Skip to content
Join our Newsletter
Join our Newsletter

A smarter way to help you pay for greening your home

On-bill financing is making energy saving upgrades more affordable in the U.S.... and soon here?

By  Colleen Kimmett ,


It was the air coming out of the light socket that opened their minds and their pocketbooks.

When Laura Lee Schultz and Jacqueline Gullion bought their East Vancouver bungalow last year, they knew going in it would need a lot of work. Their first priority, like many of the newly "house rich, cash poor" set in Vancouver, was building a basement suite they could rent out to help cover mortgage payments.

Energy efficiency was not a priority, explains Schultz, at least not until they found out they could get a $1,200 rebate from the provincial government's LiveSmart program to replace their 60-year-old furnace. As part of the deal, they were required to have an energy auditor come in and do a standard test that measures air leakage in the house.

"His eyebrows shot waaaay up," recalls Schultz. "He made me put my hand in front of the back outlet, where the light socket is, and there was air blowing into my hand - a lot of air.

"And he said, that's just one spot where you're having air leakage in this house. It's really, really bad."

Learning just how much heat their house was hemorrhaging was the impetus for a host of other energy-efficient retrofits - including weather stripping and insulation - that Schultz and Gullion eventually undertook. They ended up spending $35,000 renovating their entire home and $15,000 on energy retrofits alone. They talked to contractors, did research online, watched how-to videos on YouTube and ultimately turned their renovation and retrofit project into a website, Lez Renovations . "We took this on, as not just buying a house together, but to have fun with it," explains Schultz. "So we kind of enjoyed the research."

Most people have no idea how inefficient their homes really are, much less what to do about it. More than a third - 35 per cent - of British Columbia's greenhouse gas emissions come from buildings, and more than 50 per cent of the buildings that will be around in 2050, the year by which B.C. is supposed to have reached its targets - already exist now.

We know technically how to green this existing housing stock. But the question of doing it on a larger scale, of how to finance millions or billions of dollars worth of private home energy retrofits, is one of the biggest challenges facing municipalities today in their quest to reduce greenhouse gas emissions.

Beyond rebates

One thing is clear: it will take more than rebates.

Rebates like the SmartEnergy program add up to just a drop in the bucket.

In December, Mayor Gregor Robertson announced the city was developing a pilot program that would allow homeowners to pay for home energy retrofits through on-bill financing.

On-bill financing means the homeowner doesn't have to dip into savings and pay a lump sum up front and it's more convenient than asking a person to go to a bank and take out a separate loan. It's easier to track as the cost of running a household, too. Retro-fit loan charges can be folded into tax or utility bills the resident is already paying.

"We want to make it easy for everyone so you can opt in and you pay over time but the cost is offset by the savings in energy," Robertson said when he launched Vancouver's version.

The program will allow a homeowner to borrow money to finance home energy retrofits - things like new furnaces and boilers, more efficient windows, insulation and weather stripping. That loan can then be repaid over time on the homeowner's property tax.

This kind of long-term, low-interest financing model is already being adopted in many U.S. jurisdictions, including Portland. Two years ago, it launched Portland Clean Energy Works, a pilot similar to the one Vancouver is proposing that has reached 500 homeowners in the city.


Moving energy savings to a top priority

Marlowe Kulley is a clean energy specialist with the city who helped develop and implement the pilot. One of the biggest challenges, she explains, was convincing homeowners that energy retrofits were something they want, or ought, to do.

"Most people would like to save energy at their home but it's not necessarily at the top of their list of projects," Kulley says. "Especially when you think about other home improvement projects they might do - a bathroom remodel, or a new addition."

To combat this, Portland Clean Energy Works did widespread advertising, but also targeted outreach in one particular neighbourhood - the Cully neighbourhood - in a working class part of the city. They contracted a team who canvassed door to door, held neighbourhood potlucks and approached people through local churches and community centres. According to Kulley, approximately 2,300 people responded.

Those who qualified for the program first received a visit from a home energy auditor to assess energy use and potential savings. Then, they got an estimate of what work needed to be done and how much it would cost. If the homeowner decided it was worth it, they signed the loan agreement and work began.

The average loan through this pilot program is $12,600, with a 20-year fixed interest rate of 5.99 per cent (residents who qualify for federal income assistance get a 3.99 per cent interest rate). The average payment per month is $76 per month, but combined with lower utility bills, real costs are more like $25 per month.

Through the whole process, Kulley and the team at Portland Clean Energy Works guided homeowners.

This is key, according to Eric de la Place, a senior researcher on climate and energy policy at the Sightline Institute .

