Despite the recent (and undoubtedly temporary) drop in energy prices, the fact remains that because of the economic downturn and an aging housing stock, many families will struggle to heat their homes this winter. At the same time, the need to create jobs, stimulate the economy, create sound investment opportunities and drastically reduce greenhouse gas emissions has never been greater. There is no silver bullet for solving all these challenges, but an innovative financing mechanism for renewable energy and energy efficiency could go a long way toward putting the country on the right track. Here's how it works.
Homeowners Need Efficiency Upgrades--But Can't Afford Them
Imagine you are a low-income homeowner in Providence, Rhode Island. Chances are your home is 100 years old: the walls are barely insulated, the windows single-paned, and the boiler a relic of the 1950s. In the winter your heating bills are such that you can hardly afford to run the heat, often leaving your family shivering. And even though a $10,000 investment would dramatically lower those heating costs and pay for itself within 5 years, you can hardly pay for the mortgage--let alone $10,000 in efficiency upgrades.
How the Model Works--And It's Potential
Now imagine that the city has a program that covers 100% of the up-front cost of the installation. First, an energy audit is done on your home to determine the best suite of efficiency upgrades. A local contractor--who is required to hire graduates of a local green job training program as part of participating in the program--then does the installation. Your utility bills immediately go down, and your property tax increases by an amount equal to your savings, so that there is no net cost. Or, the utility might simply keep your bill constant, using the difference to pay whoever issued the loan--be it the city or a private company. Because the loan does not depend on your credit score, you can secure a better interest rate than if you were to go to a bank. And if you sell the house at any time during the 10-15 year payback period, the new repayments will continue under the new homeowner.
This model, which is currently being piloted in Berkeley and San Francisco for solar photovoltaic and solar thermal systems, and in Milwaukee for energy efficiency, has the potential to be a powerful investment mechanism. In fact, a "study soon to be published by a team from the UC Berkeley Renewable and Appropriate Energy Laboratory found the potential for this type of financing to go national -- investing $240 billion in renewable energy and energy efficiency, reducing 37 million metric tons of CO2, saving homeowners an average of $190 a year, all at no net cost to government. " (source: Grist)
Banks Could Have Avoided Collapse
Consider this: while banks were busy raking in huge profits by effectively pushing paper around, they could have been working with cities to finance energy-saving, job creating programs that offer real, tangible returns on investment. Private investors could have put their money into investments that, yes, offer a lower return, but are also financially secure and morally sound. Thousands of companies that install, service, design, construct and transport clean energy technologies would be busy filling orders, and jobs in the sector would be growing. Instead, innovative programs--including the pilot projects in Milwaukee and Berkeley--have had a hard time raising capital. The bailout for the financial industry should have required that financial entities seek out low-risk, high social impact investments such as these. Instead, the bailout has neither freed up credit nor helped struggling homeowners.
Private Companies Are Answering the Call, But More is Needed
Fortunately, progressive cities aren't the only ones getting in on the game. Solar City is offering no money down residential solar panel leases, and SunEdison has pioneered the third-party energy service model, under which the company pays for, installs and operates rooftop solar arrays, and companies such as Wal-Mart buy the energy from those arrays at a fixed price over the life of the system.
But the market potential is huge and hardly being tapped; more needs to be done to bring green technologies--and financing schemes--to market. After all, buildings account for a significant percentage of greenhouse gases, and there are literally millions of rooftops just waiting for solar arrays to start producing clean energy. President-elect Obama is talking a lot about a green economic stimulus program, and politicians across the country see the potential for green collar jobs to create a healthier society and environment. The problem has always been putting up the money it takes to actually create those jobs. With new financing mechanisms like this, there is no longer an excuse not to make the green economy a reality.
More on Innovative Financing Mechanisms for Cleantech
Easy for Staples to go Solar
World's Largest Solar Project for Nevada Military Base
Koehl's Converting Californian Stores to Solar Power
TreeHugger Picks: Why Buy When you Can Rent?
Whole Foods Looks to the Sun
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