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Financing Energy Efficiency

We all know the environmetnal challenges- but only recently have the necessary financial tools hit the scene.

By Chris Castro 

TODAY, PEOPLE AROUND the world are seeing the effects of climate disruption in their daily lives. They’re becoming apprehensive about the impacts, and are hungry for leadership and solutions to address these challenges.

 So if we’re serious about solving the current economic and environmental epidemic, there’s no aspect more important than energy efficiency. Currently, buildings contribute over 39% of all emissions in the U.S., consume over 40% of the world’s energy, and use 72% of the electricity generated by the power plants surrounding our cities. At the same time, a staggering amount of energy is lost through transmission, distribution and usage. Scientists at Rocky Mountain Institute (RMI) say we waste 30% or more of the electricity we produce—due in large part to outdated equipment.

Energy efficiency has been called “one of the most cost-effective solutions to the greatest challenge facing humanity,” because regardless of the policy, it makes business sense. It has proven to ultimately lower our energy demand (and operational cost for businesses), spur the creation of new jobs, and secure our nation and the next generation on a pathway to a clean, healthy and safe future, powered by 100% renewable energy.


This all sounds great, but in order to harness the full potential of the efficiency market, we have to ask the right questions. What has traditionally been the roadblock in this almost-seemingly flawless solution of energy efficiency?

In short, it comes down to project financing. The key to unlocking this multi-billion dollar potential in built environment is thinking outside of the current norm of energy services, and getting creative with alternative finance options that make it easy for building owners and managers to adopt and invest in energy solutions that will ultimately lower their energy consumption and operational costs.

These new alternative financing options are offering building owners a different approach to solving their energy problems. They help alleviate up-front cost for various efficiency upgrades, including LED lighting, energy management systems (EMS) and solar power. Most take the form of long-term, low-interest loans to the home and small business owner.

In Port St. Lucie County, Florida, a new financing tool called SELF, or “Solar & Energy Loan Fund,” is now providing these low-interest energy loans to a wide demographic, including low- and moderate-income minorities—a group that historically has not been able to afford efficiency upgrades or qualify for a traditional debt financing loan.

Alonzo Mitchell, a clean energy specialist for SELF, explains the model further by explaining that “SELF is a nonprofit organization and community development bank certified through the Department of Treasury (DOT) for the purpose of funding residential and small business energy retrofits.”

SELF registered with FDIC as a Community Development Financial Institution (CDFI), providing a pathway to collect community reinvestment funding and distribute them as low-interest rate energy loans that are paid off by the energy savings each year. To go a step further and streamline these efforts, the SELF program also assists you with selecting qualified contractors to complete the work in a cost-effective and timely manner.

When I asked Mitchell if this was a replicable model that could potentially unleash the efficiency market, he responded by saying, “Yes, currently there are over 900 CDFI banks, but unfortunately SELF is 1 or only 2 across the United States that are geared towards the clean retrofits model. Since it’s inception, SELF was designed to be a scalable model that could be implemented county-wide across the U.S., and removes any legal barriers in having to deal with housing mortgages and property liens such as the Residential Property Assessed Clean Energy (PACE) program.” And as of May 2013, SELF has catalyzed over 200 projects in the amount of $1.8 million dollars from a Department of Energy grant through Recovery Act funds, with less than a 1% default rate.

What’s even more exciting is the expansion of opportunities throughout the State. Over the coming months, Space Coast Energy Consortium (SPEC), a 501c3 nonprofit based in Cocoa Beach, Fla., set up to catalyze policy and technological commercialization—will be working with my local energy firm in Central Florida—Citizen Energy—to roll out the SELF model in Brevard County and throughout the Central Florida region, further advancing the market transformation, and spurring investment in green energy retrofits.


This is just one example of the energy efficiency markets gaining momentum through unique avenues. It’s apparent that implementing energy efficiency upgrades and improvements is becoming more and more accessible with emerging financing options, especially to a demographic that often gets left out, yet needs these opportunities. It will be interesting to see the evolution of these programs over time. They may spur a wave of new financing tools that businesses can choose from to enhance their homes and businesses.

Chris Castro is co-founder and president of Citizen Energy.