Eleni Pelican: Good afternoon and good morning, and welcome to the presentation today on Current Practices in Energy Financing: An Overview for State and Local Governments. This presentation today is to go over an upcoming publication. And my name is Eleni Pelican. I am a policy advisor at the US Department of Energy in the Office of Energy Efficiency and Renewable Energy.
Today you will also be hearing from Greg Leventis, from Lawrence Berkeley National Lab, and Chris Kramer from the Energy Futures Group, two of the co-authors of the publication. Next slide, please.
Before we get started, I wanted to highlight some of the resources that we have, and that we continually create through the Department of Energy, and more specifically the Weatherization and Intergovernmental Programs Office. We are the office that works with state and local governments on their clean energy efforts. I wanted to let everybody know primarily about the State and Local Solutions Center.
As you can see on the slide in front of you, these are some of the resources that we have through the State and Local Solutions Center. If you did not receive an alert for this webinar, I would encourage you to go ahead and subscribe at the address you see at the bottom right hand corner of the screen, or e-mail us at stateandlocal@ee.doe.gov, and we can add you to our distribution list and let you know of upcoming events and resources. Next slide, please.
Some things that you're going to find at the State and Local Solutions Center are targeted opportunities for impact in your jurisdiction. We run a number of accelerators on different areas that we have heard are important for – that state and local governments are working on. Also, we have key resources from our four action areas. Financing, today's presentation, is one of those action areas.
This presentation as well as the associated publication will be available on the State and Local Solutions Center. Finally, there will be information on initiatives on other programs in the Office of Energy Efficiency and Renewable Energy, including renewable power, sustainable transportation, energy-saving homes, buildings, and manufacturing. Next slide, please.
And with that, I will be handing over the presentation to Greg and Chris to go over the main content. I will be back near the end to go over some additional resources we have coming up in the near future, as well as to help take questions from the audience.
We have quite a large participation rate today. We are hoping to leave some time at the end for Q&A. However, due to the large size of our audience today, if you have a question, I would encourage you to write your question into the question box. As you can see on your webinar panel, there is a box for questions. And if you go ahead and click on the plus sign, it'll expand out, and we can see your question. And with that, I'm going to hand it over to Greg, and thank you all for participating.
Greg Leventis: Thanks so much, Eleni. I appreciate it. So Lawrence Berkeley National Lab is really excited about the release of this, which is our latest publication on financing for energy efficiency called Current Practices in Efficiency Financing: An Overview for State and Local Governments, which is what we'll be discussing today.
We'd like to thank the Department of Energy's Office of Weatherization and Intergovernmental Programs for funding the work, and to Eleni and to Anna Maria Garcia for their guidance and support on the project. Next slide, please.
So the first thing I want to do is give a quick overview of the presentation today. First, I'm going to talk about the objectives of the report. After that, my coauthor Chris Kramer is going to talk about the comprehensive framework that we lay out in the report.
Next, I'm going to talk about the different financing products that are examined in the report, which we break down into traditional products and specialized products. Finally, Chris Kramer's going to explore the role of financing in improving the energy efficiency value proposition, and we're also going to have a number of polls throughout the presentation, and as Eleni said, we are going to leave some time for questions at the end of the presentation. So first, objectives. Next slide, please. Actually one more, Monica. Thanks.
Okay, so the objectives for this report were first off to provide a solid background and a broad context to help state and local governments do a number of things. For example, to participate in discussions of on-bill and PACE programs; to choose which financing products to include in a Green Bank; to make decisions about starting a new financing program or modifying an existing program; to understand the benefits and trade-offs for all customer-facing financing products. And by customer-facing I mean financing products that are extending by a lender to a customer, so not talking about secondary market sales or of loan portfolios, or the process of bond issuance.
So we're talking about all customer-facing financing products used for energy efficiency. And also to identify market barriers and financing solutions to those barriers in all market sectors. Another objective is to provide an easy-to-use framework to think about the larger context of energy efficiency financing, the relevant merits of the different products, and how those merits look in each sector. So this is providing a framework to think about the big picture in this space.
But first, we're going to do two polls to find out more about you all. So poll number one, so are you – select one of these – are you a program administrator, state and local government or regulator, a contractor, a financing provider, or something else? And I think we'll give you about 30 seconds for this. Monica, I'm going to let you call it in terms of time.
Okay, looks like – let me move my thing here. It looks like most people are other, followed by state and local governments, and contractors, and program administrators. Interesting. Okay.
So we have a second poll really quickly. This is which market segment are you most interested in using financing for? So the single family residential, multi-family residential, small business, large commercial or industrial, or the MUSH market. It's municipalities, universities, schools, and hospitals.
All right, and it looks like it is – this is pretty even here. MUSH wins, but large commercial, small business, and single family all seem like they have right about the same amount. Great. So next, Monica, if we could go back to the deck.
Next, we have got Chris Kramer, who is going to talk about the comprehensive framework. Chris, I'll turn it over to you.
Chris Kramer: Great. Thanks, Greg. So one of the things that we wanted to do with this report was really lay out a broad overview of what products are out there within the energy efficiency financing space, and provide a framework or sort of a typology for those products, so you could look at this report and come away from it saying, "Okay. Now I know – financing can sometimes feel a little inaccessible, but now I know at least what the universe is and get my head around that." So thank you. This slide is great.
The report organizes financing products into traditional financing products and specialized products, and by that we mean with traditional, one of the things to recall that sometimes actually gets a little bit lost ironically in the conversation on energy efficiency financing is there is a lot of financing out there already. And a lot of it is used for energy related work. So just things like regular old unsecured loans that you can go get from your bank, or secured loans like a home equity loan would be an example. Leasing. Leasing is really common.
I was just in a meeting where contractors said, "Yeah, we actually do a lot of our own financing on the side, not through programs, and it's basically all leasing." That was in a small business context. So this is just as a reminder that there is a lot of, quote/unquote, traditional, regular old financing out there, and it's often used for energy work.
That said, there are also, as you are all probably aware at this point, a few different – although it's not as many as you might think – there are a few different types of specialized financing products that we also talk about in this paper. And those are by and large products that are created and specifically designed for the energy efficiency and, to some extent, the renewable sector, specifically to address – and we'll get into this a bit more later – market barriers that exist in those sectors.
So those might be things like can you transfer the financing easily from one occupant to the next? Or does it address whether it's on or off balance sheet? Does it try to address what incentive? Those kinds of things. So you have now the proliferation of these, quote/unquote, specialized, products which aren't just sort of your run-of-the-mill products for this space as well.
