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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.

4U.S. Clean Energy Financing

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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)

5U.S. Clean Energy Financing

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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

6U.S. Clean Energy Financing

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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.

7U.S. Clean Energy Financing

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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.

8U.S. Clean Energy Financing

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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.

9U.S. Clean Energy Financing

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