Verdict Session21 ACEF2008

8/14/2019 Verdict Session21 ACEF2008

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U.S. Energy Ef f ic ienc y and CleanEnergy Funds Panac ea or Pipe Dream ?

Presentation For

Asia Clean Energy Forum 2008

June 1 6 ADB Headquarters Makati, Philippines

by

Malcolm E. Verdict, CEM

Associate DirectorEnergy Systems Laboratory

Texas A&M University System, USA


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Im Here To

Provide Overview of U.S. Energy Efficiency Funds

Examine What Worked & Didnt and Why

Create a Dialogue with Forum Participates

2U.S. Clean Energy Financing
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PANACEA OR PIPE DREAM?

Panacea is defined as universal remedy orsolution, cure-all, or magic potion

Pipe Dream is defined as dream, wishful

thinking, fantasy, or delusion

Energy Efficiency & Clean Energy Funds3U.S. Clean Energy Financing
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Clean Energy Funds Important GloballyFor Same Reasons As U.S.

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4Common U.S. Energy Efficiency& Clean Energy Funds ($)

Public Sector Funds - Revolving funds, tax-exempt bonds

Private Sector Funds - Banks, utilities, green capital

funds, energy service companies (ESCOs)

Incentives/Dedicated Funds - Interest buy downs,

rebates, clean technology funds (wind, bio fuels, etc.)

Credit Enhancements Govt loan guarantees, energyefficient home mortgages (EEMs)

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Examples of Successful CleanEnergy Funding Programs

Public Sector Funds $96 M Texas LoanSTAR revolving fundwith $240M loans & 5.6 yr. avg. payback since 1990

Private Sector Funds Green mutual funds invested inenvironmentally responsible corp., green bonds, bank capital

Incentivized/Dedicated Funding Numerous utility loanprograms such Austin Energys Residential & Commercial loans

for appliance/weatherization/commercial lighting @ 0%.

Credit Enhancement Funding Dept. of Energy ($38.5B) &Agriculture [$2.1 B] Loan Guarantee Programs

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Key Reasons for Successful U.S.Clean Energy Funding Programs

Dedicated public sector funds Key word is dedicated i.e.,Low-cost dollars chasing green projects.

Loan Guarantees (new to clean energy in U.S. & my favorite)Can leverage $billions without Govt. tax dollars. Govt.

guarantees lowers risks, the costs & project paybacks.

Use of existing banking channels Lenders already in thebusiness and know what they are doing. Also, low transaction

costs plus good at marketing. Utilities like this one.

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Not So Successful, U.S. CleanEnergy Financing Mechanisms

Energy Efficient Mortgages (EEMS) One of biggestdisappointments in U.S. last 20 years

Performance guaranteed loans Too many unknowns

Some ESCO projects Very much a mixed bag.

Difficult to do right on both sides.

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Reasons For Lack Luster Performanceof Some U.S. Clean Energy Funds

Based on False Assumptions - Lack of private funds, that lowinterest rate will increase demand, that financing is a Silver Bullet.

Boutique Loan Products Very specialized with low volumesthat that becomes a non-profitable loan product (not sustainable).

High Transaction Costs Added fees for certification (i.e. energyrating), added paper work & long lead times.

Greater Credit Risk - New/emerging technologies, volatileenergy prices, difficulty in verifying savings & performance, few

lenders with energy engineering experts or vice versa.

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Homework/Good References US EPA Report: State Clean Energy Funds (www.epa.gov/combdhpp/state-

policy/funds_fs.html)

NGO Reports: (1) State Residential Energy Efficiency Loan Programs,

Energy Programs Consortium, M. Brown, Sept 2007 (http://www.cee1.org/)(2) Funds for Energy Efficiency Projects, Alliance to Save Energy, Apr 2002(www.ase.org/)

State Loan Programs: California Energy Commission(http://www.energy.ca.gov/), NYSERDA - (http://www.getenergysmart.org/),

Texas State Energy Conservation Office - (http://www.seco.cpa.state.tx.us/) World Bank Reports: (1) Financing Energy Efficiency: Lessons from recent

experience in Brazil, China, and India, May 2006

(2) Development & Climate: Financing Challenges, A. Miller, IFC, Sep 2006

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Summary of Lessons Learned& Questions?

- Clean Energy Funds rightfully recognized as anessential public tool but not a Silver Bullet or panacea.

Success of U.S. EE financing has varied widely

- Study U. S. models carefully to not repeat missteps

Contact: Email [email protected]


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Verdict Session21 ACEF2008

Documents

Transcript of Verdict Session21 ACEF2008