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Strategic Financing Partnerships Help Jacksonville Program Take Loans From Buydown to Uptake

In early 2011, the ShopSmart with JEA program in Jacksonville, Florida, began offering an energy efficiency interest rate buydown incentive in an effort to provide more enticing and affordable loans for homeowners to finance energy efficiency upgrades. Using seed funding provided by the Better Buildings Neighborhood Program through the Southeast Energy Efficiency Alliance, JEA was able to "buy down" the interest rate that local lenders offered homeowners for energy upgrades by six percentage points. For example, a homeowner who qualified for an 8% interest rate on an energy upgrade loan would be offered a reduced rate of 2% in order to make the financing more attractive. Despite these lower rates, however, JEA's initial offering received a moderate response rate of 33 loans during the first 14 months.

After several months of trying to market the "buydown" interest rates to homeowners, local lenders suggested it might be easier to explain and promote a 0% interest rate. To supplement the Better Buildings Neighborhood Program funding and help JEA reduce the interest rate to 0%, three credit unions subsidized the difference and began offering 0% financing on energy upgrade loans to their members. As soon as JEA rolled out the 0% interest rate offer through the credit union partners, homeowners responded. JEA offered the 0% interest rate for only three months, and during that time the participating credit unions issued 87 loans, nearly 13 times as many per month than were made under the interest rate buydown offer.

Even after the 0% financing offer ended, and despite the fact that JEA did not initiate any additional outreach efforts, homeowners continued to show interest in energy efficiency upgrades, and lenders continued to provide energy efficiency loans at market rates. By forming strategic partnerships and understanding lender, contractor, and homeowner needs, JEA learned what was important to each and how to market them effectively.

"The process must be simple and manageable for all players," says Bruce Doueck, JEA's manager of customer conservation and energy. "We must all create value in order for others to buy the energy efficiency improvements that we are suggesting people and organizations make. It is important to clearly articulate this in a manner that not only the stakeholder or customer understands, but that also resonates with both the emotional and logical components of their decision making. Being able to have a process that allows for ease of application and timely loan decisions is what seems to have been a key factor in the success of the lending program."

The successful partnerships JEA created early on with lenders and other program supporters also helped sustain the program. Understanding key motivators and challenges for each party was critical to building successful relationships. Before starting the 6% interest rate buydown incentive, JEA held workshops and meetings during which it explained the program to interested financial institutions and also gathered feedback from the organizations on the program approach.

"We've learned that you must be able to answer the 'what's in it for me?' question for all stakeholders," Doueck says. Self-sustaining programs such as ShopSmart with JEA are built on strong communication among all partners, as well as the program's ability to relate to consumers in simple, logical ways.