenders at no cost to ratepayers or taxpayers.  OBR also allows for longer term loans with lower interest rates.

The general concept of OBR is not new. Several utilities around the country have instituted on-bill finance programs. However, there is a key difference. On-bill finance programs use utility money to finance the program, thus creating an additional cost for the ratepayers. On-bill repayment would use new money from third parties, such as banks, to create a new market that is secure, cost effective, and enables more bang for the buck in terms of what the ratepayer receives.

OBR is a flexible program that works for a wide variety of properties and vendor business models.  In some programs, contractors are told what solutions can be offered to each customer.  OBR, on the other hand, allows each contractor or vendor significant latitude to design solutions that meet the needs for their customers.  This could include everything from insulation upgrades for residential customers or lighting upgrades for restaurants all the way to deep retrofits of commercial or industrial properties.  All of these would be delivered by the private sector and would be completely voluntary to each property owner.

Benefits of OBR include:

  • Job growth: We estimate that it could generate 100,000 new jobs to install energy efficiency and renewable electricity.
  • New market creation: We estimate that OBR could generate $13.5 billion over a decade in private sector investments in energy efficiency, renewable generation, and demand response projects.
  • Ratepayer and state savings: OBR would promote energy efficiency and distributed energy resources that avoid the cost of expensive new power plants and other high-cost generation—saving ratepayers $4.8 billion in energy bills.
  • Flexibility for contractors and vendors: Program participants would have considerable discretion to design product offerings and go-to-market strategies to meet their customers’ needs.

In a state like Texas that prides itself on making its economy attractive to investors and creating markets, especially in the energy sector, OBR could be an effective tool to opening up the state to a private sector solution that can ameliorate our Texas energy crunch. Efficiency is an investment that makes sense for Texas. As utilities face increasing demands on their energy resources, and fewer dollars to spend on efficiency for their customers, giving them another tool, energized by funds from the private market, will benefit the entire state.

Kate Zerrenner helps develop and implement strategies to promote energy efficiency in Texas and leads EDF’s multi-year campaign to influence and enact state and national energy efficiency policy. This piece was originally published at EDF’s Energy Exchange and was reprinted with permission.

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5 Responses to On-Bill Repayment: A Way To Eliminate The Upfront Costs For Energy Efficiency Projects

  1. gingerbaker says:

    “On-bill repayment (OBR) offers an opportunity for home and building owners to finance energy efficiency and renewable electricity generation projects through cost-saving loans from third-party investors. The loans are repaid through customer’s utility bills. The money comes from private sector lenders at no cost to ratepayers or taxpayers.”

    Why is the idea that no government taxpayer money is highlighted (once again) as a positive feature of such programs?

    Why would it not be more appropriate, less costly, and way more pragmatic to use government funds to convert to renewables?

    This paradigm, that only market-based solutions should be contemplated for our national conversion to renewable energy is an completely abject failure over the past three decades. Our CO2 emissions have never been higher!

    Continuing down this path is going to destroy civilization as we know it – unless you think that repeating the same failed strategy that has not worked is magically going to make our looming environmental catastrophe disappear.

    => We do not have the luxury of time anymore to futz around like this. It is time to start talking about how the Federal government can be our national 100% renewable electricity utility.

    We need to reduce our carbon emissions to zero in the next ten years if we are going to survive AGW. Bullshit like “on-bill repayment” is merely rearranging the chairs on the Titanic.

    • Mulga Mumblebrain says:

      Well said, Ginger! The habit of letting the Right’s ideological canards go unanswered, even unquestioned, is moral madness and intellectual cowardice. Government is the supposed expression of the popular will in so-called ‘democracies’, and taxation the price one pays for civilized decency. In this case Government spending paid for by taxation is also the means by which we escape annihilation. Why has no-one on the American pseudo-Left the guts to argue this case?

    • riverat says:

      I agree with you in principle but it’s impossible to hit net zero emissions of carbon in 10 years without killing off a whole lot of people. It’ll take longer than that to build out the infrastructure needed to make the transition. What’s important is that we get serious about making the transition.

      • Merrelyn Emery says:

        I’m sorry but there really is no way to sugar coat this – you are going to watch a lot of people die in the next 10 years. There is only one possible way out of major global catastrophe now, possible only, and that is for the only unifying forces we all have to mobilize everything we have and can dream up to stop the emissions now, and those forces are called governments, ME

      • gingerbaker says:

        Impossible? Why? And why will people die?

        If we had a crash Federal program, and invested the money to, say, cover the Mojave with PV panels, upgrade our grid, retrofit our homes and businesses to electric, and added electrical-induction charging to our roads we could accomplish this in perhaps five years.That one installation would be enough to replace every calorie of carbon energy our country needs.

        And supply millions of jobs along the way. Stimulate our economy like crazy.

        Even if the government paid for every penny of this plan, and gave the resulting electricity away for free forever, it would cost about only about 1/100 that the cost of adaptation to our current policy trajectory will take us.

        1/100th the cost and free electricity. Or business as usual and catastrophe.