I think the thing to remember between these two is that essentially there are tradeoffs between both of these. So for traditional products, the key thing to remember is there actually is some value in them. They're familiar to customers. They're familiar to banks. And they're a little bit simpler by and large, all else equal, to both underwrite and to administer because it's just what banks have been doing for decades at this point.
That said, they may not always address those barriers, and so sometimes it may be worth thinking about whether a specialized product addresses the barriers that are really important in your sector. Can we go to the next slide?
So we won't walk through every one of these boxes, obviously, but one – here's where you can actually breathe a sigh of relief. While there are a number of boxes on this slide, this is basically, by and large – and feel free to type in your comment into the comment box if you disagree – but basically, this is the whole world of energy efficiency financing. This is it.
And as I said, we divided that world into – you can see at the very top – traditional versus specialized products. Under traditional we've got both loans, and that includes both unsecured and secured loans, and then leases, and a few different types of those.
Then under specialized products, we're basically talking about on-bill and PACE properties with clean energy programs. And there are a few different types of on-bill programs. And then the last category that we have, which Greg will talk about a little bit more later, are things that we call savings-backed arrangements, and those are things like performance contracting, and a new type of product that some of you may have heard of, which is energy service agreement.
I won't go through every one of these obviously i this slide. The report does, and Greg will give a quick overview. But again, I think the key thing to take away from here is – I mean, this is actually something that we sketched out on a single sheet of paper and that made its way into the report. So if financing feels a little bit intimidating, rest a little easy, because yeah, there are a lot of boxes here, but this is it. If you can get your head around this stuff, you can get your head around EE financing. Next slide.
Okay, so this is – there's a – I don't know if it's exactly a companion report, but there's another report that LBNL and DOE worked on and have now put out that quantifies on the specialized side the amount of activity that we've seen to date, or actually, I believe it's on an annual basis for 2014. And yes, you can see the label there, how much activity you're seeing in these different types of specialized products.
What we don't know, although in the next slide we'll give you a little sense of, is how much activity is happening on the traditional side. I think what we can kind of conjecture by and large is that as I said earlier, traditional products are very widely used for lots of kinds of things, obviously well outside the world of energy as well. But they are very, very commonly used in the world of energy as well, and so those numbers are likely to be pretty big, and I think it's probably fair to say or likely to be substantially larger than the specialized, but we can't 100 percent guarantee that. We need to do more research to try to nail down what those numbers look like and even how to define them. But just as an example of that, let's go to the next slide.
So this is just one example from one sector in one state of why we have this sense of what the world might look like. This is the residential sector in California. This is research that was done by Opinion Dynamics and Dunsky Energy Consulting, and there's a report that this is in which we can forward as well if you're interested. But they were looking at how are projects paid for currently.
Of the ones that use financing – of the customers who use financing to pay for their projects, how many of them use, quote/unquote, traditional products versus specialized financing? And what you can see is first of all, one thing to notice is that actually quite a number of the people who are doing work right now actually don't use financing, so that's at the top there, that 75 percent did not actually use financing for residential projects.
And then out of the ones who do use financing, the other 25 percent, 81 percent of those used what they call conventional financing, and basically that aligns with what we're talking about when we talk about traditional products. And 14 percent of them used EE-specific financing, so essentially specialized products.
We don't have the date on here. PACE in California has certainly grown, so these numbers may have shifted some since this research was done, but it's still worth just noting that by and large, even in this sector with a prominent programmatic option, that the majority of projects are not using financing, and of those that do, the majority are using conventional products.
So again, just to keep in mind I think there's a tendency to think, "Okay I want to do EE work. I want financing to be a piece of that. Let's jump to specialized product, and implement one of those." It's worth stepping back and thinking about where traditional products may fit into this picture as well. Now I'll turn it back to Greg.
Greg Leventis: All right. Thanks a lot, Chris. I appreciate it. Now we're going to look at the different products, what they are, their pros and cons, and what the experience has been. We're going to look at them and separate them into traditional products and specialized products, as Chris just talked about. But first we are going to take another poll.
So what products are you most interested in? Please select one of either the traditional products, unsecured loans, shared loans, and leases,, or specialized products, on-bill, PACE, and energy savings performance contracts or energy services agreements. And we'll give you about 30 seconds for this.
Okay, wow. Actually, that's not so surprising. So the ones that are less common and less familiar. So specialized wins quite handily. But first we're going to talk about traditional products. Next slide, please. And thanks, Monica, for the poll, by the way. One more.
So we're going to start with, like I said, traditional products, and specifically unsecured financing. So this is credit that has no collateral backing it up, and there are two major implications to this. First, there's no need for the valuation of an asset, and also, it increases the lender's risk of loss, because if the borrower doesn't repay the loan in full, there's no collateral to mitigate that loss.
However, this can mean that there's a quicker application process, partly since no valuation is needed. And since the borrower doesn't need to own an asset like a house for collateral, these loans are open to more people, so accessible to more borrowers. However, because lenders are taking a risk, they tend to charge higher rates than secured loans, and in the absence of a subsidy these loans are generally more expensive that secured loans, like mortgages.
The total market for these types of loans and this type of lending is difficult to estimate– for example, utilities, banks, and a lot of equipment manufacturers offer unsecured financing for efficiency – but it's likely very large. And so they're often used for reactive measures, like replacing a heater or an air conditioner when it breaks, and they're used by a range of program administrators, usually at subsidized rates, and they reach all market segments. So next, we'll look at secured loans. Next slide, please, Monica. Next slide, please, Monica. Thank you.
So these loans do have collateral. If a borrower doesn't repay the loan in full, the lender has a right to foreclose on the borrower's home and sell it to mitigate or recover their loss. And here we have kind of the reverse implications. The lenders face less risk of loss, but they do have to assess the value of the home. Because they face less risk of loss, they offer these loans generally at lower rates than they might for unsecured loans.
However, they can take longer to execute, and they can have higher transaction costs than unsecured products do. And there are several drawbacks for non-residential customers. Some of the drawbacks, like adding debt to a company's books, are not specific to secured loans, but some, like having a lien on the property, are.
And the experience for secured financing is another area where there can be a large amount of lending going on for efficiency that isn't necessarily identified as such, but is rather just done under the guise of home improvement, for example.
But in terms of efficiency programs that offer secured financing, several government entities have offered secured loan programs, mostly in the single family residential space, like, for example, energy efficient mortgages that add efficiency project costs to a mortgage, but the uptake for these programs has been pretty modest to date.
However, recently, Fannie Mae, Freddie Mac, and HUD have all launched secured multi-family products that have had strong uptake, so that could be an area that we see growth coming soon. Okay, next slide please.