"Even if you've got $10,000 in hand to do energy-efficient upgrades, how do you spend it? It's hard for the average person to determine the right investments," he says. "We've been advocating for an energy concierge for municipalities, someone to help you do energy audits, tell you about the return, hire out contractors, have the work done and do a post-work audit."

Kulley measures the program's success in part by its conversion rate; that is, the number of people who received an energy audit and actually went on to get a loan and do the work. Clean Energy Works has a 66 per cent conversion rate. In a free market, without the benefit of an on-bill financing program, that number is more like 16 to 20 per cent, according to Kulley.

On-bill financing not only gets more people to invest in retrofits, but they tend to do more work overall, says Peter Sundberg, executive director of City Green Solutions , a Vancouver non-profit that provides energy efficiency services for single-family homes, as well as commercial and multi-family buildings.

"What you can afford to do now is obviously a huge part of it for the majority of people," Sundberg says. "A lot of people who go through the LiveSmart program... don't go through the whole potential because they don't necessarily have cash in hand."

In addition, he points out, grant programs like LiveSmart are often prescriptive, rather than focused on overall energy use in the home.

"The program, behind the scenes, is weighted so that it's giving larger amounts of money to upgrades that result in more greenhouse gas emission reductions," Sundberg says. Which means even though energy efficient windows may cost more than a new furnace or boiler, there is a lower rebate attached.

"I think the on-bill financing would be a really good solution for a lot of different people," says Sundberg. "What's the interest going to be on on-bill financing? How does that compare to just getting a regular loan? Is it more attractive?"

David Ramslie, Vancouver's sustainable development program manager, says the city's priority is to use its position to offer economies of scale and certainty to potential lenders, but will not be a lender itself. "We are trying to be absolutely responsible to the Vancouver taxpayer," says Ramslie. "Taxpayer dollars are not being utilized to finance private homeowner energy efficiency retrofits."

At this stage of development, the city offers few details on the pilot it's developing. It's not clear where the loans will come from, what the terms will be, and if there will be one lender or several lenders.

While sources say that VanCity credit union is a likely financial partner, Ramslie says the city has not yet entered into a formal agreement with any financial institution, and is open to proposals.

"We're not guaranteeing that the loan will be commensurate with energy savings," explains Ramslie, "but we're trying to get so that in most cases, the energy savings will be around what you're paying extra on property taxes."


Greening Homes Can Be Big Boost to Economy

The story of how new Vancouver homeowners Schultz and Gullion took a $1,200 government rebate and turned it into $15,000 worth of energy-efficient upgrades is just one example of how a little investment can go a long way.

On average, for every dollar that government spends on these kinds of incentive programs, homeowners who use them spend another 10 on materials and contractor services.

And every million dollars of government investment in energy efficiency programs creates 10 to 15 new jobs in the green building sector.

In the U.S., Clean Energy Works Portland and programs like it have begun to proliferate, thanks in large part to millions of dollars in stimulus funding from the federal government. Without that advantage, can similar efforts here take off?

Jeremy Hays is the special program director of Green For All , a national non-profit in the U.S. with a mandate to build an inclusive green economy. It was a partner in Portland Clean Energy Works, a provider of green home retrofit financing, and similar initiatives across the states.

"Retrofitting buildings can reduce bill payments for homeowners, reduce energy use and carbon emissions - depending on the energy - and it creates jobs that folks desperately need," says Hays. "Why we're behind this issue is that it's just such a win-win-win."


US law stimulated green projects

According to Hays, Green For All successfully lobbied the federal government for a key piece of legislation - the Energy Efficiency and Conservation Block Grant program - that is helping more communities develop programs like Portland's.

The program earmarked $2.7 billion from the 2009 Recovery Act to assist U.S. cities, counties, states, territories and Indian tribes to "develop, promote, implement and manage energy efficiency and conservation projects and programs..."

Green for All is now helping those communities spend the money wisely, says Hays. Portland Clean Energy Works, for example, received $20 million from the program to scale up its program, which gave 500 homeowners in the city access to low-interest loans for energy retrofits, and allowed them to pay it back on their utility bills.

Now, Portland Clean Energy Works has become Oregon Clean Energy Works , and is targeting 6,000 homes across the state.

Marlowe Kulley, an energy advisor with the city of Portland who helped run the program, said they used part of the funding to set up an IT program.

"There's just a lot of data that has to come back and forth between a lot of different agencies," explains Kulley. This includes information about utility bill payment and credit history, information from partner utilities on energy use before and after, and information from contractors on the work that was done and its impact.

"It's a huge undertaking that requires a fair amount of capital to start up," says Kulley. "Right now there's just a lot of paperwork that's being handled by hand... and it's just not feasible when you're looking at thousands of units."

