BY RAMONA DU HOUX
March 1, 2011
Weatherizing a home in Bangor with foam. photo by Ramona du Houx
Michael Stoddard talks about Maine’s energy efficiency efforts since the establishment of the Energy Efficiency Trust. Stoddard is the agency’s Executive Director
How have weatherization efforts been progressing?
It was a fantastic year for Maine state efficiency efforts to lower customers’ heating oil through energy efficiency and weatherization. We were really fortunate to receive funding from the American Recovery and Reinvestment Act (ARRA) that allowed us to build a market-based program that provides technical assistance and access to certified energy advisers. And the icing on the cake is the financial rebates.
How much savings can an average homeowner expect if they weatherize?
Eighty percent of Maine homes and businesses heat with oil.
On an average Maine home, the consumption is 900 gallons of heating oil a year. A 25 percent energy reduction from weatherization would mean not using 225 gallons a year— at three dollars a gallon the savings would come to $675 per year. That savings will last for the life of the improvements, paying dividends to the homeowner for many years.
The Efficiency Maine Trust has brought together the information consumers need before they begin to weatherize their homes. The trust provides technical support, marketing, raises awareness about energy efficiency, and offers rebates with Efficiency Maine. Last summer you had a promotion with cash rebates, how did it go?
altLast summer’s promotion required customers to sign up by the 31st of August and complete all energy improvements by December 31. It’s been fantastic. There were a total of 2,900 audits by certified energy auditors. We had more than 5,750 calls to our call center about the promotion. Participants who achieved more than 50% savings were eligible to receive a cash rebate of up to $4,000 from Efficiency Maine and another $1,500 from the federal tax credit.
That’s a huge rebate, isn’t it?
Yes, the rebates were generous. That was the intention. The hope is you generate enough interest and awareness about energy efficiency benefits so other consumers will continue to want that service.
We’re excited about the buzz around how valuable it is to weatherize your home and how good the product is. The summer promotion has brought a continuous stream of customers into this program, even after the promotion ended. People are still pouring in the door, finding an energy audit—at efficancymaine.com. We have jumpstarted the marketplace.
It was always the case that some level of energy efficiency improvements made financial sense, but we all know there are a lot of competing uses for our limited dollars, whether it’s taking a vacation or buying a car. We want energy efficiency at the top of the list. Our programs make that happen.
The federal rebates have expired. Can someone who applies now still get a rebate?
The incentives are continuing, but not at the same level as during the promotion. This project was only designed to last two years—we’re more than half done. We only ever expected to do a few thousand homes with this limited funding. We’re on track and thrilled about that.
What happens next?
altTo continue our weatherization programs we received additional federal grant money to create a revolving loan fund offering a type of Property Assessed Clean Energy (PACE) loan.
Even if the rebates diminish or disappear, we will still have an attractive loan product, or customers can go to their local banks, to help finance weatherization.
The financing products that are available from the revolving loan fund will start with a straightforward loan for residential weatherization with a secured note on the property.
With PACE, a customer will be able to borrow up to $15,000 to finance efficiency improvements and heating upgrades to their home if the town they live in has opted into the PACE program. Presently more that 55 towns have opted in; that’s about one third of the state’s population. We are one of the first in the nation to do this. It has taken us some time to establish a rule-making process and work with towns to opt in to the program, and we are nearly ready to launch it.
Maine’s proposal for the grant from the DOE was the third highest in the nation, receiving $30million. Your have referred to it as a revolving loan, how so?
Once that money is put out there with loans and we exhaust the initial capital fund, the proposal contemplates putting out bonds to recapitalize the loan fund, and we will pay debt on those bonds with the repayments of the first crop of loans. As people pay back their principle and interest on the loans—that will help pay off the debt service on the next round of bond money.
Why is the PACE program more advantageous for people considering weatherization, than going to the bank?
1. The length of the loan could be stretched out as long as 15 years. That enables you to lower the monthly payments, so they are close to, or even below, the amount of energy cost you are saving by virtue of making the improvements.
2. The interest rate will be very modest—probably around 5 percent.
3. Because the note of the loan is attached to the property, there are opportunities to transfer the note to subsequent purchasers of the property. So, if you sell the home, you could pay it off or transfer the loan to the new homeowner. It reduces the market barrier people face when they consider this kind of home energy improvement.
Coming up with an initial investment, up to $15,000, for most people means taking out a loan. So, PACE essentially makes weatherization available to a wider range of incomes?
