How energy efficiency financing can help states meet Clean Power Plan goals

Blog Post | May 27, 2015 - 9:13 am
By Sara Hayes, Program Manager, Health and Environment

EPA’s final rule for regulating greenhouse gases from existing power plants, the Clean Power Plan, is anticipated later this summer. With just 12 months to develop compliance plans, states will have to scramble to identify their most reliable, lowest cost compliance options. In addition, they will have to find funds to pay for it all.

Building new, cleaner generation is typically funded through increases in electricity rates. Utility-run energy efficiency programs are often funded this way as well. There are other options, though. Energy efficiency financing can leverage public and private sources of funding to remove some of the typical barriers to investments in new technologies—namely, by spreading upfront investment costs into smaller payments over time.

Today, ACEEE is releasing the second in a series of step-by-step guides that help states claim emissions reductions resulting from energy efficiency programs and policies. Navigating the Clean Power Plan: A Template for Including Energy Efficiency Finance Programs in State Compliance Plans is focused on helping states incorporate financing programs and policies into their plans for complying with the EPA Clean Power Plan. The tool provides an overview of some types of financing approaches that may be well suited for Clean Power Plan compliance. (For those interested in learning about some of the best financing options out there, consider the Energy Efficiency Finance Forum coming at the end of the month.)

Additionally, the tool highlights program and policy design aspects that states should weigh, and a discussion of issues that may need to be addressed in a compliance plan submission. For those interested in digging a bit deeper, the tool also includes a hypothetical submission to EPA based on a real-world financing program in Ohio.

Greater Cincinnati Property Assessed Clean Energy, or “GC-PACE,” is modeled after PACE programs around the country and serves the state of Ohio. Essentially the PACE model allows building owners to finance efficiency and renewable energy improvements through a voluntary assessment on their property tax bill. Loans are secured by a lien on the property, so long-term funding can be raised from the private sector. The City of Cincinnati is the lead sponsoring municipality, and the program relies on a partnership between the Port of Greater Cincinnati Development Authority and the Greater Cincinnati Energy Alliance.

This is a great example of how localities can play a critical role in state compliance planning. The GC-PACE financing mechanism eliminates the upfront costs of energy improvement projects, a common barrier to the implementation of energy efficiency. Commercial and industrial building owners can obtain financing for clean energy improvements to their buildings by opting to add the financed cost of the improvements to a special property tax assessment on their property.

No single program or policy is likely to be the magic pill that gets a state all the way to compliance. Rather, states will likely need a suite of measures to achieve EPA’s goals. We will continue to support states in thinking through their options in the coming months. For more tools like this template, see our first in the series on building codes. Check back here next week for a brand new template on how to obtain credit for combined heat and power in a state compliance plan.