California Program Finances Efficiency Retrofits

financing program, commercial energy efficiency retrofits In order to cut upfront costs to the commercial sector, California utilities Sempra, SoCalEd and PG&E are initiating the first On-Bill Repayment (OBR) program in early 2013. This came after the California Public Utility Commission (CPUC) announced it would require investor-owned utilities to create On-Bill Repayment (OBR) programs.

The financing proposal, first presented to CPUC by the Environmental Defense Fund (EDF), allows building owners and renters to fund energy efficiency upgrades and renewable electricity generation projects with bank or other private loans that are repaid through their energy bills.

Using third-party capital to finance energy efficiency retrofits in commercial properties, property owners will be able to access low-cost capital to finance upgrades and repay the investment through their utility bill.

Over the next 10 years, EDF estimates that OBR could generate $6 billion of private sector investment in commercial energy efficiency investment.

OBR is expected to be operational in California by the end of March 2013. EDF will be working closely with energy efficiency project developers, energy services companies, lenders and other investors to develop a robust pipeline of OBR projects that can be executed soon after program initiation. During the next few years, EDF hopes to expand this initial program to additional states, and to cover residential properties.

EDF estimates that if 1% of California households utilize on bill repayment it could spur investments in the range of $3 billion annually could create 20,000 jobs and, after five years, reduce annual electricity use and emissions equal to that of 1.6 million cars.

The OBR program will contain three design elements that EDF believes are critical to success:

  • The obligation will ‘run with the meter' upon change in ownership or occupancy including via foreclosure. This both improves the credit quality of the obligation and allows investment in longer-payback retrofits.
  • Partial payments will be allocated pro rata between energy and financing obligations. The utilities will also use all standard collection procedures for unpaid obligations. These features insure that the obligation will be treated similarly to existing utility bills.
  • The program will provide flexibility for vendors, contractors, project developers, lenders and other investors to design retrofit solutions, go-to-market strategies and financing products that meet the needs of their customers.