Exactly. It’s a great investment that pays for itself. And the state law that authorizes the establishment of PACE provides that loans can only be used for energy improvement that are cost effective. Our certified energy auditors are the doctors of weatherization. They diagnose for energy efficiency options based on what’s best for your home—so the weatherization is cost effective.
Is the loan paid back through property taxes?
No. At first, when the loan was proposed, the idea was to attach it to property tax payments.
During legislative negotiations, stakeholders were seriously concerned that a default would interfere with the marketability of the home mortgage. The mortgage industry said it was a very bad idea.
If you don’t pay property taxes, they put a lien on your property. That lien by law has priority status. It’s put in first place before your home mortgage. To avoid the risk of interfering with the marketability of the home mortgage, the Maine law clarified that these loans would be subordinate loans.
So, where is PACE now?
We were really pleased that we received a letter of support from the Federal Housing Finance Agency (FHFA)—the regulator of Fannie Mae, Freddie Mac, and the regulator of the 12 Federal Home Loan Banks.
The FHFA said, “The Efficiency Maine’s program design incorporates responsible lending practices.” And, “promotes sustainable home ownership.” There is no other home loan program in the country that is putting a loan with a property, which has received that kind of recognition from industry.
We are putting the final touches on a contract with a financial institution to help originate and service these loans, and when that is done we will launch the PACE loan program in Maine.
The state established the goal to weatherize all residences and 50 percent of businesses by 2030. Is this achievable?
We demonstrated the viability of the marketplace and the value of weatherizing homes in Maine. We need to maintain the momentum and find a way to multiply it ten times over. That is the scale of the need and the scale of the opportunity.
We are on the path to do about 2,000 homes per year. There are roughly half a million homes in Maine. We have the oldest building stock in the country, and people’s average heating bill is almost $3,000 per year.
This is a huge drain on our economy. If we can just reduce our energy consumption by ten or twenty percent, it will have a terrific economic development impact on our economy.
altMaine’s major heating fuels are oil, kerosene, propane or natural gas. When we buy them, our money goes out of state. When we buy the alternative—of energy efficiency—the dollars stay in the local economy and have a multiplier effect.
Economic studies were done a year ago showing that for every dollar we invest in heating-fuel-efficiency projects it increases the Maine gross state product by $6.6. People who save on energy efficiency spend some of what they save—in the Maine economy, instead of shipping it off to Saudi Arabia. The money stays local.
It’s creating and growing businesses, which provide the services. More than 90 companies are involved and have signed up. They are on our Web site. http://www.effciencymaine.com. During the recession many builders turned to weatherization, retooling their businesses to meet the demands of this new market.
For a homeowner or commercial/industrial businesses, it helps them stay more competitive, so they can stay in business and grow.
We used part of the federal ARRA dollars to invest $2 million in a project that VERSO paper Mill is doing in Bucksport. Verso chose to invest over $40 million at the Bucksport mill, because Efficiency Maine was able to entice them with our incentives. You now have a more competitive industrial employer. Energy efficiency makes Verso more stable.
How do we go from 2,000 homes to 20,000 homes a year?
The new Efficiency Maine Trust was directed by law to create a three-year strategic plan to help Maine’s customers reduce energy costs, regardless of fuel type. The triennial plan calls for continuation of the home weatherization program, as well as comparable programs for commercial and industrial customers, for an annual budget of $14.3 million, starting in July, 2012.
But that funding is contingent upon the Legislature deciding that they want to continue those programs, and finding a revenue stream to pay for them.
It’s a kiss of death for a program like this to turn up the gas—and then switch it off, because it’s not just about administrating the program. You completely whipsaw the customers and manufactures. Eventually the vendors will throw their hands up and say, “I quit. This is a crazy way to do business.”
They need to make investments in their business. They need to buy trucks, insulation, equipment, infrared heating guns and hire staff. They won’t do that if they think these programs are going to yoyo up and down. We need a reliable flow of resources.
Efficiency Maine’s electrical energy savings programs have been successful for a number of years—that’s our proven track record. Our electricity efficiency programs have a steady, reliable, modest flow of funding to promote electric efficiency—but we have nothing comparable for heating fuels. But, at the end of the day, it is not for the Trust to decide whether or how to fund these programs; that is a decision for policymakers.
We face some real challenges in this economy to maintain the revenue stream that is needed to make these investments, but we hope that the new administration and new Legislature will agree that this is one of the best business development programs we have in the state—not using taxpayer dollars. There is no General Fund money involved. And it has this terrific economic development impact while it lowers energy costs.
It hits a lot of the objectives heard on the campaign trail. We would like to be part of the solution.