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Mark ZimringLawrence Berkeley National Laboratory (LBNL)
December 7, 2010
Financing Energy Efficiency Upgrades in the Residential
Market
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Why address EE in buildings?
Just the residential market….• Over 110 million homes and
apartments in the U.S.• 70% owner occupied• Average home is 40 years old
and uses 40% more energy than new homes
Consume 20% of energy used in the U.S.
Emit 20% of U.S. greenhouse gas pollution
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Job Creation
Assume 12 jobs per $1M investment
8 from direct installation4 from manufacturing of parts & materials
360,000 jobs sustained over 10 years
Retrofitting 30 million homes
3.6 millionperson-years of employment
= =
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The Opportunity
~$240 BILLION spent on residential energy in 2008
Assume most homes can save ~20%
Savings potential of ~$48 BILLION
every year
Savings Potential Investment Needed
Assume 30 million homes (~30%) get retrofits in the next 10 years
$10,000 average per home
~$300 BILLION investment required (over $1 TRILLION
for all homes)
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State of the Market for EE Financing• Lending is constrained. National lenders are
reluctant to provide consumer financing. Local and regional lenders face increased collateral requirements from regulators.
• There is no “national model”. Local lenders have limited balance sheets, so developing secondary markets may be critical to scale and pricing. Stay tuned…
• Local lenders are increasingly active. Community banks, credit unions and community development financial institutions (CDFIs) are partnering with public programs. Many new privately-funded loan programs are being supported by credit enhancements such as loan loss reserves. 5
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Trends in Residential EE Finance
• Existing National Energy Efficiency Loans– Fannie Mae Energy Loans– EGIA GeoSmart Loans – Enerbank “Same as Cash” Loans
• Existing Local/Regional Energy Efficiency Financing Products– Local Loan Programs (Clean Energy Works
Portland, Community Energy Challenge)– Regional Loan Programs (Michigan Saves)
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Michigan Saves
• Michigan Saves Home Energy Loan Program. 5 credit unions are underwriting unsecured residential loans. Available in 36 Michigan counties.
• Basic Loan Details. $1,000-$12,000. 7% interest. 1-10 year term. Minimum FICO score 680. Uses a 5% loan loss reserve. Contractors pay a 1.9% transaction fee.
• Centralized loan origination. Over-the-phone approval.
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Community Energy Challenge
• Whatcom County, WA-Sponsored Loan Program. The County has partnered with a private lender, Banner Bank, to provide secured residential energy efficiency loans
• Basic Loan Details. Borrowers may choose 5, 10 or 15 year terms. Net interest rates vary from 3.5-6.5% depending on loan term and borrower credit (2-3% buy down) Minimum FICO score: 640. $1-20K. Uses a 5% loan loss reserve.
• Loans are Secured By a Deed of Trust on the property. There is no property equity check.
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Financing Residential Energy Efficiency—Product Comparison
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Financing Option
Security
Interest Rate to Borrow
er
Loan Term
Loan Size
Minimum FICO Score
Fannie Mae Energy Loans
(national)
Unsecured 5.99%-
13.99%+1-10 Years
$2,500-$25,00
0680
EGIA GeoSmart
Loans (national)
Unsecured 5.99%-
13.99%+5-10 Years
$1,000-$25,00
0N/A
Enerbank (national)
Unsecured
0% initially17-18% after 18 months
Up to 18
Months
$1,000-$45,00
0680
Community Energy
Challenge (Whatcom
County, WA)
Secured 3.5%-6.5%
5,10, or 15 Years
$1,000-$20,00
0640
Michigan Saves (State of Michigan)
Unsecured 7% 1-10
Years$1,000-$12,00
0680
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FHA PowerSaver Pilot
• Basic Loan Details: Secured and unsecured loans up to $25,000 and 20 years for residential energy improvements.
• Additional Credit Requirements: Min. FICO 660, Max LTV 100%
• FHA is actively seeking lending partners and comment on the pilot proposal. E-mail [email protected] by December 27, 2010
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Fannie Mae Energy Loans
• Basic Loan Details. $2,500-$20,000. 1-10 year terms. Offered in all 50 states. Fixed-interest unsecured loans.
• Risk-Based Interest Rate Pricing. Interest rate is a function of customer risk profile. Starts at 13.99% before interest buy downs.
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EGIA GEO Smart Loans
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• Basic Loan Details. $1,000-$25,000. 5-10 year terms. Over-the-phone approval. Offered in all 50 states.
• Interest rates get bought down. Contractors or programs buy down interest rates from 26% to between 0% and 13.99%. Buy down cost is ~7-10% of loan principal amount.
• All qualified borrowers are charged the same base interest rate. This simplifies buy down cost calculations for programs and contractors.
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Enerbank “Same as Cash Loans”• The “Same as Cash” Concept. Short-term, 0%
interest unsecured loans. This is an alternate financing approach to long-term low monthly payment loans. Contractors pay ~4% of loan value in fees.
• How “Same as Cash” Works. Borrowers pay no interest for terms of 90 days to 18 months. After this initial period, they are charged 17-18% fees until the loan is paid off.
• Additional Loan Details. $1,000-$45,000. Minimum FICO score: 680. Over the phone approval.
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