Next, we have the leases. These are arrangements in which a lessor – that is, the owner of a piece of equipment – offers a lessee possession and use of an asset for a fixed period of time. And there are two main types here. The first is operating leases, where the lessor retains ownership of the leased asset – and these are being phased out, by the way, in 2018 – and then capital leases, in which the lessee intends to purchase the leased asset.
Then there are tax-exempt lease purchase agreements, which are a type of capital lease, that can be used by tax-exempt entities, and they're often used in the MUSH sector. These can contain a non-appropriation clause which can allow entities like a school, for example, to execute an efficiency project without having to get voter approval, for example.
Now leases can generally be turned around faster, have easier approval, a lower transaction cost, and they can be more flexible than secured loans or bond financing. However, like other forms of debt, they do affect debt limits, and can have other impacts that debt has, although tax-exempt lease purchase agreements, and like I said, until 2018, operating leases may avoid some of these impacts.
In terms of experience, to date, most programmatic use of leasing for efficiency has been through tax-exempt lease purchases used in the ESCO market, but again, this is another place where the market for leases is hard to estimate, and there's likely a lot of leasing going on for energy efficiency outside the ESCO market as well. Market activity is likely very large. Next slide, please.
Here we have a visual breakdown of different types of leases, and some other names they go by. Next slide, please.
Now we're going to talk about specialized financing products. These are ones, like Chris said before, that are designed to overcome certain barriers to the uptake of efficiency. So we'll start with on-bill financing and repayment. On-bill financing, by the way, refers to programs that use either utility customer or utility shareholder funds to fund on-bill loans, or public money.
And on-bill repayment generally refers to programs in which third party private lenders supply the money for funding for loans. In on-bill, these are loans for or investments in energy efficiency that are paid back on the utility bill, and they have some pros and cons here.
Paying on the utility bill is convenient, and for some customers in the residential sector, paying on the utility bill might be more familiar than dealing with a loan. It's also nice to have the loan payment show up in the same place where you will see the resulting savings from the efficiency.
There's some other – they can be structured to do a number of other things to address market barriers, including allowing the loan to transfer to an incoming occupant if the original borrower moves out. They can use – some of them use alternative underwriting, which may omit or give less weight to traditional metrics like FICO scores that could disqualify many consumers who apply for financing. And many require that estimated savings from the project be more than the loan payments, so that the project is cash flow positive from the borrower's point of view.
Now on the con side, there are significant costs for IT, and ongoing administrative complexity can be significant. Experience here – these have been around for a long time. Some of the programs are still operating from the '70s. They've loaned over $2 billion historically. In 2014, they loaned over $179 million. And the default rates have been between zero and three percent. They are also – they've been used in all market sectors. And two important aspects to that – Monica, if you could go back to that one slide quickly please.
Two important aspects are – number one is that the programs that have done a lot of volume have offered below market interest rates, and they combine that with either – one of two strategies. One is allowing almost any energy-related improvement to be included sometimes with a focus on single measures. The other is coupling the loans with robust financial incentives and rebates. Okay. Back to the other one, please. Next slide.
The other important aspect I was going to point out is that the volume for on-bill programs is highly concentrated. Just 5 programs generated about 90 percent of the historic volume for these programs, meaning that most programs are either new or they haven't succeeding in generating significant volume. Lawrence Berkeley National Laboratory found that this concentration of volume is pretty common different types of efficiency financing programs. Okay, next slide please.
Next, we're going to look at PACE. This is property assessed clean energy financing, and this is – PACE is a loan made as a special assessment on a property that is repaid through the tax bill. Some of the implications here are that as a special assessment, they have the highest priority rights to the property in case there's a default or if there's non-payment.
If there's a mortgage on the home, for example, the PACE loan would get paid even before the mortgage. And this allow lenders – this is a strong security. It allows them to offer long terms and lower rates. These are also transferable, since they are attached to the property and not to the occupant of the property, attached to the tax bill there.
They could be cash flow positive, particularly because they are able to offer somewhat lower rates, and they are able to offer very long terms, which can help projects pencil out to be cash flow positive. And they use alternative underwriting, which, as I said in the last slide, could mean that they could be more accessible to more people.
In terms of experience here, there's been rapid, rapid, rapid growth in the residential side. It's mostly been in California, and we'll see the California growth in the next slide. But let's stay on this one for a second. It's also been very concentrated on the commercial side as well, which has seen much less field volume. But 80 percent of projects have been in California, Ohio, and Connecticut.
Now there's also some uncertainty in the value of the transferability, of being able to transfer that loan to the next occupant. The data that's available shows that only about half of the loans transfer in situations where they could transfer. There's also some uncertainty in the ability of PACE to encourage deeper projects, more efficiency. It's just that there hasn't been much rigorous study on this to date.
And then of course there is regulatory status. There is some regulatory uncertainty in that Fannie Mae and Freddie Mac, who are two of the biggest players in the mortgage market, have been cautioned against buying mortgages on properties with PACE liens on them. So that's weighed on the market a little bit.
Since 2009 PACE programs have extended over $2.3 billion in loans. In 2014, PACE generated over $267 million in efficiency lending. Next slide, please.
This graphic shows both the number of residential projects – you see on the left axis there – and the amount of residential PACE investment on the right there. And as you can see, this is for California residential PACE. As you can see, this has taken off really fast. It's had very rapid growth. Next slide, please.
Now this slide shows the discrepancy both in the number of residential projects on the left and the amount – the discrepancy between residential projects and commercial projects, the commercial on the left and the residential on the right. And you can see that it is quite stark. You can also see what measures PACE is being used for. It's actually being used a bit more for energy efficiency than for renewables or water. Okay, next slide.
So finally we have savings-back arrangements, and these are arrangements in which the service provider takes on performance risk. That's the risk that the efficiency measures don't generate the savings that they're projected to, and they can do this – they can mitigate this either by using shared savings arrangements or by guaranteeing some amount of savings.
And there are two main types of savings-backed arrangements. There's energy savings performance contracts, ESPCs, and energy service agreements, or ESAs, which there's also a subset of ESAs called managed energy service agreements, as well. So ESPCs, in these arrangements, energy service companies or ESCOs directly contract with building owners to perform energy efficiency work.
The ESPCs, they often guarantee energy savings, and the financing is actually obtained separately, but usually these arrangements do include financing. With the energy service agreements and the managed energy service agreements, here, an ESA provider contracts with a building owner to oversee an ESCO's work and to furnish project financing. So they do both of these things, and they often use either a shared savings arrangement, or they guarantee the energy savings that they project, or some amount of energy savings that they project. So first, we'll take a look at the ESPCs.
