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A program in Minnesota and Iowa aims to make it easier for small utilities and co-ops to help customers finance clean-energy projects.
The Minnesota-based McKnight Foundation gave a two-year, $150,000 grant to the Environmental and Energy Study Institute (EESI) to support the development of on-bill financing that would help households to reduce energy use, or to generate their own power (The McKnight Foundation is a funder of Midwest Energy News).
With on-bill financing, the costs of such improvements can be offset by energy savings, in some cases making the customer’s bill the same, or lower, than it was before. Utilities also sometimes charge a lower interest rate than conventional lenders.
Minnesota and Iowa were singled out because “We see a good opportunity here,” said John-Michael Cross, a policy associate with EESI who will be managing the project. “We’ve had a lot of interest expressed by the non-profit community, and by some utilities. And there is already good interest in clean energy and energy efficiency in these two states.
“But this particular approach, which has caught on most strongly in the Southeast, hasn’t penetrated this area yet. We think this can be pursued in a way that will allow for further penetration of energy efficiency and distributed generation.”
Although utilities typically have offered on-bill financing to facilitate efficiency improvements, this project also will help utilities offer that type of financing for installation of solar arrays or other on-site generation.
Establishing an on-bill system is complicated, and the grant will allow the Institute to provide technical assistance to small utilities and co-ops.
Compared to investor-owned utilities such as Xcel and Alliant, “Municipals and rural electric cooperatives are smaller and have less resources for program development,” Cross said. “We thought we could be of greater assistance to these smaller, more resource-strapped utilities.”
And also, he observed, as non-profit entities, they aren’t dogged by the financial concerns that can interfere with investor-owned utilities’ pursuit of efficiency and the decreased sales of power that generally result.
A few utilities in the region already offer on-bill financing. In Iowa, the Cedar Falls and Woodbine utilities provide some upfront financing. In Minnesota, the Lake Region Electric Cooperative offers on-bill as a way to pay for a share of its community solar project.
“With the growth of community solar, especially in Minnesota, we think that on-bill can be a nice complement,” Cross said.
In Iowa, the municipal utility in Bloomfield has begun to design an on-bill system, and will get some assistance from EESI’s grant. Cross said that an electric cooperative in Minnesota also has expressed interest in getting some help.
In South Carolina, Cross said, his team worked with a state co-op association to design a system. Retail cooperatives then were allowed to tap into the system to establish their on-bill systems.
“We think something like that could work here as well,” Cross said. “A wholesaler could handle some behind-the-scenes things, and hold down costs rather than individual co-ops doing everything themselves.”
Cross estimates that the grant probably could help utilities to reach roughly 500 customers.
There are about 60 on-bill financing programs now operating across the country, according to Cross. In July, he expects Holland, Michigan to join their ranks.
“It’s a well-designed program. We have big hopes for that,” he said. “As programs get started, the word spreads through a variety of means and programs are naturally replicated. We believe strongly in the idea. The more it’s successfully applied, the easier it is for it to snowball.”