A VERY EXCITING ENERGY INITIATIVE THAT THE TOWN OF GREENBURGH SHOULD CONSIDER...

Cities Use Creative, Targeted Lending to Speed Energy Projects
By Libby Tucker
Several communities are implementing a variety of lending programs to make this sort of thing more feasible. (Photo: Wendy Carlson for The New York Times)
One challenge to getting energy-saving initiatives off the ground is that the presumed social benefits arising from improved energy efficiency (fewer greenhouse gases, for instance) are often at odds with the rational economic calculus of homeowners on the ground. From solar panels to efficient window systems, the capital costs of such projects can be prohibitive — and take years, sometimes decades, to pay for themselves.

Faced with that reality, a number of municipalities across the country are getting creative and experimenting with incremental, neighborhood- or district-based lending programs that help homeowners pay the up-front capital costs.

Under what are called “geographic targeting” or “renewable energy community” programs, a lender — be it a city, utility or bank — effectively goes door-to-door, offering homeowners or businesses within designated neighborhoods low-interest loans to complete efficiency or renewable energy projects.

Through an addition to their utility or property tax bills, borrowers in turn repay the loans over 20 or 30 years — typically with the money earned through energy savings or sales back to the grid. The debt typically stays with the property, rather than the individual, so homeowners who reckon they’d be selling their homes inside of a 30-year repayment period aren’t dissuaded from participating.

Concentrating efforts in discrete neighborhoods or districts also allows energy contractors to concentrate their resources and cut costs, working entirely through one area before moving on to the next.


Berkeley, Calif.m approved the creation of a citywide Sustainable Energy Financing District in 2007 to help property owners install solar-powered electric and thermal systems.

The City of Berkeley’s Web site explains the program this way:

The citywide voluntary Sustainable Energy Financing District would allow property owners (residential and commercial) to install solar systems and make energy efficiency improvements to their buildings and pay for the cost as a 20-year assessment on their property tax bills. No property owner would pay an assessment unless they had work done on their property as part of the program. Those who do have work done on their property would pay only for the cost of their project and fees to administer the program. The City would secure the upfront funding through the placement of a taxable bond.

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The Financing District solves many of the financial hurdles facing property owners. First, there would be little upfront cost to the property owner. Second, the upfront costs are repaid through a voluntary tax on the property, therefore funding approval is not determined directly by property owner’s credit or the equity in the property. Third, the total cost of the solar system and energy improvements is comparable to financing through a traditional equity line or mortgage refinancing because the well-secured bond will provide lower interest rates than is commercially available. Fourth, the tax assessment is transferable between owners. Therefore, if you sell your property prior to the end of the 20-year repayment period, the next owner takes over the assessment as part of their property tax bill.

Other cities are developing similar programs.

Babylon, N.Y., has introduced the Long Island Green Homes program to provide low-cost loans for home energy efficiency projects. In Austin, Tex., and Boulder, Colo., community energy demonstration projects aimed at deploying new smart-grid technologies have been developed. And similar initiatives are under way in Vermont and Connecticut.

“The idea behind the clean energy investment fund is to overcome the obstacle of high up-front costs to energy efficiency and renewable investments by offering longer-term, lower-interest financing,” said Derek Smith, a policy analyst for the Office of Sustainable Development in Portland, Ore., the latest city to join the trend.

Portland is proposing a new $5 million to $10 million pilot project that will loan about $6,000 to every property owner within a designated neighborhood. The money will pay for home energy audits, heating, air conditioning and ventilation system upgrades, and weatherization in 500 to 1,000 homes a year.

Borrowers will then repay the loan over 20 to 30 years through a monthly charge added to their utility bill. All told, the city expects the average participant to break even on the project – though some homeowners will end up with higher, or lower, utility bills than before.

“Quite literally, it’s costing you nothing,” said Tom Osdoba, an economic development consultant who’s designing the program for the city of Portland. “There’s zero out-of-pocket cost and the energy savings is roughly equivalent to what you spend on upgrades.”

To pay for the program, Portland will create a clean energy investment fund, backed by the Oregon Department of Energy’s small energy loan program. If all goes well, the city will extend the loans to every neighborhood citywide in coming years. (The city needs to complete efficiency upgrades in 10,000 homes each year in order to meet its goal of an 80 percent reduction below 1990 levels in greenhouse gas emissions by 2050, said Mr. Osdoba.)

Oregon legislators will also consider a bill this year that would allow every city in the state to create “local improvement districts” for energy efficiency. Washington State is taking the idea further with a proposal to create “climate benefit districts” that would include financing and incentives for improving efficiency as well as water conservation, recycling, transit and other aspects of sustainable living.

Though the concept of district financing is catching on, designing and retrofitting communities around energy use is still largely untested, however, according to a January 2008 report on renewable energy communities by the United States Department of Energy’s National Renewable Energy Laboratory.

The biggest challenge to large-scale community energy projects is demonstrating a consistent return on investment that attracts the right mix of public and private financing, said Rhys Roth, director of strategic innovations for Climate Solutions, a nonprofit group that advocates geographic targeting in several Pacific Northwest cities, including Portland, Seattle, Spokane and Boise. Cities will play a key role in testing new financing models for mass adoption, he said.

“The local government has a critical role to play in climate leadership,” said Mr. Roth, “galvanizing stakeholders, bringing focus to zones, and leveraging public financing.”