ShoreBank Blog
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Posts Tagged ‘energy efficiency’
Tuesday, March 9th, 2010
One would assume that energy lending is suffering. Lenders are not only lending less, but actually reducing average balances on credit cards, home equity loans, and lines of credit. In fact, the contrary is true – energy lending seems to be growing by leaps and bounds. Many people ask me why I believe energy finance is poised for explosive growth.
Here are my five reasons for this growth:
- As credit is so difficult to obtain for any kind of project, the federal government is extremely focused on creating new loan programs, like energy finance, that expand credit in all sectors.
- The credit crunch is forcing many in the energy efficiency community to reach out to new types of partners to create these loan programs. In the past, the efficiency community concentrated on developing partnerships with very large commercial banks for easier replication and escalation. The problem is that pilots require experimentation, a willingness to develop new processes and procedures, and, often, an assumption of added risk – elements that do not easily mesh with these large banks’ established lending platforms, especially for lending products, such as residential mortgages, that highly value routinization, efficiency, and standardization. The credit crunch has meant that smaller, mission-driven institutions, which are eager to pioneer new types of loan structures and quite adept at pulling in philanthropic partners to leverage public dollars, such as our colleagues in Portland, are now courted more routinely as partners.
An increasing number of states are legislatively mandating that utilities create on-bill financing mechanisms. As a result, utilities are being thrust into the finance business. Consequently, they are now more eager to develop partnerships, explore leveraging models, use their expertise in measurement and verification of savings, and, with contractor oversight, to develop effective energy lending programs.- The severe economic downturn, budgetary shortfalls at all levels of government, and growing discontent with government (and elected officials), puts a premium on programs that promote job growth, are revenue neutral, and are open to a wide swath of the electorate. Energy financing programs are among the few policy options that offer all of these elements.
- The extreme run up in energy prices in 2007 and 2008 has altered perspectives on where future energy prices are headed. Most people now believe that energy prices will rise over time and that escalation will greatly outpace overall inflation. Indeed, rising costs for energy, like death and taxes, is now seen as one of the few certainties in life.
All of these reasons have thrust energy finance into the national spotlight and to much higher prominence in the financial services industry, especially if the Department of Energy is successful in its efforts to create a new secondary market for loans tied to residential energy efficiency improvements. Naysayers look out: energy finance is poised for growth.
Tags: energy efficiency, energy finance, financial crisis, on-bill financing, ShoreBank, triple bottom line
Posted in Green Collar | No Comments »
Tuesday, February 16th, 2010
Although landlords are ultimately responsible for a building’s energy efficiency, there are a number of steps which environmentally-friendly renters, some of whom pay their own utility bills, can take to reduce energy costs and consumption. So I am going to share with you some of the easy and convenient steps that we share with our ShoreBank customers and encourage building owners to pass along to their tenants.
*P.S. Many of the tips also apply to anyone owning or inhabiting a home, apartment, or condo.
1. Turn off unused lights and computers and replace incandescent light bulbs with compact fluorescent bulbs (CFLs).
2. Caulk and weather-strip windows and outside doors. For older windows, place a sheet of plastic over them and use two-way tape to affix it. The greatest source of heat loss in a home comes from the windows.
3. Remember to use the storm windows which help insulate the home and keep heat inside it.
4. Keep your drapes open in the winter to let sunlight naturally warm the room and home. And in the summer, keep them closed to prevent the place from getting too warm.
5. For each degree lower or higher you set the thermostat, you will save potentially two to 10 percent on heating or cooling costs. In the winter, keep the temperature set at 68 degrees during the day and 55 in the evening. Wearing a sweater or layered clothing will make the temperature more tolerable, especially on days when the bill arrives in the mail.
6. Clean the coils on the back of the refrigerators which contribute to about 15 percent of the total monthly electrical bill. This can help persuade your landlord to finally get around to replacing the old one with an ENERGY STAR model.