Next slide, please. Thank you.
So in terms of the ESPCs, they can of course minimize project performance risk for building owners, and that's a huge thing. But they also provide technical support for those building owners, and often operations and maintenance. These can be very key aspects as well for building owners, especially building owners who do not have experience in those realms.
Another thing is, or rather the downside of these is that they can be complex. They're generally for projects that are over $100,000.00, and as I mentioned before, financing has to be obtained from a third party. So that can be a distinct downside.
In terms of experience, most ESPC activity takes place in the public and institutional markets: federal, state, and local government buildings – we'll see this in just a second – K-12 schools, universities, and colleges. Since 1990, there has been over $57 billion worth of investment done through ESPCs. There was over $24 billion in 2014 alone, which represented most of the programmatic financing in that year. Next slide, please.
Now this graphic shows the volume of activity of energy service companies in 2014 by market sector. The purple bars show the energy savings performance contract activity specifically. You can see that federal, state and government buildings, along with K-12 schools, are obviously the largest market for ESPC work. Okay, next slide, please.
And then finally, energy service agreements, and I'm including managed energy service agreements in this quick overview here. Some of the good things about energy service agreements are that they require no public funds. Some of the same ones as the ESPCs, that they have no upfront costs and no operations and maintenance responsibility for the building owners.
They can also minimize project performance risk and utility bill price risk in the case of managed energy service agreements. And some structures can potentially garner off balance sheet treatment, which can be important for companies and firms that are limited by how much debt they can take on.
The experience of ESAs is they are, as I had said before, a complex, relatively new structure, and they're currently not that well understood in the marketplace. They're mostly used in large commercial projects, but they're also now being used in single-family residential buildings as well.
Oh, actually, I skipped this one bullet, which is that a lot of times providers raise capital by attracting investors to individual projects, and although this can be helpful, it can also add significant transaction costs and complexity. Okay, now next slide. Thanks, Monica.
And so here we see a simplified structure of an energy service agreement. You see how the left side and below we've got investors who are investing with the energy service agreement provider. Energy service provider is repaying them over time. And then they are also, on the right and bottom here, they're working with the contracting services and installation and operations and maintenance from the energy service company, giving them an upfront payment. And then the customer on the top here, they only have to deal with the energy service provider.
They are ESA providers providing energy savings as a service to the customer, and they are being paid on a per megawatt hour basis, being paid for the savings that are produced by the project.
So that is my walk through the products that we examined in the report, and I am now going to turn it back over to Chris.
Chris Kramer: Great. Thanks, Greg. So I guess we have another poll here. We'll actually turn it to Monica to launch this poll before we get into the next section.
The poll here is what is the top barrier to the uptake of efficiency or financing in your area? These are just some examples of barriers that you might be considering when you're thinking about launching an energy efficiency financing product or program. We want to get a sense – we'll talk a bit in a minute about barriers, but we want to get a sense from your own experience, what barriers are most important in your area. I'll give you a few moments to answer this poll.
Greg Leventis: Might need a few extra moments for this one because there's a lot of text on that. Sorry about that.
Chris Kramer: Sure. Great. Okay. Interesting. Yeah. So there's actually a relatively even split among barriers that we've listed, and there's not necessarily one right answer here. Obviously, all of these things can end up being barriers _____.
I won't focus on each one of these, but I think the point here – and we can go to the next slide – is that when you think about what energy efficiency financing product you may want to use to promote your efficiency objectives, one of the first fundamental things to think about is what barriers are you trying to address, and which barriers are most critical in the market that you're trying to serve, and then what products most effectively address those barriers.
Too often I think I myself and others hear folks say, "I've heard a lot about one particular product, and I'm really interested in launching that one in my jurisdiction. It's getting a lot of buzz. Everybody else is doing it. How can I start that product in my jurisdiction and get it moving?" And in some cases that may make a lot of sense, but I think even if it does, it's still worth thinking through why it is that you want to launch that particular product in your jurisdiction, and what it is about that product that's most likely to be helpful to achieving your objectives.
So these are just a few of the kinds of barriers that you might think about in a financing context. I guess an important thing to note even before that is that, of course, financing itself only addresses a certain subset of all of the barriers that we know exist to energy efficiency. So whether it's just awareness of what the opportunities are, or the hassle of going through the application and the installation process, all kinds of barriers exist out there to doing more energy efficiency. But financing is one tool that addresses a set of those barriers. And so we talk about that in the report.
So obviously, access to capital is one, and probably one of the most important ones, although the difficulty in accessing capital does vary to a large degree by the market or at least the sub-market that you're talking about. For example, it might vary quite a bit – take multi-family, for example. It might vary quite a bit as to whether you're talking about affordable multi-family versus market rate, and how hard it is to access capital in that sector. And similar things apply in other sectors.
Cash flow is an important one. We say here customer focus on short payback. What we mean by that and how financing is related to that is that often you'll hear people say, "Well, I'm only going to do this project if it's got let's say a two to three year payback, or maybe a five year payback, at the outside."
If you can structure a finance deal such that the savings that you're at least projecting are greater than the loan obligation, at least in some cases you may be able to shift the focus for people from, "Yeah, I need a two to three year payback, so it doesn't have too negative of an impact on my finances," to, "Okay, I'm willing to go deeper and do more comprehensive work as long as I know that there's not a negative impact or a positive impact even on my cash flow every month or at least every year." That's what we mean there.
Customer debt limits. This gets a lot of attention, and this is really – we mean this in a broad way. Often what you'll hear is, "I want this to be off balance sheet" in a commercial context, for example, or in a government context. It's really important for this to be off balance sheet. And we'll talk about that. But this also really applies in the residential sector, too, because people may not have balance sheets, but they just may be averse to taking on more debt. So we mean this to kind of cover both of those kinds of things.
Split incentives. So who's taking out the financing, and who is actually realizing the energy savings? Does the meter go to the tenant, or does it go to the owner? And does the loan obligation go to the tenant or the owner, and are those two things matched up or not? And if they're not, there are ways through certain financing products to try to align those incentives.
Occupancy duration. This is important in a financing context, because let's say you have a 15 year loan, and your average occupant expects to move out within 10 years. Then they may be stuck with a loan that they're still paying for five more years while they're no longer enjoying the benefits of the energy savings. So how does that affect their willingness to enter into the deal, and are there ways to structure financing products that can be transferred from one occupant to another?
