Residential Energy Efficiency Financing

In many geographies, particularly those with older housing stock, there is a large market opportunity to simultaneously improve home comfort and reduce monthly energy costs by increasing the energy efficiency of homes.

But large upfront costs and uncertainty of savings limits homeowners’ investment in energy efficiency upgrades. Homeowners often do not want to pay for upgrades out of pocket for upgrades with uncertain savings.

Yet there are increasingly products available that allow homeowners to get the benefits of home energy efficiency with more dependable savings and without paying the upfront cost. Two examples of these innovative solutions are below.

CT Green Bank Smart-E Loan

The Connecticut Green Bank incentivized local lenders in Connecticut to offer loans to finance multi-measure energy efficiency retrofits by creating a loan-loss reserve that would de-risk any such loans that were ultimately made. To benefit from the loan loss reserve, participating lenders had to agree to various conditions, and the terms of their loans had to fit within criteria specified by the Connecticut Green Bank.

As a result of the Connecticut Green Bank’s loan-loss reserve, 11 private lenders now offer unsecured personal Smart-E Loans for home energy retrofits in Connecticut. Homeowners can finance any combination of over 40 eligible efficiency measures, and can borrow up to $40k. The loans have variable terms between 5 and 12 years, and terms are chosen such that savings are greater than loan payments so the projects are cash flow positive for the homeowners. Interest rates are offered at attractive rates due to Connecticut Green Bank’s loan loss reserve, and homeowners pay a fixed monthly payment with no pre-payment penalty.

The Connecticut Green Bank also trains contractors on how to use the financing products from the local lenders, and thereby increase the amount of business they do and customers they can serve.

NY Green Bank Sealed

Sealed, a New York-based company, and the NY Green Bank are working together to address the opportunities in the residential energy efficiency market. Sealed has a product that uses energy savings modeling technology, combined with its Pay As You Save (PAYS) model to provide homeowners with no- and low-cost efficiency retrofits that are repaid through a Sealed bill. Sealed pays for most of the upfront efficiency retrofit project cost, then uses the energy savings to pay themselves back (Sealed website, HomeAdvance). Homeowners are also guaranteed a lower bill than they would have paid through their utility.

Sealed website, HomeAdvance

To support Sealed’s innovative model, NY Green Bank provided a $5 million credit facility to facilitate the financing of up to $7.5 million in energy efficiency upgrades, or up to 400 additional homeowners in New York. NYGB’s credit facility will help establish a track record for Sealed’s financing approach and will provide an opportunity to Sealed, and potential future investors, to determine the scalability of the market. Upon creation of an initial portfolio, private capital providers are expected to engage more readily in future financing discussions. The credit facility provided by NYGB is replicable for other participants in the clean energy market in New York State, specifically smaller developers with early marketplace success but limited scale to date.