RESIDENTIAL ENERGY EFFICIENCY FINANCING MARKET TRENDS. Presented: 5/23/2016

Transcription

1 RESIDENTIAL ENERGY EFFICIENCY FINANCING MARKET TRENDS Presented: 5/23/2016

2 Overview Trends throughout the country A closer look at CA Where our data comes from What s Out There: Energy Efficiency Financing Products (EEFPs) in the Market Contractor Support of EE Financing Customer Demand for EE Financing Market Opportunities

3 Energy Efficiency Financing: New or a fresh take on an old theme? Qualified for lower energy efficiency interest rate in 1972

4 Turn of the century started a growing trend in public-funded financing programs $2M $15M $40M $300M $100M $184M $200K $1B *Cumulative loan volume based on public data sources The California Residential Energy Efficiency Financing Market 4

5 A closer look at the CA market for energy efficiency Supply-Side Baseline Efforts Demand-Side Baseline Efforts Review of secondary data General Population Survey Mystery Borrower interviews Supply- Side Efforts Financial Institution interviews Demand- Side Efforts General Population credit score analysis Contractor interviews

6 What s Out There: Energy Efficiency Financing Products in the Market The California Residential Energy Efficiency Financing Market

7 There are three common types of Energy Efficient Financing Products (EEFPs) in the marketplace now Home Equity Loans: incorporate energyefficient upgrade costs in the overall mortgage value Term Loans: with specific energy-related requirements, secured against the financed equipment or not PACE Loans: repay loans through a tax assessment on the property Fis* offering loan type Product DesignNumber of 60 (primarily FHA PowerSaver and private lender supported) Security type Mortgage lien Equipment/ unsecured Qualification criteria *Financial Institutions D/I ratio, property value, FICO score, equity 23 (primarily credit unions) 10 FICO score/ability to pay Priority lien leading to Tax Impact Sufficient equity/ payment history

8 PACE dominates the market for energy efficiency financing Home Equity Loans 2% Total CA EEFP Annual Volume in % $436M Term Loans 8% Energy efficiency and solar!

9 Annual Percentage Rate Interest rates offered to customers throughout CA 25% 20% 15% 16.54% 15.98% 10% 10.27% 8.69% 11.30% 10.32% 5% 5.30% 5.18% 0% Small Project ($7,000) Range Large Project ($25,000) Small Project ($7,000) Standard Deviation Large Project ($25,000) Small Project ($7,000) Large Project ($25,000) Small Project ($7,000) Large Project ($25,000) FICO (716) FICO (580) FICO (716) FICO (580) Secured Unsecured 9

10 Contractor Support of EE Financing The California Residential Energy Efficiency Financing Market

11 Many contractors are aware of EEFPs but few promote them About three of four contractors (71%) are aware of EEFPs Contractors who promote are mainly promoting PACE (n=156) Contractors who are aware tend to be larger and offer solar but 15% promote them 85% Do Not Promote EEFPs (n=156) 11% Promote PACE 7% Promote Term Loans 2% Promote Home Equity Loans

12 85% of contractors face barriers to promoting EEFPs 3/4 th of homeowners who used financing noted financing allowed them to undertake measures that would not have been otherwise possible Perceived lack of customer need for financing (44%) Barriers Perceived lack of capacity to promote financing (40%) Lack of awareness of financing options available (35%) Lack of interest in promoting financing (15%) (n=156)

13 Customer Demand for EE Financing The California Residential Energy Efficiency Financing Market

14 EEFPs represent a small fraction of how homeowners pay for energyrelated home upgrades About one in three customers (36%) made an energyrelated upgrade in the last two years (n=1296) 1% of home-owners, 3% of those who made an upgrade 25% used financing (n=464) 75% did not use financing Most customers did not use financing 14% used EEFPs 81% used conventional financing Home Equity Loan (0%) Term Loans (5%) (9%) (n=115) Retailer (34%) Contractor (23%) Credit Card (20%)

15 Homeowners who use an EEFP are more likely to undertake a larger project Average Project Cost Conventional: $16,599 EEFP: $25,714 EEFP often used for larger energy saving measures

16 Opportunities Customers face large barriers to completing upgrades and using financing, but EEFPs may present opportunities Barriers Low Awareness: One in three homeowners is aware of EEFPs High Upfront Cost: 54% of homeowners agreed that the higher upfront costs is why they might not buy a high-efficiency item High Interest Rates: 62% felt that the interest rates available to them are too high Continued demand for Upgrades: Four in ten homeowners likely to make upgrades in the next two years Continued demand for Financing: 27% are at least somewhat likely to use financing EEFPs could increase affordability: 13% said a loan could help overcome the high upfront costs of an EE product

17 Thank you! Megan Campbell Vice President Opinion Dynamics