USDA Launches Energy Efficiency Loan Program
Success of “Help My House” Pilot in
South Carolina Helped Influence New Program
December 5, 2013–The Environmental and Energy Study Institute (EESI) welcomes the U.S. Department of Agriculture’s new Energy Efficiency and Conservation Loan Program (EECLP), thefinal rule of which was published in today’s Federal Register. This new program, under the purview of USDA’s Rural Utilities Service (RUS), provides an initial $250 million per year in federal loans and financial assistance to support energy efficiency programs operated by rural electric cooperatives and other rural utilities. RUS anticipates higher funding levels in subsequent years to meet demand. With the federal loan capital, utilities will be able to finance investments in energy upgrades to homes and businesses. Participating customers who benefit from the program repay the utility through their utility bills, in a process known as on-bill financing. This model has been implemented with great success by electric cooperatives in South Carolina, Kansas, and elsewhere. Applauding USDA’s action, eesi Executive Director Carol Werner said, “This offers a great opportunity for the more than 900 co-ops across the country to help their members achieve energy savings.”
Additional loan-eligible projects include small-scale distributed generation, demand-side management investments, energy audits, consumer education and outreach programs, and energy efficient lighting. Performance thresholds will ensure the funds are well spent, for maximum impact. The economic benefits of the EECLP will go far beyond energy savings; it will drive small business growth and job creation in rural areas as well as nurture a manufacturing supply chain across the United States. Agriculture Secretary Tom Vilsack emphasized the program’s potential, saying “energy efficiency retrofitting can shrink home energy use by 40 percent, saving money for consumers and helping rural utilities manage their electric load more efficiently.”
The program took inspiration from several successful statewide rural energy efficiency programs, including “Help My House,” an on-bill financing pilot program run by The Electric Cooperatives of South Carolina and Central Electric Power Cooperative, with support from eesi. The South Carolina program was funded primarily through a no-interest loan from USDA’s Rural Economic Development Loan and Grant (REDLG) program. It was the first REDLG loan ever to be used for energy efficiency improvements.
According to Carol Werner, “With ‘Help My House,’ our South Carolina partners and EESI demonstrated there are significant energy savings to be had in rural areas, but that access to capital is difficult and is a major barrier. The Energy Efficiency and Conservation Loan Program will provide badly needed capital to co-ops for on-bill financing programs and other energy efficiency projects, helping to achieve significant savings around the country. Not only will participating co-op members cut their energy bills, they will also be more comfortable in their homes. We are delighted to have played a part in this program’s conception.”
The South Carolina co-ops worked with 125 member homes to finance “whole-house” energy efficiency retrofits in late 2011. Based on a full year of data, the participating households cut their energy use by an average of 34 percent, pocketing $288 per year per home after loan repayments. With the 10-year loans averaging $7,700, and being repaid at 2.5 percent interest, the average payback period is projected to be 6.6 years. Over 15 years, the average participating home is expected to save a net of more than $8,500.
EESI has been involved with the “Help My House” pilot since its inception, participating in the planning, execution, and analysis of the pilot. Drawing on its experience with the “Help My House” program, EESI recommended several changes to the draft USDA rule during the comment phase, to encourage maximum participation by rural co-ops. Many of our recommendations were included in the final rule.
Now that the final rule has been published in the Federal Register, there is a 60-day waiting period before any loans may be issued. The first energy efficiency loans are expected to be issued by summer 2014.
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The Environmental and Energy Study Institute (www.eesi.org) is an independent, non-profit organization advancing innovative policy solutions to set us on a cleaner, more secure and sustainable energy path. EESI educates policymakers, builds coalitions and develops policy in support of energy efficiency, renewable energy, sustainable biomass, sustainable buildings, and sustainable transportation. EESI was founded by a bipartisan Congressional caucus in 1984, and its strong relationship with Congress helps EESI serve as a trusted source of credible, non-partisan information on energy and environmental issues. EESI receives no congressional funding and is supported through contributions and grants.