7. Get an electric blanket. Besides the joy and comfort that comes from getting into a bed at night with warm sheets, it is less expensive than heating your bedroom.
8. Move your furniture away from the exterior walls to create space between you and the cold walls. This will make space for the air to move around, making the air warmer.
9. Keep your radiator and heating vents clean from dust. Dust and dirt prevents heat from flowing into the rooms where you need it. It’s “no fun” to clean, but being cold and paying more for it can be even more painful.
10. Select ENERGY STAR appliances and products, and check efficiency ratings prior to purchasing.
Whether you own or rent, energy efficiency is everyone’s concern. Please share this information with friends, family and / or your landlord. It might even help some renters get a faster response to a lingering maintenance issue when the building owner understands how it will reduce their monthly costs while adding comfort and value to the property.
In fact many of the improvements are eligible for tax deductions and may help lower income taxes. With the April tax deadline fast approaching, I will explore the tax benefits of buying a home and incorporating energy saving improvements in your 2009 tax return in my next blog entry.
For additional energy saving information, visit the U.S. Department of Energy’s website.
Tags: community development, energy efficiency, environmental sustainability, green banking, green building, ShoreBank, triple bottom line
Posted in Mortgage Lending | No Comments »
Tuesday, December 15th, 2009
I can’t think of many better New Year’s resolutions than one promising to make 2010 the time for improving your home’s energy efficiency. While the cold weather has descended on most regions of the country, making sure your home is well insulated and reducing energy costs never goes out of season. To help save you 25 to 45% per month on your utility bills, while protecting the planet and making your home more comfortable, I have some inexpensive and easy tips for going about it.
Getting Started: An Energy Audit
Winter is the ideal time for a certified auditor to perform a Blower Door Test which will determine how airtight your home really is.
From our experience with the ShoreBank Home Energy Conservation Loan Program, I suggest contacting a professional to perform an in-home inspection for air leaks, checking insulation and the overall efficiency of your home’s mechanicals and appliances to help determine which improvements offer the best value and environmental impact.
Insulate Your Attic
Be certain the attic hatch is well insulated. Heat loss due to poor insulation forces the furnace to work overtime, costing you more to heat your home.
Furnace
Have the furnace serviced and change its filters on a monthly basis to ensure maximum efficiency. Clogged air filters can make the heating system work harder and is more costly.
Install a Programmable Thermostat
A programmable thermostat will enable you to lower the temperature when the home is empty or in the evening while you’re asleep. And it can be adjusted for comfort when you are at home.
Check Windows
Quality storm windows not only improve energy efficiency, but also are eligible for a $1,500 tax credit in 2009 and 2010 from the federal government, thanks to the America Recovery and Reinvestment Act signed into law by President Obama last February. Plus you can include the cost of installation for these products.
Older windows can be repaired and continue to be efficient by sealing gaps with caulk, applying new glazing compound, replacing broken panes and repairing loose parts and installing weather stripping.
Decorate
One of my personal favorites, using lined draperies, working shutters or insulated shades, helps cut heat loss.
More information about energy-efficient improvements and tax credits is also available from the Alliance to Save Energy at www.ase.org.
Close Fireplace Dampers
When not in use, an open damper allows nearly 10% of the heat in your home to escape, according to “Preservation” magazine.
Caulk Opening and Holes
For areas around mail chutes, outdoor faucets, cable television and utility entrances, use exterior-grade caulking on the outside of your home.
Ceiling Fans
Set your fans to the lowest speed so the direction of rotation and the blades push the warm air down from the ceiling.
Bathroom Fans
Ensure the fans have functioning dampers to keep the cold air from coming in.
Finally, let’s make it happen in 2010. Remember, one-third of all dangerous greenhouse gas emissions released into the environment emanate from our homes. The small investment we make in improving our home is not only a good return on investment but also helps to stimulate local economies and supports good paying jobs.
Happy Holidays!