And then finally, as simple as this sounds, this is really critical – the application process. Very often you'll hear folks say, such and such program or product is really successful because I can – you often hear this from contractors. I can get my customers through it quickly. It doesn't take a lot of hassle. And I think that tends to be one of the more undervalued aspects of a successful financing program. Next slide.
So what we've done here to help kind of frame this out for folks is to establish a couple of different tables or frameworks, one for – and they're both based on these market barriers that we've identified. One of them is in markets, so which barriers are most critical to which particular market?
And then the other one is, which barriers are best addressed by specific financing products? And essentially what we've done is created a little Consumer Reports type of system where if you have – essentially, a way to interpret this is if there's no circle in a particular cell, it may not be particularly critical, or it may not be addressed in that market or by that product. Then moving kind of up the scale, the open circle's sort of a medium. It may be important to some degree, or it may be partially addressed but not fully addressed. And then the dark circle essentially is it's critical, it's essential, or it's very well addressed by that particular product.
And essentially, by matching up the markets with the products, the idea is to kind of provide an exercise in the process of program design to think through, okay, is this product likely to really address well the barriers that I know are essential in the market that I'm focused on?
And I think that for anybody doing program design around financing products in pretty much any jurisdiction, that's a useful exercise to start from. And it's probably a better place to start from than just jumping into one particular product, even if you end up going with the one that you thought you were going to use from the beginning. So next slide.
So again, this is really – I don't know if I said this, but this is really meant to be kind of a straw man in a sense – not entirely, I guess I should say, because we did think about it a little bit in putting these circles into this chart, but for one thing, this is going to vary depending on where you are, depending on your particular circumstances, your market, the customers you're trying to serve.
Don't take this as written in stone in any way. You may disagree with some of these, and that's fine. Or they may not really apply in the same way in your market, and that's completely fine. So this is just to get you started thinking about what market barriers may be particularly important in specific markets.
So just to clarify in case the acronyms at the top aren't clear, we've got single-family general, which is just the overall single-family market. Then we have low to moderate income single-family, which some market research in certain states has sort of helped show this is actually a bigger – we've always known this, but it's helpful to be reminded – it's sometimes a bigger market than you may realize. There are a number of, in some states, single-family low to moderate income homes.
Then in multi-family, you have the same distinction that I was making earlier, which is affordable versus market rate. For the next two, we've got commercial and industrial small business, and then commercial and industrial large. Obviously, sometimes folks include medium in there as well, but we just didn't _____ distinction. And then the MUSH market, finally, which includes the government sector in particular within it, but also universities, schools, and hospitals.
So this is the next one. This is where we lay out how these barriers are addressed by specific products, and again, we've got the same products that we just went through. We've got unsecured, secured, and leasing, which are all traditional products, on-bill, PACE, and savings-backed arrangements. And what you can see by and large, although not entirely, is sort of on the right side you've got more circles than you do on the left. And that makes sense, because the whole reason that these specialized products have been designed is to address these kinds of market barriers.
But I think going back to the earlier portion of the presentation, one of the things that may not jump out from this chart is you have to weigh that against the potential value of using products that are kind of already in place and more familiar to customers, and understanding what people are doing today and meeting them where they're at, versus – and that goes for both customers and financial institutions – versus specifically implementing products that are really designed around these particular market barriers.
But just to give a quick example of how this works, let's take cash flow, for example. You can see that of course all of these products to some degree have a circle in them, because the whole idea of financing is to spread out the repayment, and so it should ideally be easier on your cash flow than just having to pay everything up front. But the reason we particularly highlighted, and you have dark circles in secured, PACE, and savings-backed arrangements – let's take secured and PACE as examples first, and then deal with the savings-backed in a minute.
In secured and PACE, essentially, you've got collateral there, and because of that collateral – in other words, because you have something for the lender to go after if they're not made whole through customer repayment – that security tends to allow them to go out longer, to longer terms, and in some cases to lower their interest rates, and therefore it's a little bit easier in certain cases – or it may be easier – to match the savings that you're enjoying from the energy installation with the amount of the loan payment obligation. So in other words, it's basically, ideally at least, a little easier to structure a cash flow positive deal.
And then the savings-backed arrangements are somewhat similar conceptually, except that in that case, what you're really doing is almost addressing it even a little bit more directly by saying, "We're either guaranteeing or structuring it in a way that the payment is somehow tied to the realization of energy savings," and so that essentially gives you as a customer some confidence that you're going to actually have a source of repayment besides just your own balance sheet or your own personal finances to repay the loan obligation.
I will say in most cases, although not all, it's not really quite done that directly in the sense that it's not actually saying, "We guarantee that you will have enough savings dollar for dollar to pay off your loan obligation." There are some cases where it's done more that way, but even if it's not, it at least may boost customer confidence that they'll at least have some savings, and that'll at least go part of the way toward the repayment obligation. Great. So next slide.
So finally, just to talk a little bit about conclusions here. We've gone through first the relative merits that we were just speaking to of both traditional and specialized financing products. And it's worth considering that as you consider what types of financing products to implement into your program, I think specialized products as we saw from that initial poll tend to draw a lot of attention within our community because of the market barriers they address, and frankly, I think because they carry an air of sophistication.
People don't really understand always what they entail, and people are attracted to their potential to address barriers for folks to overcome. But it's just worth considering, again, weighing those advantages against the potential advantages of using products that people are familiar with, on both the customer and the lender side.
And then different products may be useful for different market sectors. Essentially, think about, as we just went through, what are the real barriers that you're trying to address in your market? And how do different products address those barriers? And if you can match up those things and go forward on that basis, you'll have more solid footing for making a decision about what types of products to implement to achieve your objective.
Our general thought, as you saw with one California example, but you could span out a few other even thought experiments and grab a little additional data, that we could talk more during Q&A if folks want to, is that likely traditional products actually outweigh specialized products in terms of their use in supporting energy efficiency installation. It's a little bit hard without more research to say that definitively, and so that's definitely an area we feel like would be worthy of some additional research.
But even if you just think a little bit about the market size for, say, residential HVAC, which is around a $50 billion market, and you think about how much of that might be financed and then compare that to what are we seeing in terms of the amount of financing that's being done with specialized products, there's a gap there. And presumably that gap is being filled with more traditional financing.
And then finally, again, sort of the flip side of that coin is that by and large, although this is not 100 percent true, and also it's all relative, so it depends a little bit on what you're comparing to, but to a large degree – and we'll see this in a minute – programmatic efficiency financing efforts to date, by which we mean essentially specialized products, but not entirely, essentially anything that's done through a program, we haven't seen huge loan volumes. So it's worth thinking about these things just to try to consider how can we potentially do more. Then finally, next slide.