When asked whether programs like this one would be possible without that federal stimulus funding, Hay's immediate response is "No."

"Well, it would be possible," he adds. "But it would be happening at a very different scale than it is now."


Canada lags in green stimulus

In Canada, the federal government policies around energy efficiency and conservation have been spotty, at best. The EcoEnergy program , which provides retrofit rebates and incentives to individual homeowners, has stopped and started in various forms over the past several years, creating little stability for a retrofit market.

Similarly, B.C.'s retrofit program, small rebates targeted towards individual homeowners, was cancelled abruptly in 2009, shaking the retrofit and renovation sector here.

Funding uncertainty around these popular programs indicate energy retrofits are not a priority for the federal or provincial governments. Which leaves Canadian municipalities to pick up the slack.

Approximately eight years ago, the Pembina Institute began exploring how local governments could finance energy efficiency and renewable energy retrofits in their communities. In particular, they looked at Local Improvement Charges , or LICs, a financing mechanism already used by local governments. These charges are levied on residents, via their property taxes, when neighbourhood-specific improvements are undertaken, such as fixing sidewalks.

"What we started to explore was whether they could use this same mechanism, but use it as a way to provide loans to homeowners, so they could do energy-efficient retrofits on their home, and they would pay it back over time through their property taxes," explains Claire Beckstead, who works in Pembina's sustainable communities group.

"The reason that this is sort of innovative and interesting is because the loan itself would be attached to the property, rather than the individual. The benefit and the cost of those retrofits would be passed on should the homeowner move."


Provincial regs 'need clarification'

Pembina even looked at testing this in Dawson Creek. What they found was that there was legal ambiguity around whether communities in B.C. can use LICs for individual homeowners.

"The main challenge in B.C. around using local improvement charges is that the Community Charter doesn't explicitly allow this use of local improvement charges," says Beckstead. "Provincially, there does need to be clarification of the legislation."

Beckstead says while the province has shown an interest in how LICs could be used to finance home energy retrofits, the message needs to come from local governments.

"We're working out a way to move this forward. We know what the program could look like, it's just a matter of getting that explicit permission from the provincial government."

There is potential in the LIC model for municipalities to partner with financial institutions - like Vancouver will do with its retrofit program.


'How do we stimulate a new market?'

Indeed, it's hard to imagine a cash-strapped municipality putting up the capital investment to fund these kinds of loans. Ultimately, if we are to make a dent in the U.S. and Canada's greenhouse gas emissions, retrofitting has to happen on a large scale. That requires private investment, says Hays.

"The dollar figures are in the trillions," he says. "There's not that much public money ever. And that's not what public money is for. The question is, how do we stimulate, literally, the creation of a new market?"

While Green for All doesn't have an official position on the matter, Hays says he believes that on-bill financing through utility bills, rather than property tax, is a better way to provide the security and stability that will attract private investors.

He cites a couple of reasons for this, which are being modeled in Portland. One is that default rates on utility bills are typically quite low, about two per cent. So lenders can be confident that they will be repaid.

The second is fairly unique to Oregon, but could be potentially adopted anywhere. This is the Energy Trust of Oregon, a non-proft focused on efficiency and conservation that is funded by a three per cent "public purpose charge" that is levied to customers of all four of Oregon's utilities. This levy model has provided the means to collect 10 per cent of each loan, which is deposited in a loan loss reserve for the program in the event that a homeowner falls behind or defaults on their payments.

"We have a platform where risk is low, we've got a loan loss reserve, 10 per cent, so you're covered," says Hays. "We've got you covered. Things like that are attracting investors. Now get other lenders to come in and use their own capital to make loans to our customers."


BC Hydro avoids question

And there are broader, perhaps more ideological reasons why utilities should become involved in financing for customer's energy retrofits, says Hays.

"I personally think that utilities, if we are looking long term, should become energy service providers, rather than vendors of kilowatts," he says. "Having them play a role in terms of helping customer finance ways to get energy services at lower costs, that just seems more like a role they should be getting in the habit of playing if we're getting into a green and equitable future."

BC Hydro conservation vice-president Bev Van Ruyven did not respond to a Tyee email asking if the utility would consider becoming a lender for retrofit programs. BC Hydro's communications department offered this emailed statement from senior manager of marketing for Power Smart, Jim Nelson:

"We're exploring a wide variety of energy-efficiency retrofit financing tools under BC Hydro's Power Smart program, taking into account our customers' needs in this area and the current options available to them."


( Colleen Kimmett writes about sustainability for The Tyee Solutions Society and others.  You can find this article and others on green building on The Tyee here: .)