Our FREE newsletters provide a daily roundup of the morning’s top headlines. Subscribe today!
The Midwest is a hot spot for Clean Energy Funds, and an ice cream business is among the beneficiaries.
The scoop? So-called Clean Energy Funds, or CEFs, from sources including monthly surcharges on utility bills, have helped pay for energy efficiency and other improvements at places like Pierre’s Ice Cream Co., which opened a new, 35,000-square-foot factory in Cleveland almost a year ago.
Pierre’s used a state grant as part of a project that’s allowed the company to spend less money on the electricity needed to make its tasty treat — and keep the final product at an optimal temperature of minus 20 degrees when it’s stored in an on-site distribution center.
“The beauty of having all of this installed is that as we can increase volume, we will not be consuming more energy,” said Shelley Roth, president of Pierre’s Ice Cream Co.
“We’re hoping to see a savings of anywhere between 15 to 25 percent (on electricity costs).”
There are numerous other examples of states using CEFs for energy efficiency and renewable energy projects in the U.S. But Ohio is among a number of states working to change the recipe for funding projects. Ohio’s version of the CEF was called the Advanced Energy Fund, or AEF. Pierre’s received money for its upgrades through an Ohio program supported by the AEF and federal funding.
The Ohio experience
Ohio’s Advanced Energy Fund was in place for a decade, until legislation that allowed for a 9-cent monthly surcharge on utility bills expired in December 2010, said Chad Smith, deputy chief of the Office of Energy at the Ohio Department of Development.
The state estimates that 120 companies are saving a total of $13 million in annual electricity and natural gas costs due to improvements supported by the Advanced Energy Fund.
Since the expiration, Ohio has restructured its remaining program dollars into an Energy Loan Fund, using payments from previous Advanced Energy Fund investments and supplemental federal funding.
“It was successful,” Smith said of the former AEF program. “One of the things we saw, however, was that the demand (for grants) exceeded the supply. So we ended up looking toward financing that could be sustainable, into the future.”
Under the state’s new Energy Loan Fund, money given to companies for efficiency improvements will be recycled, Smith said. Eligible projects include upgrades like insulation, lighting, heating and cooling systems, renewable-energy projects and improved production processes.
“The projects that we do will be repaid with a financing program,” he said. “The funds will come back into the program, and they can be loaned out again and again.”
The program is structured so companies can design a schedule that uses savings from reduced energy costs to pay back the loan, in 15 years or less and at an interest rate below prime, Smith said.
The Energy Loan Fund, with about $10 million per year available, received 60 pre-applications after its December launch. After a round of evaluations, 47 companies have enrolled in the program, said Penny Martin, communications specialist at the Ohio Department of Development. The surcharge collected a similar annual amount for AEF grants, via a 9-cent monthly fee on all investor-owned utility bills.
Christina O’Keeffe, assistant deputy chief at the Ohio energy office, said the Energy Loan Fund seems to fill a gap in the marketplace.
“Some of our customers cannot get loans from commercial banks because there’s not an understanding of the technology involved,” O’Keeffe said. “When we look, we’re looking at estimated energy savings from a project, and using that as a source to repay the loan.”
Experts Say Coordination is the Key
According to a January report from The Brookings Institution, a public policy think-tank based in Washington, D.C., CEFs exist in more than 20 states, mostly in the Northeast, West Coast and Midwest, generating more than $500 million annually, mostly from utility surcharges.
Programs in Minnesota, Wisconsin, Michigan, Illinois and Ohio will have collectively distributed more than $600 million in assistance by 2017, according the report.
Over the last decade, the state funds have invested more than $2.7 billion to support renewable energy markets while leveraging another $9.7 billion in federal and private sector investment, the report states. As a result, $12 billion has gone to more than 72,000 projects in the U.S., including solar and wind installations, hydrokinetic projects in rivers, and biomass generation plants on farms.
But authors of the Brookings report caution that such programs need to better coordinate activities with their respective state and federal economic development agencies, and go beyond per-project financing measures like grants.
Smith said he’s familiar with the Brookings report, and agrees that clean energy and economic development efforts in states work best if they’re merged.
“That’s something we’ve always thought was a good idea,” he said. “It really creates an environment that allows a company, in the future, to pursue job expansion and job creation.”
For Pierre’s Ice Cream, shifting from grants to loans also seems to make good sense, said Roth, company president.
“We have a very large electrical bill,” she said. “Our goal was to have a new state-of-the-art facility that allows us to grow. And as we grow, the per-gallon, cost-per-unit in electricity will decrease due to what we’ve invested.”
Energy-saving features in Pierre’s new factory include:
- Using the hot and cold air created during the ice-cream making process to heat and cool rooms in other parts of the building;
- Insulated panels to save on energy use;
- Making use of natural light with strategically placed windows and skylights;
- Motion sensors and timers that make sure the lights are on only when rooms are in use;
- Programmable equipment control panels that optimize utility consumption;
- Pumps and equipment controls designed to reduce water consumption and process waste;
- A recycling program for corrugated packaging.
Roth said she’s not sure if her company will take advantage of Ohio’s new clean energy loans in the future, but she encourages other companies to look into ways to save energy.
“I thought what was great about the program was they made us really evaluate all aspects of our energy consumption and our training and our focus,” she said. “They made us quantify things that were eye-opening.”