Mark Zimring Lawrence Berkeley National Laboratory (LBNL) December 7, 2010 Financing Energy Efficiency Upgrades in the Residential Market

Why address EE in buildings? Just the residential market…. Over 110 million homes and apartments in the U.S. 70% owner occupied Average home is 40 years old and uses 40% more energy than new homes  Consume 20% of energy used in the U.S.  Emit 20% of U.S. greenhouse gas pollution

Job Creation Assume 12 jobs per $1M investment 8 from direct installation 4 from manufacturing of parts & materials 360,000 jobs sustained over 10 years Retrofitting 30 million homes 3.6 million person-years of employment ==

The Opportunity  ~$240 BILLION spent on residential energy in 2008  Assume most homes can save ~20% Savings potential of ~$48 BILLION every year Savings PotentialInvestment Needed  Assume 30 million homes (~30%) get retrofits in the next 10 years  $10,000 average per home ~$300 BILLION investment required (over $1 TRILLION for all homes)

State of the Market for EE Financing Lending is constrained. National lenders are reluctant to provide consumer financing. Local and regional lenders face increased collateral requirements from regulators. There is no “national model”. Local lenders have limited balance sheets, so developing secondary markets may be critical to scale and pricing. Stay tuned… Local lenders are increasingly active. Community banks, credit unions and community development financial institutions (CDFIs) are partnering with public programs. Many new privately-funded loan programs are being supported by credit enhancements such as loan loss reserves. 5

Trends in Residential EE Finance Existing National Energy Efficiency Loans – Fannie Mae Energy Loans – EGIA GeoSmart Loans – Enerbank “Same as Cash” Loans Existing Local/Regional Energy Efficiency Financing Products – Local Loan Programs (Clean Energy Works Portland, Community Energy Challenge) – Regional Loan Programs (Michigan Saves) 6

Michigan Saves Michigan Saves Home Energy Loan Program. 5 credit unions are underwriting unsecured residential loans. Available in 36 Michigan counties. Basic Loan Details. $1,000-$12,000. 7% interest year term. Minimum FICO score 680. Uses a 5% loan loss reserve. Contractors pay a 1.9% transaction fee. Centralized loan origination. Over-the-phone approval. 7

Community Energy Challenge Whatcom County, WA-Sponsored Loan Program. The County has partnered with a private lender, Banner Bank, to provide secured residential energy efficiency loans Basic Loan Details. Borrowers may choose 5, 10 or 15 year terms. Net interest rates vary from % depending on loan term and borrower credit (2-3% buy down) Minimum FICO score: 640. $1-20K. Uses a 5% loan loss reserve. Loans are Secured By a Deed of Trust on the property. There is no property equity check. 8

Financing Residential Energy Efficiency— Product Comparison 9 Financing Option Security Interest Rate to Borrower Loan Term Loan Size Minimum FICO Score Fannie Mae Energy Loans (national) Unsecured5.99% % Years $2,500- $25, EGIA GeoSmart Loans (national) Unsecured5.99% % Years $1,000- $25,000 N/A Enerbank (national) Unsecured 0% initially 17-18% after 18 months Up to 18 Months $1,000- $45, Community Energy Challenge (Whatcom County, WA) Secured3.5%-6.5% 5,10, or 15 Years $1,000- $20, Michigan Saves (State of Michigan) Unsecured7% 1-10 Years $1,000- $12,

Questions? Mark Zimring Lawrence Berkeley National Laboratory

FHA PowerSaver Pilot Basic Loan Details: Secured and unsecured loans up to $25,000 and 20 years for residential energy improvements. Additional Credit Requirements: Min. FICO 660, Max LTV 100% FHA is actively seeking lending partners and comment on the pilot proposal. by December 27,

Fannie Mae Energy Loans Basic Loan Details. $2,500-$20, year terms. Offered in all 50 states. Fixed- interest unsecured loans. Risk-Based Interest Rate Pricing. Interest rate is a function of customer risk profile. Starts at 13.99% before interest buy downs. 12

EGIA GEO Smart Loans 13 Basic Loan Details. $1,000-$25, year terms. Over-the-phone approval. Offered in all 50 states. Interest rates get bought down. Contractors or programs buy down interest rates from 26% to between 0% and 13.99%. Buy down cost is ~7-10% of loan principal amount. All qualified borrowers are charged the same base interest rate. This simplifies buy down cost calculations for programs and contractors.

Enerbank “Same as Cash Loans” The “Same as Cash” Concept. Short-term, 0% interest unsecured loans. This is an alternate financing approach to long-term low monthly payment loans. Contractors pay ~4% of loan value in fees. How “Same as Cash” Works. Borrowers pay no interest for terms of 90 days to 18 months. After this initial period, they are charged 17-18% fees until the loan is paid off. Additional Loan Details. $1,000-$45,000. Minimum FICO score: 680. Over the phone approval. 14