Energy Smart Loans, Snohomish County

Location: Washington, USA

Population: 822,083 (2019)

Climate: moderate year-round

Duration: 2012 –

Sector: Buildings

Funding sources: Public-private

City networks: N/A

Savings: 7,033,700 kWh (source)

Solutions: Low-interest loans to homeowners to increase access to energy efficiency improvements and renewable energy projects.

Multiple benefits: local job creation, improved indoor comfort and health conditions, improved social equity

Objective – To help local homeowners save energy and money and invest in renewable energy.

Solutions – In March 2012, the County government $644,000 from the Energy Efficiency and Conservation Block Grant (EECBG) funding through the Department of Energy. The County partnered with Puget Sound Cooperative Credit Union (PSCCU) to offer Snohomish County homeowners a special energy-smart loan program. The program has an innovative financing model, under which PSCCU administers the lending program and uses its capital to service loans. Snohomish County’s investment of $644,000 in grant dollars with the PSCCU serves as a “loan loss reserve” and is only used in the event of customer default.

The loan loss reserve model has numerous benefits. The primary is that Snohomish County can leverage the initial investment of $644,000 to support approximately $12 million in loans over about 15-20 years.

The Energy Smart Loan Program started in 2012 and is contracted to operate until 2031, yet program lending capacity likely reached its cap of  $12 million around 2018 based on current participation rates.

Local homeowners can access the loans to make their homes more energy-efficient and reduce their utility bills year-round. The loans can be used to fund various energy efficiency actions, for example:

• Insulation installation
• Window replacement
• Air and duct sealing
• Heating and cooling improvements
• Water heaters
• Conversion to natural gas
• Water conservation
• Solar system installation for electricity and hot water
• Geothermal systems

The favourable terms of the loans include: 1) terms up to 15 years; 2) loan amounts up to $50,000; 3) low rates—fixed for the life of the loan (4.25-8.74%); 3) no pre-payment penalties; and 4) flexible pre-payment options.

As of Q1 2018, the program had issued 1487 loans totalling $16.3 million. The annual energy saving was 7,033,700 kWh.

Funding – Grants from the federal government and bank capital.

Innovation – Using grants as a guarantee to leverage low-interest bank loans for energy-efficient actions and renewable energy installation by homeowners.

Success factors – 1) Innovative financial model to use government grant to reduce bank loan risks and leverage low-interest rate bank loans; 2) using low-interest and long-term bank loans to overcome financing barrier to energy efficiency and renewable energy actions by homeowners; 3) the borrowers can also access utility rebates and incentives; 4) The Program is structured such that project contractors receive the funds directly for all home energy improvements. There is no cost to contractors to participate in the program, which helps to keep their prices attractive to customers. 4) With PSSCU as the program administrator, homeowners and contractors benefit from a primary point of contact. In addition, Snohomish County does not pay PSCCU any program administration fees, which helps keep program costs low for customers. It also allows Snohomish County to offer the Program without investing in the staff necessary to underwrite and service loans.

Significant outcomes

As of spring 2018:

• Installed 3,869 kW of solar power;
• Replaced 2,065 inefficient windows;
• Completed 1,255 heating retrofits, including 463 ductless heat pumps;
• Annual energy saving 7,033,700 kWh

Synergies with local policies:

• Snohomish County has multiple policies and programs on energy-efficient homes and climate change mitigation (source).
• On February 20, 2019, Snohomish County passed a Joint Resolution committing to 100% clean electricity by 2030 and 100% clean energy by 2045 (source).

Political alignment:

• The program is aligned with the federal and state policies of green development, clean energy transition, and climate change mitigation.
• It is also aligned with overall trends that financial institutions are increasing their financing of clean and green projects, including energy efficiency

Marketability:

The program’s advantage of high leverage rate and low-administrative load for the government makes it an attractive and low-cost option for motivating energy efficiency actions by homeowners.