Tags: energy efficiency, Energy Tax Credits, green building, ShoreBank, triple bottom line
Posted in Mortgage Lending | No Comments »
Tuesday, December 1st, 2009
I am often asked to describe an innovative “energy loan” product created by ShoreBank. My answer may seem surprising. In my opinion, one of our most innovative “energy loan” products is the same conventional single-family mortgage product we’ve offered to customers for more than 30 years!
My retort is contrary to what most people think. For many in the energy efficiency industry, “energy loans” have features that distinguish them from conventional loans. “Energy loans” may have different underwriting guidelines (such as higher debt-to-income or loan-to-value limits), more generous terms (such as longer amortization periods) or, may be originated and serviced by unconventional “lenders,” such as utilities or municipalities.
This existential question about what makes an “energy loan” was the focus of a panel at last month’s Behavior, Energy, and Climate Change Conference. Interestingly, a common theme among myself and my fellow panelists was the idea that “energy loans” are not categorically different from other loan products we each have offered for decades. What is different is how we engage with customers to guide them towards choosing more energy efficient products. We all recognized that our existing loan products could be used for energy projects. We didn’t need to create novel loan products – but we did need to create novel lending programs.
For each of the panelists, “energy lending” involves developing ways to prod our customers into choosing energy efficient products. For instance, AFC First Financial Corp (AFC), one of the largest non-bank lenders for energy efficiency projects, discovered it had to focus on educating contractors. Contractors interact with customers at key times, such as when a customer’s furnace stops operating and he or she needs a new one immediately. According to AFC, 80% of consumer choices are reactionary. As a result, AFC needs to be sure consumers are making smart choices at these critical moments. Although having a flexible loan available to consummate the deal and a reduced interest rate for an energy efficient model can help to steer the consumer towards a more efficient product, without the contractor making the consumer aware of the benefits of the efficient model at this decisive time, the consumer is not likely to choose the ENERGY STAR qualified furnace over a conventional one, irrespective of the financing options. So, AFC spends a lot of time working with its contractor network to ensure contractors are able to accurately and articulately explain why efficient models are better choices.
For ShoreBank, our energy lending programs similarly focus on ensuring that our customers choose more efficient products. For example, we provide a free energy audit at the time of loan application to help customers understand the benefits of completing air sealing, adding insulation, and choosing ENERGY STAR qualified windows, HVAC systems, and appliances
The key is to drive consumer behavior towards more efficient outcomes, not necessarily to create “energy loan” products. While the current financial crisis has necessitated a need for unconventional approaches to lending (whether for energy efficiency projects or more mundane credit needs), I hope this crisis does not cause us to focus too much attention on the creation of new “energy loan” products at the expense of creating more effective “energy lending” programs.
Tags: energy efficiency, green banking, green loan, ShoreBank, triple bottom line
Posted in Green Collar | No Comments »
Tuesday, September 15th, 2009
Despite current economic conditions, many home improvement projects are holding their own. And the best way to get exactly what you want in your home is to customize its features. But “custom” doesn’t mean it has to be an expensive endeavor. Instead it just might mean saving money while protecting the planet. Here are a few ideas:
Tax Credits.
By incorporating sustainable materials and energy saving products in your home improvement project, you can recoup even more of your project costs and generate a social return. Thanks to President Obama’s America Recovery and Reinvestment Act of 2009 (ARRA) that was signed into law last February, tax credits have been extended and expanded for energy-saving improvements that had expired two years ago. This will save you money at tax time!
Tax credits are available in 2009 and 2010 for 30% of the cost of energy-efficient doors and windows, insulation, air conditioners, furnaces, heat pumps, and boilers for your primary home, up to a lifetime cap of $1,500. Plus you can include the cost of installation for these products. Starting this year, solar water heaters, geothermal heat pumps, and wind energy systems are also eligible for a tax credit of up to 30% of the cost and are available until 2016. More information about energy-efficient improvements and tax credits is available from the Alliance to Save Energy at www.ase.org.
Lower Utility Bills.
