As more and more distributed resources come onto the grid, we are coming full circle back to something that looks more like Edison’s original distributed energy system, after a century of Samuel Insull’s centralized model. Besides changes in how energy is generated, the way it is used is also changing, with energy customers becoming active participants rather than just passive consumers. The interoperability of all of the devices on the grid is essential to keeping up with the changing needs of customers and energy markets.

Energy efficiency improvements can be expensive and burdensome for residential homeowners, renters and building owners. Luckily, there are an increasing number of financial options to help cover the up-front costs of efficiency upgrades. Below, we lay out several financing options to make our homes and workplaces more energy efficient.  

1. On-Bill Financing

On-bill financing is an umbrella term for a financing program where a charge is added to a customer’s energy bill to repay a loan from a utility for energy efficiency upgrades. The utility acts as the lender and incurs the upfront costs of the improvements.

How It Works

Cost-effectiveness testing is an important part of energy efficiency planning, reporting and evaluation. Utilities use cost-effectiveness tests to demonstrate that their investments in energy efficiency are in the best interests of the utility, their customers and society in general. The traditional tests come from a California Public Utility Commission manual that was developed in the early 1980s and last updated in 2001.

Utilities across the Midwest have invested billions of dollars in energy efficiency programs over the past several years, causing the energy efficiency workforce to flourish. However, the industry remains largely homogeneous and lacks diversity in trade ally suppliers, implementers and other program administrators.

Nationwide, over 16 million households struggle to meet their heating, cooling and other energy needs, but energy efficiency is increasingly recognized as a potential solution to this problem. In 2018, Illinois, Michigan and Missouri began holding income qualified energy efficiency stakeholder collaboratives to strengthen program design and delivery for these communities. Throughout the Midwest, decision makers across the political spectrum recognize the value of low-income energy efficiency in helping families afford their basic energy needs.

On May 4, Iowa Governor Kim Reynolds signed Senate File 2311(SF 2311) into law, which will make significant changes to the way utilities drive customer energy savings programs within the state. Most notably, the bill caps utility investments in energy efficiency and created a broad opt-out provision for all customers.

Last week the Iowa House Commerce Committee passed Senate File 2311, a bill that will significantly alter the way utilities drive customer energy savings programs in Iowa. The bill has already passed the Senate and is now eligible to go to a debate on the House floor.

Energy efficiency investments and their resulting energy savings drive financial benefits throughout the Midwest region. To spread these benefits, on February 7, 2018, MEEA will host the "Good EE Policy for Economic Growth Summit" in Chicago. This free summit, sponsored by E4theFuture and preceding the 2018 Midwest Energy Solutions Conference, will focus on the ways energy efficiency advocates develop sound policy to drive regional economic and job growth.

The average Midwesterner pays 65% more for electricity than they did at the turn of the millennium. Saving energy is a key way to help lower customer bills even with rising rates. Utility Consumer Advocates (UCAs) represent residential customers before regulators and legislatures, and they use their expertise to help ensure ratepayer dollars are spent prudently and cost-effectively.

Industrial energy efficiency is losing ground in the Midwest. Though it’s one of the most cost-effective energy efficiency measures, states are increasingly allowing industrial customers to opt-out of paying into energy efficiency programs or exempting them from doing so altogether. As a result, overall energy savings and the cost-effectiveness of EE programs are on the edge of decline.