Over the past several years, the energy efficiency community has worked hard to engage lenders in what is estimated to be a $279 billion market. At ACEEE’s annual Finance Forums, we have witnessed tremendous progress. As we work to mainstream the market, it is important to assess where to focus our efforts to maximize impacts and maintain lender interest and engagement.
Last week ACEEE and Energi Insurance Services, with support from the [no-glossary]Department of Energy[/no-glossary], the National Renewable Energy Laboratory, and Argonne National Laboratory, hosted the Small Lender Energy Efficiency Convening (SLEEC), a convening of small to mid-size lenders with an interest in participating in the market for energy efficiency investments in commercial, residential, and industrial markets.. The convening brought together about 30 key stakeholders, the majority of whom are actively lending to consumers and businesses looking to make energy efficiency improvements. The lenders shared their motivations for participating in the market, perceived obstacles to energy efficiency lending, and suggestions on possible roles for research, policy, and technical assistance to catalyze market activity.
Five key findings emerged from the discussion:
- Non-mission-driven lenders are drawn to energy efficiency because they view it as an opportunity to create a sustainable business model. One participant cited a statistic that 5-10% of residential customers will at some point make energy efficiency improvements. They also view it as a largely untapped market and see a high potential to develop a market niche.
- Mission-driven lenders are drawn to energy efficiency by the potential high impact that energy savings could have for their low- and moderate-income customers, particularly those in multifamily housing, and within their communities. Some cited an alignment with their affordable housing mission.
- There is a great need for the energy efficiency community and consumers to demonstrate demand for, and show success of, energy efficiency products and services. Lenders are not seeking to “sell loans” but rather to finance services that consumers already want. Connecting lenders with active participants in the community including energy audit firms and contractors could catalyze some additional market activity.
- Validation of cash flow from energy efficiency improvements remain a concern for energy efficiency-specific lending products, though non-mission-driven lenders are more likely to focus on the likelihood of loan repayment than certainty about energy savings. These concerns may be mitigated, in part, with increased awareness of existing data projects and products. In addition, the availability of both public sector and philanthropic credit enhancements (e.g., loan-loss reserves), and private sector credit enhancements (e.g., insurance) could be useful in bringing the market to maturity.
- There is a lot of great publicly available information about energy efficiency and market opportunity that is targeted toward lenders. This information has been deemed potentially useful, but it is not necessarily reaching this core audience.
The group expressed interest in maintaining and expanding this network of lenders. ACEEE will be working to develop resources and networking opportunities for this group going forward. The complete results of the conversation will be released in an ACEEE white paper in early 2014.
Key stakeholders in the energy efficiency community are seeking to leverage lender input to determine future funding and project priorities. If you are a lender and you are interested in engaging with like-minded institutions as a part of SLEEC, please reach out to Casey Bell at email@example.com.