And Greg can speak a little bit more to this during Q&A. This comes from the quantitative report that he and others in DOE worked on. But this just gives you a sense of the financing volume. This is actually program by program, so each one of these boxes is a financing program. And it gives you some sense of what loan volumes look like.
While you can see there are a few fairly large programs on a relative basis, many of the programs out there are much smaller. So that just gives you sort of an overall sense of where things stand today in terms of programmatic volume, and I think the key question is how do we grow this overall pie in a way that supports more additional energy efficiency than we're doing right now.
With that I will turn it over back to Eleni to speak to some additional resources that may be useful on these topics. Eleni?
Eleni Pelican: Yeah. Thank you, Chris. That was great. And I will mention that Greg and Chris really skimmed the surface of the final report. The report, when you see it, digs more deeply into each individual instrument and gives very good examples of successes, programs that you could look further into that had success in each one of those categories, as well as discusses, as a program administrator of state and local government looking into exploring a financing program, some of the considerations to make. So thank you both for a great presentation, but I would really encourage people to further investigate the document itself.
But I just want to go over a couple resources that we have, both existing and coming out, that are in this same space, and then hopefully get as many questions and answers in, because we have a good bit of time left.
So as you can see on the slide here, we have the DOE State and Local Solutions Center that I have been referencing. If you go there and click on "pay for clean energy," you will see a number of our financing resources. The last slide that you saw with all of the boxes was a document put out earlier in the fall I believe, and it was the Energy Efficiency Program Financing, where they try to quantify more deeply what mechanisms are being used out there, and that's really good if you're looking at sizes of markets and things like that.
And then the last two bullets are things that are coming soon, one of which is we are working on a deeper dive on commercial PACE, for basically going over program designs and options for state and local governments as they stand up their commercial PACE programs, how to better understand what other jurisdictions are doing. And we are hoping that will be forthcoming this spring.
And then finally – next slide – there is the Better Buildings Energy Efficiency Financing Navigator that, as you can see here, it has borrowed from the great work that LBNL has done. This is an online portal put together by the financing team at Better Buildings, and it's basically taken some of the tools and made more of a clickable interactive resource. So that is forthcoming, and you can – again, if you sign up on the Solutions Center alerts, we will let you know when that comes out, or you could contact Joe Indvik there at the bottom if you're interested. This is a little bit more focused on the commercial sector than the broader research that was done at LBNL.
And with that, I'm going to start throwing out some of the questions that we have received. And we have gotten a number of questions. Greg and Chris, there was one question I got that asked about the volume and the size in the unsecured market, and if you could dig a little bit more deeply there, where did you get the – can you talk about what you considered in your data sources for the unsecured markets, and why it was larger than the rest?
Greg Leventis: Sure. Oh, go ahead, Chris.
Chris Kramer: Sure. Sure. I just want to make one clarifying point, because I saw that question in the stream, and so just to clarify, I want to be clear, when we – traditional products I think is the distinction that we're making between – well, in terms of the amount of loan volume that we expect is being done.
So I think there was a question as to whether unsecured specifically was really high, and that gets into even more detail than we really I think delved into. We don't actually have a number for unsecured lending volume on the traditional side.
If you saw, there was a slide – I can't remember the slide number – but there are actually blanks for unsecured, secured, and leasing. I think it was slide 13. And so the point that we're making I think here more is just that traditional products overall, in other words, things that banks already do, they finance lots of kinds of projects, and some of those are energy projects, and people tend to use those kinds of products to do energy-related work.
I think that's fairly intuitive. But we gave the California example. I think unsecured does tend to get used for certain things. Eleni, I saw you had mentioned equipment financing. I think that's correct, although I think in the context, you also certainly see plenty of leasing for that kind of thing as well, and even secured where it's secured by the equipment rather than by the home.
So I don't think we have that actual unsecured breakout. I guess it – but we do think this is an area that's worthy of further research.
Greg Leventis: Yeah, and I would just – that's exactly right, Chris. I'd just add that we – in the study that we did where we looked at the programmatic financing, we wanted to also look at traditional financing that is not tagged as energy efficiency in some way, but that's very difficult. We started out doing it with just the programmatic financing, but we do know that there are some other conduits for this type of financing. Banks do it. There are credit cards. There are equipment manufacturers that have unsecured programs, or rather offerings.
And so the point is, number one, that we say that it's – we believe it's likely large, but we don't know, and we think that's something that would be helpful to understand how much is going on there.
Eleni Pelican: Well, thank you for that clarification. We also got some questions about leasing, which I think is also a less discussed topic in this area. One of the questions we got was if the leases are being processed using a small pool of financial institutions – Wells Fargo, PNC, B of A, et cetera – is there anywhere to go for further data on this sector or research on this particular instrument?
Greg Leventis: I'll start this one, Chris, if you've got more to say. But I would say that, yeah, again this is another one where it's a traditional product. We didn't have a good way to follow where a lot of this activity is being done. And so the truth is I do not know the answer to that question. It could be out there.
What we did find were some state programs. There are not very many. We found about three or four state programs where they use a master lease to do leasing in their state buildings. They use a master lease to do efficiency financing in those buildings. But I am not sure of a good resource in terms of looking at the data for how much activity is being done in that space. Chris, I don't know if you have any other ideas on that.
Chris Kramer: No, I mean, again, I would go back to your point, that it's a traditional product, and therefore, I think whoever asked the question sort of implied the answer to a degree that it's being done by private companies.
I would say it's not just banks. There are leasing companies out there specifically, so like Raymar for example is one that does – that really focuses, but there are a number of them that focus on leasing. There are leasing associations out there that may have some information around exactly how much is being done in the energy sector. But I think it's an area that's worthy of more consideration.
I will say from a programmatic standpoint that kind of anecdotally, my general sense – and I deal with financing programs kind of all over the country – is that frankly I think there's not a lot of immediate thought of leasing as a programmatic option because people think of loans first. And I think in the private market, in terms of actual customers, especially on the commercial side, there's actually a lot of leasing that's getting done on the traditional side. As I mentioned, I just came away from a meeting where all the contractors basically said, "Yeah, when we don't use the on-bill option that we can get through the utilities, we go to a leasing company." And so I think that this is a really good example of where even if we don't have the numbers, it's worth thinking about what our customers are actually doing and what are they familiar with, and how can we potentially align ourselves with that, and get outside of our box or our comfort zone. Again, I'm not trying to recommend that as a solution, but it's just worth considering and putting on the table.
