As the electric utility industry restructures, we find ourselves living in interesting times. Utilities are testing new approaches to providing energy efficiency services to customers. In this more competitive environment, new opportunities arise that support the evolution of financing mechanisms as part of utility energy efficiency programs. More than ever, utilities want to cut costs, and, if designed well, financing mechanisms will allow utilities to shift the bulk of energy efficiency programs' costs to participating customers. Although there are many factors working in support of financing programs, their success requires overcoming many obstacles.
Most utilities lack expertise in providing consumer financing, thus making it more costly.
High participation rates may be difficult to achieve on a wide-spread basis, thus limiting energy savings. In addition, in some cases customers have become accustomed to rebates and may not be interested in financing. Certainly, financing mechanisms represent just one piece of a package of programs designed to achieve energy efficiency goals. Time will tell whether utilities can design energy efficiency programs that offer customers financing options that achieve participation and savings levels comparable to successful rebate programs at significantly lower utility costs. This report discusses different approaches that utilities are taking to provide customers with financing for energy efficiency improvements, including various types of financing mechanisms, such as loans, shared savings, leases, energy service charges, and end-use pricing.