Policy makers, think tank professionals, and business executives have been trying to solve the issue of financing for energy efficiency and renewable energy projects at the residential level for years, with mixed success. The latest iteration is a great effort led by Del. Ben Kramer from Montgomery County (HB 1088). He has a bill in the Maryland legislature that would allow homeowners to finance energy efficiency work through their electricity bills. This is called "on-bill financing". I commend Del. Kramer’s leadership on this, and will work with him and other stakeholders to craft something that works best for everyone.
The brief history of financing starts with innovative efforts out of California (where else!) to allow homeowners to borrow money from banks, in partnership with their local municipalities, whereby they’d be able to repay the loan through a property tax assessment over a twenty year period. This is the so-called “Berkeley” model, named after the town where it started. Legislators tried to bring the model to Maryland, but the enabling legislation they wanted to pass was blocked by lobbyists for the large banks and other concerns.
The free market came into play when companies like SolarCity and others entered our area with an offer for a solar lease, whereby customers would pay to lease the solar photovoltaic system for a term of twenty years. The benefit is that there is no upfront cost. Others have followed, and now for people with good credit, this is a serious option. It only applies to solar photovoltaic now but could be expanded to other renewable options.
The Maryland Clean Energy Center has a home loan program, which provides lower interest loans for energy efficiency upgrades. The program, called the "Maryland Home Energy Loan Program (MHELP)" provides eligible participants with loans with an interest rate of 6.9% or 9.9%.
So, there are several options out there for eligible homeowners. On-Bill Financing would add to the options and spread the eligibility to a broader range of consumers. The way it works is simple – the utility back-stops the credit needed by lenders, allowing homeowners to borrow money at lower interest rates. The repayments would be put on the electric bill. If the consumer moves, the new owner would be assigned the electric account number and be responsible for repayment. The key to making this work is to have it include on-site renewable energy as well as energy efficiency. It should also be done in a way that keeps Maryland’s competitive electricity market strong and growing. I look forward to working with Del. Kramer and other leaders to shape an on-bill financing mechanism that works.