Innovative Financing

Spending to Save

One of the biggest challenges faced by property owners seeking to make energy efficiency upgrades is their ability to cover upfront costs. To help address the first-cost barrier and spur investments in energy efficiency, over 150 utilities and state/local governments sponsor special financing programs.

Financing Mechanisms

Some use conventional tools, such as low- or zero-interest short term loans, with streamlined application processes to attract customers. Recently, new program models like tariff-based on-bill financing and property assessed clean energy (PACE) have been introduced. These attach the responsibility for the loan to the meter or property rather than the owner and the obligation transfers upon sale, allowing for longer payback periods and for more comprehensive or costly measures to be pursued. While PACE has only been piloted in a handful of jurisdictions around the country, it's a hot topic. In the City of Berkley’s first program year, more than 1,300 local governments contacted city staff to learn more about their pilot, and inquire about how to replicate it in their own communities. PACE has been garnering a lot of attention at the federal level too, as a mechanism that, if proven, may be the key to widespread market transformation.

Innovative financing options are also available for municipalities seeking to retrofit their own facilities - through revolving loan funds and performance contracts, which allow for investment capital to be repaid through energy savings.

Learn More

This section contains overviews, case studies, and how-to guides to help you learn more about these financing mechanisms. This topic is particularly important to communities implementing programs with Recovery Act funding, since the guidance challenges recipients to leverage public money and private financing, and develop long term self-sustaining programs.