How do we pay for it? Does it pay off? Is it expensive?
Thinking about financing clean electricity and energy efficiency is more than simply listing what finance options are available - it includes understanding important contextual and procedural elements such as why financing is important, when options should be pursued, and who is best positioned to take the lead.
It's 2023 and the Inflation Reduction Act is designed to help make so much of the clean energy transition affordable. We highlight I.R.A. offerings HERE.
why financing clean energy is important
2. Opportunity to build more equitable energy system
Our energy reduction goals are intertwined with our climate resiliency goals, as evidenced in the recently passed Climate Ready Missoula plan, and the guiding principles should Catalyzing efforts to reduce our carbon footprint & build a resilient & equitable Missoula Clean Energy Finance Options – Climate Smart Report 2 be kept at the fore as we explore funding, create new opportunities, and ultimately use community funds or investments. These include principles such as prioritizing equity, collaborate and think holistically, and, importantly, evaluate actions by considering their long-term costs and benefits alongside the costs of not taking action.
3. Energy price volatility
The price of energy is set to increase over the coming decade. As we consider our financing and funding plans, we need to factor the payback time based on the strong likelihood of increasing costs of carbon. As such price signals kick in, the less energy we use and the more clean energy we have, the more we are collectively buffered from these increases.
when we should pursue financing options
Addressing climate change is urgent. We recognize that the COVID-19 pandemic is challenging all of us, with economic losses, tightening budgets and compounding community needs. We believe that this is precisely the time, as we work aggressively to “build back better”, to steer financing toward a climate smart future and accelerate green investments. In the next 10 months, there will likely be additional federal stimulus programs that could be garnered for clean electricity and energy efficiency purposes, and the state legislative session will take place. The financing of clean energy, energy efficiency and green infrastructure must be a priority in this moment of opportunity
who should lead these efforts
Snapshots of WHAT options are available:
C-PACE - Commercial Property Assessed Clean Energy
C-PACE programs enable business owners to install energy efficiency improvements and/or on-site renewable energy systems, and to pay for them over time through an assessment on their property taxes. The authority for C-PACE passed the 2021 Montana legislature and is now enabled in Missoula County! The program is being run by the state and all information is available at lastbestpace.com.
Third Party Financing
Third-party financing is a well-established financing solution utilized across the United States, and is now one of the most popular methods to finance large solar or other renewable energy installations.
Carbon Offsets Footprint Fund
The Footprint Fund is a local carbon offset program being developed by Climate Smart Missoula and partners. It is modeled on successful efforts across the country, and provides residents, businesses, nonprofits, and local government in the Missoula area the opportunity to reduce their carbon footprint by purchasing carbon offsets that support local projects.
Energy Savings Performance Contracting
Energy Savings Performance Contracting is not new to local government and is presently being utilized by both the City of Missoula and Missoula County. ESPCs are an alternative financing mechanism designed to accelerate investment in cost effective measures in existing buildings, allowing local government to accomplish energy savings projects without up-front capital costs.
Green Tax Increment Financing
Tax increment financing (TIF) is another potential financing tool for energy efficiency and renewable energy projects. While energy efficiency is not explicitly named in the list of types of projects that may be undertaken with TIF, it could be argued that it falls within the “public improvement” or “improvement of facilities or equipment for reducing, preventing, abating, or eliminating pollution” sections of Montana Code Section 7-15-4288. Costs that may be paid by tax increment financing
Revolving Loan Funds
Revolving loan funds are pools of capital from which loans are made for clean energy projects. As loans are paid back, the capital is loaned for other projects, and this process can be repeated indefinitely as long as the default rate is low. The State of Montana operates the Alternative Energy Revolving Loan Program, a low-interest loan program open to individuals, small businesses, local governments and nonprofits.
On-bill programs allow utility customers to pay off the cost of energy efficiency improvements on their utility bills. There are several variations on this type of program: on-bill financing, in which the utility is the lender; on-bill repayment, in which a third party is the lender; and tariffed on-bill, in which the energy efficiency improvements are financed not through a loan but rather through a new additional tariff on the customer’s bill.