Edmonton’s Energy Transition Plan Clean Energy

Transcript:Edmonton’s Energy Transition Plan Clean Energy:
Edmonton’s Energy Transition Plan Clean Energy Financing: Briefing Note 21 October 2013 RICHARD BOYD Numerous reports by government, non-profits, and private businesses have surveyed approaches for funding clean energy (energy efficiency and renewable energy) programs and projects, including C3’s Energy Efficiency Funding and Administration Options for Alberta. The purpose of this note is not to provide another scan of the full spectrum of available approaches, but rather to focus on innovative solutions that have recently gained traction in the USA, and that are in use, or are being considered for use, in a Canadian context. Recent innovations in clean energy financing have developed business models that simultaneously address many recognized market barriers, including the first-time cost barrier, and that encourage the adoption of cutting-edge technologies and deep improvements in energy efficiency. These financing strategies also provide scalable solutions, and are designed to use limited public funds to mobilize, leverage, and support investment in clean energy by private financial institutions (FIs). Leverage ratios of 4:1 (young programs) to 20:1 (mature programs) have been observed in the USA. In the latter case, $3 million of public grant capital can be turned into $60 million of private lending capital. The path to adequate and sustainable funding of clean energy programs and projects, requires a shift from the traditional publicly grant-funded world of rebates, towards innovative financing programs that use public funds to mobilize large amounts of private capital. Given this basic premise, we provide a high-level overview of three innovative, scalable clean energy financing models that exhibit great promise, namely: Property assessed (Local Improvement Charge) programs; Energy savings agreement programs; and On-bill tariff repayment programs. A typical financing program – applicable to residential, commercial, and industrial clean energy projects – consists of up to five major elements: a source(s) of program funds (e.g., private debt or equity, public grants or loans); an administrator(s); a repayment vehicle (e.g., monthly credit bill, on-bill tariff, property tax assessment, service fee); credit enhancements (e.g., loan loss reserve fund, subordinate debt structure, loan guarantee); and security (e.g., utility meter, property tax-lien, equipment). For each of the three program models, we provide a brief description of the underlying model (encompassing each of these elements), list key strengths and weaknesses, and highlight the roles for the City of Edmonton (COE) and the Government of Alberta (GOA). Before looking at the three models for clean energy financing, we first outline the