Efficiency Loans Strong, Despite Burst Bubble

Energy efficiency loan programs continue to be a stable, low-risk investment, despite the housing bubble, according to a  study by the American Council for an Energy-Efficient Economy (ACEEE). Highlights of the study, What Have We Learned From Energy Efficient Financing Programs, were recently released on the Council’s website.

The study looked at 24 energy efficiency loan programs and found that extremely low default rates, between zero and 3 percent, were reported throughout the life of the financing program. Default rates for efficiency loan programs have also remained largely unchanged, even during the near collapse of the real estate market over the past few years.

Green Building

image via Shutterstock

Energy efficiency loan programs provide financing for a building’s upgrades – anything from adding renewable energy components into a building’s design to installing low-flow water features. Small banks and credit unions are the largest suppliers of these types of loans, according to the ACEEE. Local and state governments also offer similar programs and incentives for energy efficiency. The study concluded that large banks have not been providing energy efficiency loans because of the small loan amounts, averaging around $9,000 for residential projects and $73,000 for commercial or public projects.

The projects financed by the loans typically reduce energy bills and can trim yearly energy costs by 12 to 17 percent. Programs evaluated in the ACEEE study show that more than $1.5 billion has been loaned out. Through the use of subsidies and energy program funds, annual interest rates for borrowers averaged between 3 and 5 percent.

Kristy Hessman is a writer and native Oregonian who currently resides in California. Before starting her own company, she worked as a reporter covering business and politics for daily newspapers and The Associated Press.