A Critical Moment for Energy Efficiency Finance

by Casey Bell, Senior Economist and Finance Policy Lead, The American Council for an Energy-Efficient Economy

State and local governments gain many economic and environmental benefits from investments in energy efficiency across the buildings sector. Yet, there are many barriers that challenge the establishment of an effective and efficient market. One key barrier is upfront costs. Consumers and businesses have used financing tools to purchase desirable products and services through a vast variety of mechanisms throughout recorded history. Now, financing solutions for energy efficiency are facing “a critical moment.”

This is the theme of ACEEE’s 2015 Finance Forum. It is also one of several reasons we chose to focus this issue of the State and Local Energy Report on financing. This “Special Edition” is a collaboration between the Energy Programs Consortium and ACEEE in partnership with the four national organizations representing state energy officials: National Association of State Energy Officials, National Association for State Community Services Programs, National Association of Regulatory Utility Commissioners, and the National Energy Assistance Directors’ Association.

Over the past decade, policymakers, utilities, energy efficiency advocates, and program administrators and implementers have attempted to deploy creative financing solutions that might leverage private sector capital. Today, there is an unprecedented amount of capital ready to be deployed into the market. Shifts in the policy landscape, including but not limited to the Clean Power Plan, energy efficiency resource standards, and state and local benchmarking and disclosure laws may catalyze project development. In addition, innovations in building and financial performance data collection and management may reduce the perceived of risk around energy efficiency investments.

There is also a major state-level trend toward investment in resiliency and clean technology. Which brings us to this critical moment: Can we leverage these developments and lessons learned about marketing energy efficiency to stimulate consumer, business, and industry demand, and what is the most effective role for finance in making this happen?

Our hope is that readers gain a deeper understanding of current activity within the market for energy efficiency finance. We have asked our authors to elaborate on opportunities for the public sector to play a role in facilitating transactions and driving future activity in financing of energy efficiency projects. The pathway to a mature market will definitely rely on sound and effective policy support. This collection of articles should provide some insights into important next steps.

As we move into 2015, we are planning to continue our partnership series with other key organizations by reporting on issues of importance to state and local energy officials. This is an exciting time in growth of state and local energy programs.

Finally, ACEEE invites you to learn more about energy efficiency financing at its annual Energy Efficiency Finance Forum, which is the premier conference dedicated to catalyzing investment in, and scaling the market for, financing of energy efficiency. This year’s conference will take place May 31-June 1 in San Francisco. Each year, the conference features more than 20 sessions covering cutting-edge developments in this dynamic and fast-growing space, and provides a foundation for tracking progress as energy efficiency and related socially responsible investments progress toward the mainstream.