Building Performance Standards Funding Resources
State and local governments seeking to fund their Building Performance Standards programming and support building owners and operators with compliance need to understand the funding opportunities available to support this effort. The Department of Energy’s Better Buildings Financial Navigator is a useful resource hub for financing and funding pathways. Additionally, below are example funding streams to help with a variety of tasks related to BPS, from technical assistance to building upgrades themselves.
Utility Energy Efficiency Incentive Programs
Many localities in the United States have established ratepayer-funded utility energy efficiency programs to support building upgrades. The incentives and rebates offered through these programs can serve as starting points for building owner compliance, especially those owners who have limited capital of their own. The program administrators staffing these utility efficiency programs should be sought out as partners in the compliance effort. DSIRE maintains a useful database of State-level incentives for renewable and efficiency technology upgrades: Database of State Incentives for Renewables & Efficiency® - DSIRE (dsireusa.org).
Green Banks are financial institutions tasked with clean energy upgrade financing activity sourced from both public and private funds. Banks can be public institutions or can be structured as a partnership between public and private entities, with public funds providing the upfront capital and a nonprofit entity administering both public and private funds. Green Banks create favorable financing conditions for private capital and borrowers – lower interest rates, longer payback periods, and reduced barriers to financing to clean energy and energy efficiency upgrade projects in their communities – by pooling public and private funds with added credit enhancements to jumpstart market activity. Our Impact - Coalition for Green Capital
Community Development Financial Institutions
CDFIs are financing institutions (banks, credit unions, and others) designed to serve low-wealth, low-income communities across the United States who are often overlooked or underserved by traditional financial institutions. While not explicitly clean energy focused, these institutions often provide financing for community-oriented projects, many of which include an efficiency or clean energy component. To learn more and to find your local institution, please visit Opportunity Finance Network’s page: CDFI Locator | Opportunity Finance Network (ofn.org)
Revolving Loan Funds
Revolving Loan Funds (RLFs) are revenue streams implemented in a variety of energy efficiency and clean energy marketplaces by public entities to provide seed capital in financing settings where traditional private capital is nonexistent, limited, or predatory. RLFs can be operated by public or private entities (for example through a Green Bank or CDFI) to expand capital in a specific marketplace. RLFs often include credit enhancements to reduce lender exposure to risk and provide favorable lending terms to borrowers (loan loss reserves, interest rate buydowns). Revolving Loan Funds | Department of Energy
Property-Assessed Clean Energy
Property-Assessed Clean Energy programs offer clean energy and energy efficiency financing tied specifically to the property, rather than to the specific borrower. These financing deals are made on assessments valuing the property with longer repayment periods and often better interest rates. Since the debt is tied to the property, any property sale also transfers ownership of the debt over the lifetime of the loan. PACE lending has been used in both residential and commercial settings, although the commercial sector has often seen better outcomes. Commercial Property Assessed Clean Energy
Power Purchase Agreements/Energy Services Agreements
Building owners and operators can leverage private capital for energy upgrades by seeking out efficiency-as-a-service models through Power Purchase Agreements (PPAs) and Energy Services Agreements (ESAs). Power Purchase Agreements allow building owners to upgrade their building by contracting with a third-party firm who installs, owns, and operates energy systems on a customer’s property. That third-party entity pays the upfront costs associated with upgrading the building, which the customer (building owner) then pays for the resulting energy use over a predetermined amount of time. Similarly, Energy Services Agreements allow building owners to implement energy efficiency upgrades at no upfront cost to them by contracting with a third-party who pays to upgrade the building. The owner then pays that entity for the savings realized by making those upgrades. Both PPAs and ESAs benefit the building owner by taking care of the upfront costs and often establishing low-cost and fixed-cost agreements over a predetermined amount of time, thus reducing the risk of fluctuating operating costs. These agreements also reduce implementation barriers by outsourcing both the project management of the energy installations and the resulting maintenance of the systems and equipment installed. Energy Savings Performance Contracting | Department of Energy
Municipal bonds are long-term debt obligations issued by state and/or local governments and sold in the marketplace, invested with an investment firm, or purchased by a bank. Many municipal governments use bonds to catalyze clean energy investments in their jurisdictions, whether through capitalizing a Revolving Loan Fund or making direct loans or grants to participating customers in their communities. Leveraging Bond Financing to Support Energy Efficiency and Renewable Energy Goals: A Resource Summary for State and Local Governments | Department of Energy
Some Building Performance Standard policies choose to incur fines and fees associated with noncompliant buildings. These funds can be aggregated and redirected to support the administrative costs of providing technical and resource assistance or direct funding to under-resourced buildings struggling to comply with their own capital. While enforcement funds are not guaranteed (and the hope is that all buildings will comply with the Standards), they can be put to good use by supporting the continuous activities required to enforce a robust performance standard across a community. The City of Boston’s Equitable Emissions Investment Fund is an example enforcement fund mechanism designed to reinvest fines and fees into upgrades for buildings located in environmental justice communities.