With ever-stronger imperatives to transition toward clean, low and zero-carbon energy, local governments are looking for affordable financing. A 2018 analysis from Kentuckians for the Commonwealth (KFTC) found that almost 9% of Louisville’s population is experiencing an energy burden (where 6% or more of income is devoted to energy costs). Energy burden disproportionately impacts low-income families with children, minority communities and senior citizens.
To meet this need, the Louisville Metro Government in Kentucky is exploring the creation of a Green Bank to leverage limited public funds to attract private investment to effectively address financing gaps in clean energy and other sustainability-focused investments. A Louisville-specific Green Bank would fund projects in need of long-term financing to match limited cash flow, or for credit-constrained borrowers. The Bank would also work to address challenges in multifamily and commercial building energy projects, where landlords are often reluctant to pay for energy-efficient upgrades.
A Green Bank would complement Louisville Metro’s other clean energy programs, providing funding for low-to-moderate income (LMI) residents to participate in programs and addressing markets that aren’t reached by existing programs. Projects could include smaller commercial and industrial projects (<US$100,000) where financing through the Energy Project Assessment District Program isn’t feasible. It could also fund the loans that LMI residents need to participate in the Solar Over Louisville program.
The Louisville Metro Government is currently working with the Coalition for Green Capital and engaging developers, lenders, and non-profit housing providers in Louisville to provide further insight into financing gaps in the local clean energy market. The survey data will inform a Green Market Opportunity Report, which will include details of what the Green Bank program would offer and potential emissions reductions the city could achieve as a result of increased access to financing.
Fort Collins, CO
The City of Fort Collins has a municipal-owned utility, Fort Collins Utilities, that provides water, wastewater, stormwater and electric services to city residents. In 2018, the utility launched an equity-focused on-bill financing program called “Epic Loans” to provide a scalable approach to renovate low and moderate-income rental properties, making them more energy efficient, affordable and healthy. The goal of Epic Loans is to “find, finance and fix” thousands of energy inefficient rental properties in the community and change how residents think about energy efficiency and its intersection with health, wellbeing and equity. To date, the program has issued over 370 loans totaling more than US$5.3 million with zero defaults. Loans of up to US$50,000 are available with terms up to 15 years and servicing on the utility bill. Project data suggests that these loans enable comprehensive retrofit projects by providing an affordable alternative for customers who currently lack funding options for home energy upgrades.
The Epic Loans program is estimated to achieve approximately 520 MT CO2e in first year savings, with about7,000 MT CO2e in lifetime savings. Moreover, with research indicating that energy inefficient housing negatively impacts children’s learning, harms wellbeing and diminishes human productivity, the City of Fort Collins has teamed up with Colorado State University to conduct an indoor environmental study to measure the improvement in air quality post-retrofit.
Epic Loans is funded with Fort Collins Light & Power reserves, grant funds and debt capital from third parties, with the loan capital repaid by participating customers via their loan payments on utility bills. To administer the loans, Fort Collins Utilities uses a vendor partner that is paid on a per-loan basis. The program works with internal staff who assist with on-bill loan payments, documentation and reporting to third party capital providers and is estimated to cost less than US$75,000 annually. Epic Loans has available capital of over US$8.2 million, from both internal and third-party sources, in a structure that is unique in the industry. Interest rates for Epic Loans are adjusted semi-annually based on the blended cost of the internal and third-party sources. While interest rates are rising in 2022, the city is a low-cost borrower, and the inclusion of zero-cost internal funds keeps customer rates competitive.