Greg Leventis: And let me just follow up on that a little bit. I would say that one of the things that that made me think of is that part of the reason that we believe that these are possibly big areas where there's a lot of lending and leasing going on for energy efficiency is just the fact that the markets are really big overall for leasing and for unsecured lending. The same for secured lending, although there's some distinct aspects of that that may make that a smaller market for efficiency specifically, but that is also part of the thinking that we have with this, that these are really big markets. And it goes to Chris' point about using what is already happening, what already has track record, what is familiar to people. That can't be discounted when you're thinking about how to really reach people.
Eleni Pelican: Yeah. Thank you. And I think that gets to the heart of the report, is to really give people a sense of the options out there in energy efficiency financing, and to the heart of what we try to do here in our office, which is give people the information to make the best choices based on their resources and actors in their jurisdiction. You may start thinking an on-bill program is great, and then hopefully if you do some research into leasing, find out that might actually be an easier lift.
So we have another interesting question. I don't know if it's going to – it's a ringer. I don't know. So Rob asked – he noticed that these were a lot of debt-driven products, and then asked if there was anything like what they have in the health savings account arena, something that would allow the consumer to take a tax deduction for the money saved that's earmarked for their clean energy investments. And this would allow people to pay from – using post-tax dollars to pre-tax dollars. I wasn't familiar with anything like that in the energy sector. I was wondering if either of you had come across it.
Greg Leventis: This is Greg. I – oh, go ahead, Chris.
Chris Kramer: Sure. I can speak a little bit to this. I haven't seen a lot of highly developed examples. It is true that we're mostly talking about debt financing here. There are a couple. Let me start with closest to the report and then move a little bit out from there.
I don't think this is quite what you're saying, but when you distinguish between debt-based product – and I read this question also, so part of this _____ is coming from my reading of it – was that I think the closest thing that you might get to what potentially is being proposed is shared savings agreements.
That's different than putting money away upfront, but the one way in which it's potentially similar is that instead of they're locking in the debt upfront to say, "You're going to be obligated to pay X amount every period," what you might have is an agreement that you'll pay in some way based on the savings that actually show up.
Historically, those have really only been used in large ESCO contracts, but we're starting to see some exceptions to that, and have that model move down to smaller scales. And essentially, one of the ways that you do that is you make fewer adjustments, and you do it more on a portfolio basis.
In other words, rather than spending a whole lot of money to go in and verify those savings, you sort of do it a little bit more broad brush, but you have enough projects that you assume it will kind of all come out in the wash. So that's getting a little bit closer.
Then beyond that, I think the examples I would start to speak to are – in the residential sector, I saw this at least laid out conceptually a couple years ago by the Vermont Energy Investment Corporation. There's a consultant there named Nikki Khun who wrote a paper about how this could potentially be done. You'd create sort of an employee benefits account for energy efficiency with tax benefits. So conceptually, I think that was kind of similar to what this person seems to be proposing.
There's also a program called HEAL, which I now can't think of what it stands for, but at least initially was structured in sort of a similar way, where folks were encouraged to put money away that they could then use toward energy efficiency projects. I think that program has evolved. I haven't tracked it closely in the last few years, but that was at least initially how that was structured.
And then finally, the last thing I guess I would point to, which is a little bit different but has certain conceptual similarities and people are starting to look into a bit more, is pre-pay, where rather than having – sort of paying for the utility service after you use it based on the amount that you use, you actually set aside at least some portion of funds.
It's sort of like a calling card or that kind of thing, where you would set aside money, and then work toward essentially only using the equivalent of whatever that would cover. And that obviously incentivizes you potentially at least to save and think about how much you're going to use before you use it. Of course, there's lots and lots of conceptual issues that go along with that. What happens if you run out? That kind of thing. And so there are some folks out there now thinking about that. I believe there's some papers. It's not a topic that I've delved into a whole lot. I think ACEEE is starting to think a little about that. There may be others as well.
Eleni Pelican: Yeah, definitely some of those things are on the cutting edge, which is interesting, to see the space evolve. So I'm going to try to combine a couple questions in the interest of time so we can get through more. We saw on the ESCO slide that they're used a lot in public schools and public buildings. Is there anything that you could add to the public school conversation where if you are a public entity looking to support energy upgrades in that space, that you should be looking at beyond ESPCs? And then I'm going to ask the flip of that, which is why haven't ESPCs been popular outside of the MUSH market? So we're looking a little bit more closely at public building financing, both how to do more of it and why certain tools don't go outside of that area.
Greg Leventis: I can say a little bit in terms of why – or at least speak to the question of why that doesn't go outside the MUSH area. We here at LBNL have staff that look specifically at the energy services company industry and energy savings performance contracts, and that is something that we have noticed and are looking into, but have not been able to answer in terms of why it has not been able to gain more traction in other markets. But it is something that we're looking into, and just released a report on. We do a survey from time to time of energy service companies, and our report on the latest survey has just come out last month. Chris, do you –
Chris Kramer: Yeah, the first thing that I would point to is LBNL actually in 2013 did a report called Financing Energy Upgrades for K-12 School Districts: A Guide to Tapping into Funding for Energy Efficiency and Renewable Energy Improvements. But in any case, we can send that around. The main title is Financing Energy Upgrades for K-12 School Districts. That was written by Merrian Goggio Borgeson and Mark Zimring. But I would check that out. That report goes through a few different options, so it includes bonds, it includes different types of leasing arrangements, and some other options as well, aside from ESPCs. That's probably worth checking out.
On the leasing side, I will just caveat that things are changing in the leasing world, so it's probably worth getting some advice about how things have changed and how that may affect those particular options.
The other thing to look at I would say, aside from ESPC, would be energy service agreements. This is a little bit of a complicated and niche area, but there are I would say more energy service agreement providers who are looking at this space in particular, and I would say schools and school districts where the projects may be a little bit smaller than traditional ESPC and ESCO providers are traditionally targeting.
Nonetheless, they offer some of the same advantages. And so without getting into all those details, that's another area to check out, and I'd be happy to speak with anybody who's interested in that a little bit more offline about how to find the best resources.
Eleni Pelican: Great. So we also have a question about yieldcos. Is it possible to set up a state-sponsored yieldco and let public utilities monetize tax and depreciation benefits? This is definitely getting into the graduate level course. So not sure if you guys have anything to say about that.
Greg Leventis: Chris, I'll let you talk about this one, if you've got anything to say about –
Chris Kramer: Yieldcos traditionally have been used more in the renewable space because the cash flow – essentially, what you're doing is setting up a corporation that monetizes the cash flows, generally from renewables project. There are folks moving into the efficiency space on this. DUAL Assets is a company that's done some thinking around this.