By conserving energy you lower your monthly utility bills by 25% to 45%. By including double-paned windows and extra insulation in the attic you can keep cool or warm air from escaping so the HVAC system doesn’t have to work as hard to maintain the right temperature.
Healthier Environment.
And the less electricity and water you use, the less of an impact you make on the earth’s resources while also reducing the amount of greenhouse gas emissions being emitted into the environment. By some estimates, one-third of all hazardous gases are emitted by homes. To discover the more than 40 categories of Environmental Protection Agency (EPA)-approved, home-improvement products and materials like insulation, appliances, windows, siding, and more, visit www.energystar.gov.
Make it Happen.
From our experience with ShoreBank’s Home Energy Conservation Loan Program, I suggest contacting a certified home energy auditor to arrange an in-home inspection of air leaks, insulation, and overall efficiency of mechanicals and appliances to help you determine which improvements offer the best value and environmental impact.
For more information, please visit, www.sbk.com.
Tags: community development, energy conservation loans, energy efficiency, Energy Tax Credits, green banking, ShoreBank, triple bottom line
Posted in Mortgage Lending | 3 Comments »
Tuesday, September 8th, 2009
It wasn’t long ago developers thought “green” design made sense only in upscale markets, not in the low to moderate income neighborhoods where we at ShoreBank focus. Thankfully, much has changed in the past few years.
When we began planning for our application for a New Markets Tax Credit allocation–a federal tax credit for commercial investments in low income communities–we had numerous discussions internally about how to use the program to promote green projects in Chicago, Detroit, and Cleveland. Eventually, we made the controversial decision to focus exclusively on financing/supporting projects involving green buildings, alternative energy installations, and energy efficiency retrofits. The assumption was that we could use the subsidy provided by the tax credits to incent borrowers to pursue LEED certification or capital intensive but cost effective green technologies and design features. We were convinced that we would have to tussle with potential investees about the requirements and hold fast to our commitments in the face of significant push-back from the project sponsors.
Interestingly, now that we have been awarded a $35 million allocation of the tax credits, we are discovering a vastly different landscape. Our growing pipeline of potential projects consists of a wide array of building types: retail, hotel, mixed-use, industrial, education, and office. Perhaps the only commonality among them is their intent to achieve at least a LEED Silver certification and inclusion of alternative energy systems and technologies. More telling, all of the sponsors were committed to achieving a LEED rating prior to reaching out to us about tapping our New Markets Tax Credits allocation. We did not have to push the developers or even initiate the conversation about choosing to build green. LEED certification was part and parcel of their plans from the outset.
There are a variety of reasons for the decisions to build green. In many cases, doing so is required for other types of public subsidy, such as TIF assistance, Enterprise Zone benefits, or allocations of low income housing tax credits. But reasons extend beyond these governmental requirements. In some cases, the developers believe “green” offers a competitive advantage. In other cases, sustainability is a fundamental component of the developers’ “triple bottom line” objectives. An example of the latter is the redevelopment project planned for a vacant commercial building on Chicago’s southeast side, not far from some of the planned Olympic venues. For the developer, this green project offers a profitable way to promote development in this very needy tract–the tract is under 20% of the area median income and has a poverty rate above 40%, making it one of poorest in the city. Yet, this project is about bringing not only 100 new jobs to this underserved community, but also healthy food options to residents of this food desert through the opening of an organic produce store.
We are pleased to see this progression in the marketplace and excited to help further the green economy by helping these great projects get off the ground (none could move forward without the subsidy provided by these tax credits). With developers more open to green requirements than we expected, we can push further by catalyzing creation of new types of financial modes involving third party ownership of alternative energy systems, being more stringent around energy efficiency requirements (as well as “green” design), and promoting greater opportunity for residents.
Tags: community development, energy efficiency, green banking, green building, ShoreBank, triple bottom line
Posted in Green Collar | No Comments »
Tuesday, July 7th, 2009
One of the more intriguing questions surrounding the stimulus package is the extent to which the dramatic increase in funding for weatherization ($5 billion) will lead to a sharp rise in number of contractors skilled in energy efficiency retrofits. For states such as Illinois, which have not invested heavily in energy efficiency programs historically, and consequently have a very limited base of contractors knowledgeable in energy efficiency basics, the outcome matters a great deal.
