How States Can Grow Equitable Efficiency Programs with the Revolving Loan Fund

The Energy Efficiency Revolving Loan Fund presents a unique opportunity for state energy offices to not only invest in long term energy efficiency financing programs, but also provide grants to small businesses and low-income residents to improve the comfort of their buildings and install more efficient technology. The application deadline is May 26, which means states still have time to take advantage of this program. This blog will provide an overview of the program and some initiatives states can pursue with this funding. 

The EE Revolving Loan Fund Capitalization Grant Program 

The Energy Efficiency Revolving Loan Fund (EE RLF) Capitalization Grant Program is a $250 million program designed to allow states to establish their own revolving loan fund to provide loans and grants for energy efficiency audits, upgrades, and retrofits. US DOE has identified three primary objectives for this program: (1) maximizing loan volume and leveraging private capital; (2) accelerating and maximizing energy savings; and (3) creating good paying jobs and supporting the Justice40 initiative. 

To support the goals and work of Justice40, the program includes grant funding. For each state, up to 25 percent of funds can be given as grants for projects and/or technical assistance for low-income residents and small business (500 employees or less). These funds are to support economic development through access to energy cost savings and creation of high quality, locally based jobs. 

Funding is distributed through formula grants with 40 percent provided to all states and 60 percent given to priority states. Priority states are the 15 states with the highest annual per capita energy-related carbon dioxide emissions and the 15 states with highest annual residential and commercial energy sector consumption. Funding amounts for each state are listed online. 

What Can States Do with Loan Funds? 

Revolving loan funds (RLFs) are pools of capital from which loans can be made for energy efficiency and/or clean energy projects. These funds are considered “evergreen” because loans will be repaid and the funding can then be "reloaned” for another project. These loans are different than private sector funding because they typically feature lower interest rates and offer better terms. 

State energy offices could use this funding to support state building energy upgrades and energy upgrades for residents and businesses in the state, including audits, insulation, and electrification measures. For this funding in particular, US DOE is encouraging states to maximize equitable access to financing through co-lending with private capital institutions to unlock additional resources and expertise. Intatives states can consider with the funding include: 

• Creating or expanding on-bill financing programs that allow for customers to pay off loans for clean energy upgrades through customer utility bills by providing lower interest rates, streamlining the program on a statewide level, and/or making more appliances available. 

• Partnering with private clean energy institutions to identify gaps in funding or application processes that could be streamlined or filled with loan funds, such as the National Energy Improvement fund that helps to implement Michigan Saves, as well as programs in Pennsylvania and Maine. 

• Partnering with community development financial institutions to develop building decarbonization loan programs specifically for underserved and disadvantaged communities.  

• Partnering with non-profits that implement green banks in other states to replicate programs, such as Inclusive Property Capital that works with the Connecticut Green Bank. 

• Implementing a green bank for publicly owned buildings to achieve energy and emissions savings and lower operating costs of public buildings.  

What Can States Do with Grant Funding? 

Grant funding is provided through the EE RLF with the intention of designing programs that serve low-income populations, including those with high energy burdens and small businesses (500 employees or less). US DOE encourages states to consider how this funding can be leveraged by their Weatherization Assistance Programs (WAP), cautioning that states are to avoid lending to WAP homes at all costs and, instead must provide grants that “supplement, not supplant” WAP funding.  

Specifically, for this work, US DOE highlighted the potential to use this funding to complete deeper retrofits or address structural or repair issues. These grants can also potentially provide upfront funding to cover the costs of heat pumps and heat pump hot water heaters for low-income homeowners and residents across the state. Below are some initiatives states could consider with the funding:

• Stacking funding with the WAP Program: Identify ways to use grants to prepare WAP homes for upgrades available from High-Efficiency Electric Homes Rebate Act (HEEHRA) through addressing structural repairs and health and safety issues or providing additional funding to complete deeper retrofits. 

• Providing no cost efficient, electric equipment: Use grants to install heat pumps and on-demand heat pump water heaters for free in low-income housing and small commercial businesses. 

• Help municipalities complete energy savings projects: Consider ways to use this funding to help municipalities fill in gaps for municipal building projects that lower emissions and energy usage, as well as operating costs. 

Conclusion 

Applications for the Energy Efficiency Revolving Loan fund are due May 26, so states still have time to apply and leverage these funds. The EE RLF provides an invaluable opportunity to invest in proven programs and alleviate inequities in our building stock. Starting now with innovation and new programs can lay the groundwork for future grants and help states outline a new direction for efficiency programs that center equity, climate, and resiliency goals for the state.