ACEEE Paper Breaks Down Funding and Financing Sources (and Pros and Cons) for Local Governments

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Feeling overwhelmed by all of the different funding mechanisms there are for energy efficiency projects – and wondering why there are so many? This report (presented at ACEEE’s 2012 Summer Buildings Study) looks first at why local governments are such an important point where energy efficiency planning and programs take root, and then provides a great overview of the different types of funding available, with pros and cons. An excerpt of the report’s “Why Local?” section is copied below, with the funding summary table it then discusses.

Why Local?

“Energy efficiency can and should be integrated into the long-term planning of local governments. Energy efficiency programs with sustainable funding structures enable communities to plan and manage a long-term approach to improving energy efficiency rather than limiting them to one-time projects or adoption of discrete technologies. Programs designed to have sustained funding and human resources allow for the regular identification of new efficiency opportunities and development of continuous improvement processes designed to capture them. Sustainable local efficiency funds have the potential to contribute to the transformation of the market for efficiency from one characterized primarily by technology specific financial incentives, often funded in fits and starts, to a market with consistently available capital devoted to performance-based and continual improvement.

     “While many aspects of advancing energy efficiency have typically been handled by state governments and utilities, local communities also have the authority to successfully implement energy efficiency initiatives. While utility efficiency efforts, where they exist, remain essential, energy efficiency initiatives spearheaded at the local level provide an opportunity for innovation in program delivery and policy beyond what is offered by investor-owned utilities. Local program administrators are often able to be more flexible in program design when compared to regulated utilities, who are often constrained by the details of cost-benefit tests and lengthy approval processes. In states that are aggressively pursuing energy efficiency, local communities can play a major role in developing new strategies that complement or drive demand to existing state and utility efforts. Communities in states taking little action on efficiency can become leaders in their state through improving energy efficiency in government operations and developing policies to improve access to information on energy savings opportunities for the community as a whole.

     “Additionally, many local initiatives allow non-traditional levers to be applied to the delivery of energy efficiency and market transformation. Local initiatives often have influence over a broad variety of activities including planning, policy, programs, and projects. These levers can be used to develop strategies that complement and address gaps in utility programs. The scale of local programs also enables close coordination between each kind of influence to remove barriers to efficiency, actions that are often impractical or intentionally segregated at the state or national level and often not allowed from utilities without significant regulatory oversight. For example, energy efficiency programs can be integrated into local economic development plans, a task that could be more difficult in a state or federal bureaucracy. In communities with municipal utilities, meaning the energy utility is a department of the local government, incentives for action on energy efficiency are often more easily aligned because policymakers and program implementers are a part of the same organization. Examples of the variety of documented local energy efficiency activities include:

  • Planning – energy benchmarking at the building and community scales, efficiency targets, energy consumption or emissions reduction targets (Mackres and Kazerooni 2012)
  • Policy – building codes, energy use disclosure requirements, building energy improvement requirements, energy taxes, parking pricing, and enabling policies for programs (Busche 2010; Mackres et al. 2012)
  • Programs – energy management in government operations (EPA 2011b), private building retrofits including finance (residential or commercial revolving loan funds, loan loss reserves, PACE, on-bill finance), financial incentives, workforce development, marketing and education (DOE 2012), transportation mode shift, telecommuting (EPA 2011c)
  • Projects – energy retrofits and retro-commissioning to local government buildings, vehicle fleet improvements, energy-efficient transportation infrastructure investments (Black et al. 2009)
  • Staffing – continuous employment of skilled and experienced staff can increase energy savings through their efforts to identify and implement efficiency activities.”

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The ACEEE Report is available in full here.

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