Without question, the contractor issue has been one of the thorniest challenges we have faced in our attempts to catalyze the market for energy efficiency. Our programs have demonstrated that banks and other financial intermediaries can stimulate homeowner interest in energy efficiency by coupling information and capital together. However, these efforts may have minimal impact on energy usage without a corresponding effort to organize, train, and certify the contractor community. We simply have no way to guarantee that the work will be done correctly or produce the projected energy savings.
Indeed, anecdotal evidence suggests that the likelihood of achieving the savings may be quite small without substantial training and quality control measures being put in place. One example comes from the Executive Director of the Midwest Energy Efficiency Alliance, who recently installed a high efficiency furnace in her home. Despite the 94% efficiency rating on the furnace, it took the contractor several attempts and lots of re-working to push the performance up from the low level initially seen. Only because this particular contractor tested the system’s performance and understood how to rectify the situation, the furnace performs at its rated level.
There does appear to be some reason for optimism, however. ComEd, our local electrical utility company, has had notable success in its efforts to engage the contractor community around commercial lighting retrofits. We believe that with a determined focus and the necessary resources behind it, a similar program could prove equally effective for the residential marketplace.
Tags: community development, energy efficiency, green banking, green jobs, Midwest Energy Efficiency Alliance, ShoreBank, triple bottom line, weatherization
Posted in Green Collar | No Comments »
Tuesday, June 2nd, 2009
Last week, I attended an invite-only discussion coordinated by the Department of Energy’s Energy Efficiency and Renewable Energy (EERE) group about the business models needed to exponentially expand energy efficiency within the residential sector. This sector is clearly a priority for the Department of Energy and President Obama. Given how inefficient most homes are and the potential for a residential energy efficiency initiative to drive significant job creation, the government will be directing billions in the coming months on this sector.
The discussion covered the usual issues such as the lack of uniform standards; inadequate processes for verification of savings; problems in the credit markets; and ineffective marketing approaches and messages. A more interesting facet of the discussion related to the philosophical differences among the attendees. One critical question centered on the marketing messages needed to catalyze consumer behavior. One school of thought focused on the need to improve how we communicate the financial benefits of energy efficiency to homeowners. A second approach suggested that emphasizing other types of benefits, such as safety, comfort, etc., may be more effective than sticking to the usual economic rationale. While I can see merits in both, I find myself siding with the latter approach. In particular, I look with envy at the way the organic food sector has just exploded – and this is a product that typically costs more than the alternatives, not less.
The second philosophical question reflects whether the large governmental influx of funds will help catalyze the marketplace or stymie its development. In particular, there is some question about whether the government will let the marketplace lead the way or will overly direct how it develops. Personally, I am fearful that in their haste to get stimulus funds into the community quickly, DOE will rely heavily on old models and existing programs. While many, such as the ENERGY STAR brand, have proven quite effective, we need to create and deploy new models, most of which don’t exist today. Moreover, due to the public ire about waste and fraud, officials are rightly concerned about demonstrating success. Yet, experimentation, and, indeed, failure, are critical for market development and expansion. Neither is likely to be seen by DOE as a measure of success, nor a milestone to be touted to the public.
Tags: community development, energy conservation loans, energy efficiency, green banking, green building, ShoreBank, triple bottom line
Posted in Green Collar | 1 Comment »
Tuesday, May 26th, 2009
It is official – summer is here! Memorial Day may have felt early this year since we still have a week of May left, but the vacation season is now underway. Whether you are traveling for food, folks, or fun, there is likely a lower carbon way of getting there.
You might guess that the answer is simple. But the Union of Concerned Scientists created a guide to the lowest carbon ways to travel. They looked at three different factors: how far you were going, what the vehicle was, and, the kicker for me, and how many people were traveling with you? It turns out that their research had some surprises.
