By Kat Friedrich
Guest Blogger, Energy Efficiency Markets
October 5, 2012
The Bank of America Energy Efficiency Finance Program has provided low-interest loans and grants to community development financial institutions (CDFIs) to increase access to energy efficiency retrofits in low- to moderate-income communities. The program was launched in 2011.
Bank of America is issuing loans to the CDFIs at an interest rate of one percent over 10 years with a total loan amount of $50 million. The program is also providing $5 million in special grants for a total investment of $55 million. The grants will help support the CDFIs’ green capacity building, free energy audits, staffing, training, reserves and marketing.
“The objective of this ground-breaking program is to provide the catalytic resources to support the most innovative energy efficiency structures out there today,” said Amy Brusiloff, senior vice president of CDFI Lending & Investing at Bank of America. “We structured the request for proposals as an open call for interesting, innovative ideas from CDFIs.”
The program’s design was sufficiently flexible to enable CDFIs to develop their own models. Some of the CDFIs in the program focused on multi-family housing, but other types of buildings were also eligible. Bank of America estimates 10,000 multifamily residential units and dozens of single-family homes, commercial buildings, community facilities and charter schools will receive retrofits.
Dick Jones, president of Boston Community Capital Solar Energy Advantage, one of the CDFIs funded by Bank of America, appreciated this flexibility. “They weren’t trying to be prescriptive, which a lot of funders tend to do,” he said. “Bank of America’s process forced us to think about what was important, what we were really doing, and what we were trying to learn.”
The request for proposals led to an avalanche of responses. “For weeks, I was fielding hundreds of calls,” Brusiloff said. “We received a lot of applications that were interesting but didn’t fit into the target markets, were too small to borrow, or hadn’t made any loans yet. The selection committee chose nine program participants and then added a capacity-building component to help some of the smaller CDFIs.”
“We view the market as pre-emerging,” Brusiloff said. She added that there are many challenges within energy efficiency financing, with one of the main concerns being that the savings are not yet proven. Therefore, it’s difficult to convince owners of buildings that energy efficiency measures will really save them money.
Jones has had similar experiences with community development corporations (CDCs). “They may want to be really green, but they aren’t able to be green at the expense of paying more for electricity.” Financing programs need to be based on solid performance measurement so that building owners will be repaid. Some building owners replace windows or take other steps toward energy efficiency and are disappointed when the savings are minimal. The project will address this challenge through rigorous collection and analysis of pre- and post-retrofit energy use data to help change behaviors and track outcomes.
Boston Community Capital works with Wegowise, a web-based data company which provides environmental performance measurement for buildings and is located in the Boston area. Wegowise tracks water, electricity, gas and oil use for property owners and can import data from local utilities. The interface allows building owners to benchmark their properties against similar buildings or against the entire database.
“We’re doing most of our financing on a performance basis,” Jones said. “We’ll design the improvements, do the energy assessment, put in all the money upfront.” Then, depending on the performance of the building, the permanent lender may buy the loan and extend it over a 30-year schedule. The typical interest rate for these loans is six percent.
Community Investment Corporation of Chicago (CIC), another CDFI funded by Bank of America, is using a somewhat different model. This CDFI offers free energy audits to owners of multifamily housing through a partnership with the Center for Neighborhood Technology. According to CIC president Jack Markowski, 33 percent of the building owners who receive audits retrofit their buildings, but building owners choose to pay the cost themselves 66 percent of the time once they see the benefits energy efficiency measures can provide.
For building owners who do seek funding, CIC offers very favorable rates. With support from Bank of America and the MacArthur Foundation, CIC offers a three percent interest rate over a seven-year term. The loans are secured and subordinate to the primary mortgages.
“For an investment of $3,000 per unit, owners are seeing savings of 30 percent or more on utility bills,” Markowski said. “That’s $10,000 a year on a typical 24-unit building in Chicago. It’s extremely unusual for anyone to be making three percent second mortgage loans. We’ve approved $8.2 million covering 2,700 units of housing.”
Markowski was very enthusiastic about the innovations in low-income energy efficiency financing accomplished by CIC. “Nobody else has a program of this scale providing information and financing. Nobody has gotten it to the scale that we have,” he said.
Bank of America has contracted with EnergyScoreCards, a subsidiary of Bright Power, a data management company, to measure and track the performance of the building retrofits in this program. Brusiloff said she is very pleased with the energy management system. “They can isolate particular areas of the building and send alerts to the building owners.” The measurements will include both water and energy savings.
The resulting data set will appear in a white paper from Bank of America which Brusiloff expects will be published in 2015.
The organizations participating in the program are:
- Boston Community Capital, Boston
- Community Investment Company, Chicago
- CRAFT3, Seattle
- Enterprise Community Partners, Multiple Cities
- Grow America Fund, Multiple Cities
- IFF, Chicago
- Low Income Investment Fund, San Francisco and Los Angeles
- Self Help, Charlotte
- The Reinvestment Fund, Baltimore and Philadelphia
Bank of America’s social responsibility report is available online at http://www.bankofamerica.com/csrreport.
Kat Friedrich is a staff writer for the Clean Energy Finance Center, which works with stakeholders to develop policies and programs that drive investment in energy efficiency and small-scale renewable energy. This blog is a repost courtesy of the center.