Financing and Implementing Energy Efficiency Initiatives Glenn Barnes Environmental Finance Center 919-962-2789 glennbarnes@sog.unc.edu www.efc.unc.edu
What is the EFC? Dedicated to enhancing the ability of governments and organizations to provide environmental programs and services in fair, effective and financially sustainable ways. Housed at the UNC School of Government.
Session Objectives Learn how to support interesting energy improvement work being done by local governments and others Identify and evaluate different partners and financing strategies Provide forum for sharing finance and management perspectives, ideas, and experiences
Scope of Energy Programs Government Facilities, Operations & Maintenance Employee actions The community
Three Guiding Principles for Community Development To increase the standards of living for North Carolinians; To reduce inequality; and To promote and encourage sustainable resource use and production Source: Henry McCoy
Promote and encourage sustainable resource use and production Of the guiding principles, this one probably has the clearest tie to energy efficiency and renewable energy and it relates to the infrastructure core area of community development But what about the other two?
Increase the standards of living for North Carolinians Job creation is a core area of community development Jobs actually doing the energy improvements Jobs saved by energy cost savings to public and private sectors Energy efficiency in residences leads to improved comfort
Reduce inequality Electricity rates in North Carolina are below the national average Average annual bill is between 2-5 percent of MHI but is that affordable?
Reduce inequality For half of all residents in a given community, their bill is more than 2-5% Bills are higher for municipal utilities and for coops that serve rural areas Energy improvements can bring down the bills for lower income families a tie to the core area of housing
Energy Efficiency Projects and Initiatives Defined
Lots of Projects... General Government Buildings Libraries Schools Prisons Police & Fire Stations Community/Senior Centers Parking Decks Landfills Transit Depots Convention Centers Parks & Outdoor Venues Water & Wastewater Treatment Plants
Examples of Energy Improvement Projects in Government Facilities Lighting Insulation Water/Wastewater Pumps Street Lights Solar Hot Water Landfill Gas Green Building design Renewables Biosolids to Energy
Examples of Community Energy Projects and Initiatives Weatherization for low income households Weatherization for public housing Paying for retrofits Rebates on energy improvements EE programs in schools Discounted/expedited permitting Residential loans Commercial loans Hog Waste to Energy Poultry Waste to Energy
Establishing Successful Partnerships and Working Relationships
Community Development Groups Part of an Overall State Effort From ACEEE report How State Governments Enable Local Governments to Advance Energy Efficiency
Fellow Technical Assistance Partners State Energy Office DENR Division of Environmental Assistance and Outreach http://portal.ncdenr.org/web/deao/ea/energyefficiency EFC NCSEA and other associations NC Solar Center Others
Energy Project Partners Energy Service Companies (ESCOs) Energy Auditors Contractors Vendors (e.g. Home Depot, Lowes) Quality Assurance Providers
Partners in Program Implementation Local Governments Utilities Third Party Program Administrators Community Development & Economic Development Entities
Financial Partners Local Governments Financial Institutions Local/Regional Banks Credit Unions CDFIs Utilities Primarily municipal and cooperative
Financing and Funding Energy Efficiency Initiatives
Paying for Energy Programs Two main program elements Finance program design Sources of capital Programs around the state and country mix and match designs and sources of capital
Common Barriers to Program Implementation Limited financial resources Resistance to change Scarce human or time resources Misunderstood or unfocused definition of sustainability Difficulty gathering data or establishing measurements Organizational structure Source: Ashley, Jackie. From Commitment to Action: Success Stories from Local Government Sustainability Initiatives. 2008 UNC MPA Capstone Paper.