One big surprise was how important it was to incorporate the size of your travel group when you plan your travels. Overall the lowest carbon emission choice is to travel by motor coach – but the second best choice just might be to fly economy. If your party has two people and you are traveling 1,000 miles then flying economy beats out driving – the flight creates 835 pounds of CO2 while driving would create 1,125 pounds of CO2. It even beats out taking the train which comes in at 860 pounds of CO2.
But the Union is serious when they stated ‘economy.’ A vacation splurge can offset an entire year of environmental conservation actions. One wild example was the carbon impact of a family of four taking a vacation. In the Union’s example, the family used frequent flyer miles to fly first class, for free, with their kids from Chicago to Disney World. First class – sounds great! But not for the environment. It turns out a first class seat takes up twice the space of an economy seat causing twice as many emissions. This single flight created 1.5x more carbon emissions than all of the family’s daily commuting for the year. And they commuted about 35 miles a day in non-hybrid cars! What an eye opener.
The Union even created a table to help you plot the most eco-friendly way to enjoy your summer vacation.
So if you are traveling beyond a walk-able distance this summer give the report a look – it has lots of tips on how to get where you are going.
http://www.ucsusa.org/clean_vehicles/solutions/cleaner_cars_pickups_and_suvs/greentravel/getting-there-greener.html
And low happy carbon travels!
Tags: community development, energy efficiency, environmental sustainability, green banking, green transportation, ShoreBank, triple bottom line
Posted in Outreach | 2 Comments »
Tuesday, May 12th, 2009
Even reaching the low hanging fruit often requires a ladder
Every year, as part of our Earth Day events, ShoreBank hosts a seminar for nonprofits about the opportunities available to reduce energy usage in their facilities and incentives available from utilities and foundation to complete the energy efficiency retrofits. As part of this year’s event, we asked representatives from ComEd, our local electrical utility, to complete an energy audit of a nonprofit facility. ComEd graciously agreed and presented the findings at the event.
The results were typical of our nonprofit customers – lots of low cost opportunities, such as changing bulbs/ballasts to more efficient varieties, switching to LED exit signs, and adding sensors for irregularly used spaces, such as meeting rooms and bathrooms. The identified measures included replacing inefficient lighting in a building that was built less than 3 years ago. In total, the costs of the measures was less than $40,000, with a pay-back estimated under 3 ½ years.
The reaction to the findings was also typical. The CFO was against spending the funds, especially to replace lighting that was only a few years old, irrespective of the large incentives offered by the utility and the quick pay-back on the measures.
Fortunately, the story doesn’t end there. Thanks to a recoverable grant from the Federal Home Loan Bank of Chicago, ShoreBank is able to offer very low-cost loan to cover these upfront cost. With this low cost funding, and an Executive Director committed to making the improvements, the retrofit is moving forward.
The story is instructive for a couple of reasons. For one, it demonstrates the importance of intermediaries such as ShoreBank. ShoreBank was instrumental in connecting the facility owner to the resources needed to understand the options available. In this case, we discovered that for-profits in Illinois are eligible for free energy audits, while nonprofits are not. So, without our focus on this sector, a whole set of owners, who maintain a large number of older buildings, would fall outside of the established programs.
Secondly, the example illustrates the importance of capitalizing loan funds focused on energy efficiency retrofits. In this case, the risk is very limited – it is a small loan to a large and well established nonprofit. But the perceived risks are high – since the loan is collateralized only by the lighting equipment and the nonprofit is dependent upon state grants, at a time where the state faces a massive budget deficit. By utilizing the funding from the Federal Home Loan Bank, we could offer terms that allowed the project to move forward. We see this financing piece as a critical mechanism to providing a ladder to pick the low hanging fruit.
Tags: community development, energy conservation loans, energy efficiency, green banking, ShoreBank, triple bottom line
Posted in Green Collar | 1 Comment »
