by David Fessler, Investment U Senior Analyst
Friday, January 06, 2011
It sounds like one of those suspect ads on television, doesn’t it? If someone told you an easy way to speed up your computer, for free, you’d more than likely take advantage of the offer.
But what if someone offered (at no upfront cost to you) to make your home more energy efficient? You’d probably take them up on that, too.
It turns out the energy efficiency industry does just that. The amazing part is that few homeowners and businesses are taking them up on it.
It’s called on-bill financing. Here’s how it works. You go get the work done to make your home more energy efficient. Your local utility pays for the work…
Sound good so far?
Customers repay the utility for the added insulation, more efficient lighting, new heating system, or other energy saving measures over extended terms on their monthly utility bills.
Your first inclination is to think: “Wait, that means higher utility bills.” But here’s the best part: In most cases, the cost savings more than offset the additional cost that shows up on the bill.
The net effect is that most customers see no net increase in the cost of their monthly utility bills. They end up with a building that uses less energy and haven’t had to shell out a dime.
If this sounds too good to be true, it isn’t. It’s a great deal for the customer, who gets a more energy-efficient house. The utility gets to postpone the building of new power plants, since its energy generation requirements go down.
I’ve often touted energy efficiency as the fastest, cheapest way not only to lower our dependence on foreign oil but to reduce our overall energy bill in the United States.
So Why Aren’t Customers Lining Up?
The American Council for Energy-Efficient Economy (ACEEE) recently published a report on these programs. There are a total of 31 different programs spread across 20 states. Some are so new they’re still in the pilot phase. In its report, the ACEEE profiled 19 on-bill finance programs. You can read the report here.
You would think that with all those programs out there, and with a populous eager to reduce one of the biggest chunks of their monthly budget – energy consumption – they would be lined up in droves.
But less than one percent of the customers eligible to participate in the programs are doing so. According to Casey Bell, lead author of the ACEEE report, it may simply be a lack of knowledge that the programs even exist: “The growth of these programs depends on a number of factors. We are seeing a trend where they are emerging in more states.”
According to ACEEE behavioral scientists, when it comes to energy, people are slow on the uptake concerning new ideas. Even after reading an information booklet from their utility, watching a TV commercial and seeing an advertisement somewhere, they’re still reluctant or slow to respond.
So what does convince them? Talking with a neighbor who did it, a pitch to a social group like a church or other community gathering, or a simple knock on the door by a utility company representative.
Does My Utility Offer Such a Program?
Good question. The report lists the ones that do, and it points out that many others are considering legislation to introduce them. The movement could eventually snowball, once utilities see the payback.
Money is certainly going to be an issue. Some utilities may be reluctant to shell out huge sums of cash, especially if they have a surplus of generation capacity. Third-party capital will likely be attracted to these types of programs, since investors perceive utilities as generally low-risk investments.
Says Bell: “There is a lot of opportunity to learn from experience, and tapping into private sector sources of funding is likely critical for scalability.”
The bottom line: The money equation has to be right, or it won’t get done. On-bill financing is one instance where it seems like a no-brainer.
Give your utility a call and see what they have to offer. You’ve got nothing to lose, except money off your utility bill.