Energy efficiency retrofits in our homes and buildings can achieve large monetary and energy savings across the buildings sector, but face numerous barriers. High upfront costs continue to be one of the significant barriers to tapping into this savings potential. Addressing the financial barrier to investments in energy efficiency has been a complex hurdle, which is evident from the number of innovative energy efficiency financing program designs that have emerged over the past several decades. To achieve higher savings from energy efficiency programs for buildings, it is imperative to assist property owners with financing the upfront costs of efficiency improvements. On-bill financing (OBF) can support this goal by leveraging an electric or natural gas utility’s unique relationship with their energy customers to provide convenient access to funding for energy efficiency investments. This access to financing can then enable customer participation in other energy efficiency programs.
Credit losses on both consumer and commercial utility bills tend to be far lower than for other obligations. OBF allows utility customers to invest in energy efficiency improvements and repay the funds through additional charges on their utility bills. If structured properly, an OBF program can substantially reduce the cost of and improve access to financing. In many cases, the product can be “bill-neutral,” meaning that energy savings are sufficient to cover the monthly payments for the financing so that the total monthly charge on utility bills is less than or equal to the pre-investment amount.
On-bill programs have been piloted as early as 1993 (New London Resource Project, Wisconsin), but have recently seen a surge in popularity. Currently, utilities in at least 23 states have implemented or are about to implement OBF programs, many of which (Illinois, Hawaii, Oregon, California, Kentucky, Georgia, South Carolina, Michigan, and New York) have legislation in place that supports adoption. Additionally, a number of state utility regulators have taken action to explore the feasibility of on-bill programs.