Chasing Green: Going Solar by Paying Your Utility Bill

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Image by solarpowerforyou/<a href="http://www.flickr.com/photos/solarpowerforyou/3352399636/">Flickr</a>

So far, my experience is that environmentalists and business executives often speak different languages. Take the basic idea of sustainability. To an environmentalist, sustainability, as applied to a business, refers to the amount of environmental damage it will cause over time. To a business person, the term refers to the ability of the business to generate profits and so sustain itself. 

In other words, there is a profound difference between the "green" that environmentalists are focused on and the "green" that businesses must generate to survive.  

At EDF, I am trying to bring those two camps together. Broadly defined, my work involves creating opportunities for companies to make profits by selling products that benefit the environment, usually by reducing carbon emissions. My belief is that, with the right incentives and market structures, the profit motive can be a powerful force for change. Green companies that hire workers also create new advocates for environmental policy.  

A study by McKinsey, the big consulting outfit, has shown that there are potentially hundreds of billions of dollars in energy efficiency investments that could yield annual returns of 7% to 20%. At a time of historically low yields on fixed income investments, like bonds, those are pretty good numbers. 

Mostly, I focus on increasing investment in energy efficiency and renewable generation projects for homes, offices and other  commercial properties.  In many cases we can lower a building’s utility bills, including  financing costs, while also reducing carbon emissions.  

Take investments in solar technologies. I am lucky enough to have pretty good credit and was able to get a solar installer to finance a rooftop installation that provided my wife and I with immediate savings. Unfortunately, many homeowners do not currently qualify for financing. So EDF is working to decrease financing costs and increase availability of capital for such projects through a program called On-Bill Repayment (“OBR”).   

OBR can help a building owner finance, say, a rooftop solar array, with money put up by an third part investor, and then repay that loan through his or her monthly utility bill. The costs of the loan are reduced because the loan is part of the legally binding rate tariff for the property, and will remain in place even after a foreclosure. 

Once we have OBR in place, far more homeowners should be able to finance the upfront cost of installing energy efficiency or solar projects that lower their bills.  This creates jobs, saves money and is good for the planet. What’s not to like?

Take California. The state is expected to initiate an OBR program for commercial properties in about 4-6 months. EDF’s economists estimate that this program over the next 12 years will lead to about $7 billion in third-party clean energy investment, create 50,000 job-years that cannot be exported. Over the same period, OBR will the cut carbon emissions by  10.3 million tons,  the equivalent to replacing 180,000 gasoline cars for 12 years with solar-powered electric vehicles. And the environmental benefit will continue to grow as we add residential customers and expand to other states.

OBR is just one way in which business and the environment can coexist. In future blog posts, I will look at other ways to achieve the same end.

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Brad Copithorne

Brad Copithorne

Brad, director of financial innovation for Environmental Defense Fund's energy group, is focused on creating markets to finance energy efficiency and renewable generation projects.

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Comments

The BEST solar solution is the fight for renewable energy credits (RECs) for EVERYONE.

"legally binding rate tariff" - That's a mouthful. Can you explain that more, in a few simple words?

Yes, that is a bit of a mouthful and I probably spend too much time talking to utilities. What I mean by that is that the repayment obligation becomes part of the monthly utility bill. Since we require that estimated savings be more than the financing charges, your bill will be lower after the program.

The other key feature is that if you move out and I move in, I automatically start to pay for the financing but I also get the benefit of the upgrade. This might allow you to consider a long term project even if you may only live a few years in your home.

Brad

Who can afford that??? Only the people who are well off!

You hit the nail on the head. Most of us on fixed salaries can’t currently afford the upfront cost to invest in energy efficiency or renewable projects even if they will save us money long term. The objective of OBR is to have a bank provide the upfront funding and then repay the obligation on the utility bill. Environmental Defense Fund advocates that in order for the project to be eligible, savings must exceed monthly financing payments, so the customer saves on day one.

The result is clean energy for people who can't currently afford it, more jobs and a better environment.

Brad

Point of transparency, I make a living selling commercial solar projects. REC’s, Utility Rebates, Investment Tax Credits, MACRS, Feed In Tarrifs, and Interconnection Agreements – all provide the financial structure that allow many if not all commercial solar projects to go forward. That being said the “Sustainable Future” is more likely in technology vs. subsidies. 10 years ago the “average” commercial solar panel that had around 15 sq’ feet of surface was rated around 100 watts (without getting into kWh, power produced over time, etc… using round numbers….) and cost around $2.00/Watt. Today that same surface area is easy to obtain in ratings over 200watts and cost around $0.70/Watt. When the technology is less than 15sq’ producing over 500 watts and has a price point of under $0.30/watt distributed generation without subsidies will become a reality. Going green will truly have a double meaning… Possibly a better discussion is how to we fund the education and research to achieve these results in less time?