The Retrofit Revolution: Innovative Financing and Programs to Green Every U.S. Home

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The Retrofit Revolution: Innovative Financing and Programs to Green Every U.S. Home Wednesday, April 28, 2010; 2:30 PM - 3:45 PM Moderator Martha Amram, CEO, Ennovationz; Senior Fellow, Milken Institute Speakers Rod Dole, Auditor-Controller-Treasurer-Tax Collector, County of Sonoma, California George McCarthy, Director, Metropolitan Opportunity Unit, Ford Foundation Joshua Raffaelli, Associate and Kauffman Fellow, Draper Fisher Jurvetson James Williamson, Policy Director, Treasury Department, State of Pennsylvania 1

Allocation of ARRA funding for residential energy efficiency The $16.8 billion designated for the Office of Energy Efficiency and Renewable Energy Energy Efficiency and Conservation Block Grants; $3.2 billion Energy Efficiency Research; $2.5 billion Others; $3 billion Weatherization Assistance Program; $5 billion Retrofit Ramp-Ups in Energy Efficiency; $ 454 million State Energy Programs; $3.1 billion Note: ARRA = the American Recovery and Reinvestment Act of 2009. Source: The U.S. Department of Energy. 2

Consumer demand for loans remains weak Revolving loans % change from a previous year 10 5 0-5 -10-15 -20 Jan-08 Jan-09 Feb-10 Nonrevolving loans % change from a previous year 10 5 0-5 -10 Jan-08 Jan-09 Feb-10 Source: Federal Reserve. 3

Continuing widespread mortgage crisis % negative equity 70 60 50 40 30 20 10 0 11 states with negative equity share > 20% as of Q4: 2009 U.S. average: 24% Note: The data only include properties with a mortgage. Source: First American CoreLogic. 4

Frozen secondary markets US$ billions U.S. issues of non-agency 1,000 mortgage-backed g securities (MBS) 800 600 400 200 0 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Source: Securities Industry and Financial Market Association, SIFMA. 5

Frozen secondary markets US$ billions 800 600 400 200 U.S. issues of asset-backed securities (ABS) by asset type Student Loans CBOs & CLOs Manufactured Housing Home Equity Equipment Credit Cards 0 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 Auto Note: CBOs = Collateralized bond obligations; CLOs = Collateralized loan obligations. Source: Securities Industry and Financial Market Association, SIFMA. 6

The collapse in the MBS markets is from the private-sector side US$ trillions 3 Private-label MBS Ginnie Mae, Fannie Mae, Freddie Mac MBS US$ trillions 3 2 2 1 1 0 96 97 98 99 00 01 02 03 04 05 06 07 08 09 0 96 97 98 99 00 01 02 03 04 05 06 07 08 09 Source: Securities Industry and Financial Market Association, SIFMA. 7

55% energy waste in the U.S. economy 8

Energy waste: Less than 5% gets to the home! Source: Build it Green; Emerson Environmental. 9

10

Residential energy efficiency financing models Energy efficient mortgages Unsecured home improvement loan On-bill financing through property taxes (PACE) On-bill payment through utilities On-bill financing through utilities 11

Financing the Residential Retrofit Revolution (November 2009) Success Factors: Build on successes Engage consumers Integrate program and financial product design Identify first movers in the private sector 12

Sonoma County, CA PACE is underway $100M authorized -- $43.5M in applications -- $23.2M disbursed (7% APR) 13

The world is watching Sonoma County This map represents visits to our website. =1000+ =100-999 =1-99 14

Homeowners benefit with increased property values 544 303 75 124 58 64 37 2.9MW of clean energy generation to date. 15

Sonoma County Energy Efficiency & Solar: $23.2M back into the local economy 16

Sonoma County Energy Efficiency and Solar: The jobs follow the funding 2009: 17

Energy efficiency creates jobs ARRA estimates: 1 job-year per $92,000 in spending Of this 2/3 is for direct and indirect jobs and 1/3 is induced employment Sonoma County experience: 252 jobs per $23.2M (1 per $90K) 18

Financing legislation SB77 (Pavley) Provides a reserve fund pool for PACE type bonds AB1873 (Huffman) This bill allows the State Air Resources Board to purchase PACE type bonds HR3525 (Thompson) Creates tax exempt status for the interest rate paid for PACE bonds. BABs/PABS/QECBs Build America Bonds/Private Activity Bonds/Qualified Energy Conservation Bonds under discussion 19

Investment opportunities Long-Term Financing 50 Million PACE Bond Reserve-SB 77 (Pavley) Tax Exemption-HR 3525 (Thompson) Securitization & Muni Bonds-AB 1873 (Huffman) BAB s; PAB s; CREB s; CRA & QCEB s Gov t Sponsored Energy Bank Gov t Guaranteed PACE Bonds & Securitizations Short-term Warehouse Financing Energy Bank CRA Investment for Banks Grant or L.O.C. for Implementation 20

25 communities selected for Recovery Act Retrofit Ramp-Up awards (April 21, 2010) Source: the White House; APA Policy News for Planners 21