I haven't seen a lot of true activity, and very little, if any, state-sponsored efficiency activity around this. So I think you'd be kind of on the cutting edge in dealing with some of the conceptual issues in trying to set up something like that. The cash flows from renewable projects are definitely more stable than efficiency, so that's one of the reasons that it's tended to be done that way.
But yeah, you could theoretically set up something like that. I think what I would say is that while there are some advantages of going down that road, as with the overall presentation and the point that we've been making here, think about what it is that you're hoping and expecting to achieve by going down that road, because that's going to be complicated.
And it's not that you can't do it. There may be good reasons to do it. But don't do it because it sounds innovative and interesting. Do it because you're pretty convinced that this is really going to be a way to open up the market. And if you decide that and you want to pilot it and work it through, that's what we're – well, at least what I'm here for, and I think others too would be happy to help you think that through. But really, make sure first that you're doing it for the right reason.
Eleni Pelican: Yeah, that's good advice. So a little bit drilling into what you mentioned, I think maybe was it Greg, that there was strong uptake for multi-family programs. Can you talk a little bit more about the multi-family space, and what you found, and what you meant by strong uptake in that area?
Greg Leventis: Actually, this is another place where I think I had mentioned three recent programs that have been launched somewhat recently, in the last year or two, by Fannie Mae and Freddie Mac and the Department of Housing and Urban Development. But Chris actually is more familiar with those programs. So Chris, I'll let you talk a little about that.
Chris Kramer: Yeah. Sure. I think that probably is the reference that whoever asked the question picked up on. Obviously – and I think I saw this question in the stream as well – my guess is that the question comes from kind of general background, which we've all probably experienced, that multi-family is a hard to reach market. This doesn't change that fact. Multi-family is a hard to reach market, and affordable multi-family in particular.
That said, these products that have been launched by the three entities that Greg just mentioned, they've done a couple things. In my view, one of the more important things that they've done is that they actually now have lowered interest rates for properties that either are already efficient or that commit to doing efficiency work. There are some standards that they have around that. Actually, there's some flexibility. It's not just one standard. And that's true for all three. They play out in slightly different ways, but basically, it's lower cost for more efficiency. And that's been really attractive to folks.
Now when we say uptake, the one thing to be aware of is that it does, as I just mentioned, include properties that are already efficient that can get lower rates, and so you can legitimately ask the question, well, are we really talking about more efficiency than is already being done?
I think my response to that is even if not, there's some value there, because you're sending a signal to the market that properties that are more efficient get lower rates, and that's pretty powerful, even if it's properties that are already efficient, because the idea is over time, that through sending that signal, you encourage others to go down that same road.
The other thing that I'll just quickly mention in regards to those products, and I believe this is true across three, but I can't swear my life on it, is that they also – certainly for Fannie, I believe for Freddie, and I think for HUD, although I can't swear to that one – allow you to do more work within the scope of a given product limitation.
So to take out more money, or certain lending ratios get relaxed a little bit, the value of the property relative to the amount you're taking out, those kinds of things, they give you a little bit more flexibility on those types of restrictions to allow you to go deeper on those projects. For some folks who are looking to do more but may not have the capital to be able to do it, that can be important as well.
On the uptake, by the way, I think in the Fannie case, it's in the order of a few hundred million and a fairly short timeframe. So they're – _____ around the country, so that you have to keep that in context, but it is, relatively speaking, ramping up fairly well.
Greg Leventis: But also looking at the volumes, like we showed on the next to last slide there, of just generally a programmatic – general programmatic experience in the past, a couple hundred million dollars is quite good.
Eleni Pelican: Thanks, guys. And we had a question about the potential for energy efficiency across the country. If we went into that report – and we didn't go into that in this report – but I did want to ask about the complementary LBNL report, Greg. How far were you able to go in the potential and what was still kind of left on the table?
Greg Leventis: In terms of the quantification report that we did?
Eleni Pelican: Yeah, if it came out in that quantification report. I know of another. There was the McKinsey report that came out in 2009 that did talk a lot about the potential for energy efficiency upgrades in this country. But in the quantification report, if you guys delved, how deeply you delved into that.
Greg Leventis: Well, we actually did not look at the potential. We were trying to get more at the historic experience and what has actually been done. So that's where we were coming from. We're trying to figure out how big a market this is, in terms of what's actually really being lent, what's actually really being invested in. And we started out, as we mentioned in here, with programs and initiatives where the lending is specifically targeted for energy efficiency. So that's where we came from.
We looked at five different areas. We looked at on-bill programs. We looked at utility programs that are not on-bill loans or investments. We looked at PACE financing. We looked at state energy office programs. And we looked at the energy savings performance contracting. But we were not looking at potential. We were trying to get more of a sense of a track record.
Eleni Pelican: Great. And so I would – I think that there's a lot of good information there, and I would recommend to anybody the 2009 McKinsey report that talks about the potential for upgrades across the country.
We have one question – I think we have time for one or two more – about tariff-based on-bill programs. I don't think we addressed I guess the difference between an on-bill mechanism and a tariff-based on-bill mechanism. I think it is interesting for people on the call to know that there is a difference. Maybe if you could explain the difference, and if you discussed that in the LBNL – I guess it's the SEE Action report that is focused on on-bill financing, if that comes out -- that was a report that came out a couple years ago.
Greg Leventis: Yeah, so that is definitely a different product. The on-bill tariff is different than an on-bill loan. An on-bill tariff is an investment that a utility makes, and then – they make it in a particular house or a building. And then the owner of that building or house or renter can then volunteer to pay that off through a tariff.
So it is not debt of the occupant there. It stays with the meter. It's debt of the meter. And it has had some very interesting experiences in a number of places across the country. Three sort of noteworthy programs are Midwest Energy in Kansas, Ouachita Electric in Arkansas, and Roanoke Electric in North Carolina.
It is not – we don't go into it very much either in this report or in the on-bill report, although we do talk about it a little bit. However, there's an upcoming report on using financing for efficiency in low and moderate income households, and in that one, we do go into this in more depth.
Part of the reason is that this is something that is designed so that it can be used by renters. Renters make up a larger portion of low and moderate income households than they do of higher income households. And so it can be – that's just one of a number of reasons it can be particularly helpful for low and moderate income customers. But we do go into the different aspects of it more in that report. We're excited about that coming up too.
Eleni Pelican: Thank you. Well, we are over time, and I would like to just thank everybody who participated and stuck with us for an hour and a half. We will be sending out a link to the recorded webinar as well as the final report. I want to thank Greg and Chris, and with that wish you a good day. Thanks so much. Bye.
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