This is NOT the Answer
Government Funding Sources and Revenues Sources of Funds Appropriated funds Unrestricted fund balance Capital reserve fund Grants Public and Private Fees ESCO financing Loans/Bond proceeds Installment purchase G.O. Special (Qualified Energy Conservation Bonds) Revenues Increased appropriated funds Savings linked to project Revenue linked to project Energy sales Green tags/recs Assessments Fees for service
Creative Finance Program Designs and Options
Innovative Options for Internal Government Programs
Guaranteed Energy Savings Contracts Contract for the evaluation, recommendation, or implementation of energy conservation measures Payments made over time Energy savings guaranteed to exceed costs G.S. 143-64.17(3)
Using Third Party Ownership to Capture Tax Credits Governments not eligible for tax credits Third party installs and owns energy improvement, then transfers to government after tax credit period over for market value
Qualified Energy Conservation Bonds 1%-5% effective interest rate for issuer Issuer gets 3%-4% subsidy from Treasury 15 to 20-year term Qualified projects are broadly defined internal government improvements, community projects, rural projects North Carolina has ~$96 million allocation
Internal Revolving Energy Funds Capitalized as a bank from which departments and divisions can borrow to fund energy efficiency, renewable energy or energy conservation projects Energy cost savings are used to replenish the bank, and then more loans are made
Innovative Options for Community Programs
Revolving Loan Funds Government loans out its own money to residents and businesses Example: Carrboro Commercial Energy Efficiency Revolving Loan Fund
Loan Loss Reserve Pools/Capital Access Program Credit enhancement to support private lending Examples: Rural Center CAP, Greensboro LLR, Michigan Saves, Keystone Help (Pennsylvania)
PACE Property owners assessed for cost of energy improvement through their property tax bills Residential programs on hold Example: Florida Statewide Agency, Commercial program in Boulder County, CO funded by QECBs
Interest Rate Buy-Down Cash paid to lenders to lower the interest rate that borrowers pay Example: Connecticut program to buy down interest rate of Fannie Mae energy loan program, UVA Community Credit Union
Rebates Program covers some or all of the cost of a specific energy improvement or suite of improvements Wide range, from small appliance rebates under $100 to whole house retrofit rebates for thousands of dollars Very common with utilities
Sustainable Energy Business Improvement District Authority for this would come from G.S. 160A-536, which allows for a city council to create a special district for downtown revitalization projects Services such as installation of solar panels, upgrades to water heaters or a.c. units, or other green services such as a green street lighting program or extensive recycling services
Innovative Options Summary Internal Government Guaranteed Energy Savings Contracts Third Party Ownership QECBs Internal Revolving Energy Funds Community Revolving Loan Funds Loan Loss Reserves PACE Interest Rate Buy-Down Rebates Sustainable Energy Business Improvement Districts
Key Resource: DSIRE Database http://www.dsireusa.org/
Questions? www.efc.unc.edu
Some Cool North Carolina Projects
Alleghany County/Town of Sparta Lighting upgrades in six buildings Funding from EECBG grants Tier 1 County
Wilmington Street Sweeper Facility Includes solar PV, solar thermal, natural lighting building orientation Expected electric bills were $23,000 annually; actual are $1,500 ~8 year payback
Haywood County Landfill Gas New project will convert methane gas into electricity at the old Francis Farm Landfill near Waynesville system owned by county Power will be sold to Haywood EMC Hope to profit off landfill for 15 years
Historic Bakersville Courthouse LEED Renovation Meet LEED Standards in Construction Geo-Thermal HVAC Teleconference Center for Mayland Community College and public access computer systems
Raleigh Water Plant Solar Array 250 kw Solar PV System on roof of clearwell Third Party ownership with 20 year lease
Durham County High Performance Building Standards LEED Gold or better on new construction (non-school) >10,000 sq ft. LEED Silver for 4,000 to 1,000 sq ft Major renovations LEED certified New buildings sited to reduce transportation-related energy use
Martin County Community Action Residential Energy Efficiency Services NC Weatherization program 33 providers Provides energy improvements to households below poverty level or that receive assistance payments under SSI or TANF Includes HVAC tune-ups, air sealing, insulation, lighting
Durham Paying for Retrofits Example: Durham s Neighborhood Energy Retrofit Program Typical retrofit package was $800 to $2,000. Eligible residents received the upgrades for $200 to $300 Now doing broader base home program
Self Help Loan Program Just announced a few weeks ago $15 million in low-interest loans for energy projects in Charlotte and other cities Targeted at commercial, community and multifamily buildings in economically distressed areas
In Rural Areas, Electricity Coops often sponsor critical energy programs
Solar Water Heater Rebates Four County EMC Bladen, Duplin, Pender, Sampson counties $1,000 rebate for members who install a solar water heater with an electric back up South River EMC Harnett, Cumberland, Sampson, Johnston and Bladen counties $400 rebate
Ag Lighting Rebates Four County EMC Bladen, Duplin, Pender, Sampson counties 25% to upgrade the lighting in chicken, hog, and turkey houses to CFLs Randolph EMC Randolph, Moore, Montgomery, Chatham and Alamance counties 25% to upgrade the lighting in chicken, hog, and turkey houses to CFLs
Low Interest Loans Tideland EMC Dare, Hyde, Beaufort, Washington, Pamlico and Craven counties Up to $10,000 for 3-5 years at 5% interest, secured with deed of trust on property
Hog Waste to Energy Example: Loyd Ray Farms in Yadkin County Duke University partnership with Duke Energy, Google, and funding from NRCS Starting this year, NC utilities have to create energy from swine waste
Poultry Waste to Energy Coming Soon to Montgomery County Poultry Power USA will build, own and operate the 36-megawatt (MW) power plant and sell the electricity to Progress Energy
Biltmore Estates Solar Array Six-acre, 1.5 mega-watt system of approx. 5,000 interconnected solar panels Will provide about 25 percent of power for estate