Investment and Financing
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Investment Levels Falling
Overall, U.S. investment levels in energy efficiency have fallen by roughly 18% from 2016 to 2018, likely due to a static policy environment.
Most energy projects can be financed through loan or debt financing through commercial banks. However, some specific financing mechanisms are particularly useful for energy efficiency, such as Property Assessed Clean Energy Programs (PACE) and Energy Savings Performance Contracts (ESPCs), On-Bill Financing, and Efficiency-as-a-Service.
Many of these investments, especially ESPCs, are implemented by energy service companies, or ESCOs. The ESCO market is seeing a leveling of revenues at approximately $5 billion in 2011 and 2014. This is just a fragment of the ESCO market potential, estimated at $92-$201 billion ($2016).
PACE financing has grown quickly since 2012, reaching 3.5 billion in investments in 2017, but investments are decelerating.
Green Bank Investments
Green Bank investments have also experienced slower growth in recent years, driven mainly by investments by the Connecticut and New York Green Banks.
Energy Efficiency Investments
U.S. energy efficiency investment levels are estimated to have fallen by 18% from 2016 to 2018
Energy Service Company (ESCO) Investments
After rising steadily through 2011, ESCO revenues have been leveling out, reaching $5 billion in 2014
|ESCO industry revenue (nominal $) by market segment|
|2008 (n=29)||2011 (n=35)||2014 (n=43)|
|Market||($ million)||($ million)||($ million)|
|Federal Govt.||$583||$ 1,102||$ 1,073|
|State/Local Govt.||$872||$ 1,233||$ 1,314|
|K-12 Schools||$847||$ 995||$ 1,219|
|Univ./College||$614||$ 702||$ 504|
|Healthcare||$238||$ 302||$ 304|
|Housing/Other||$356||$ 385||$ 342|
|Commercial/Industrial||$277||$ 419||$ 409|
|TOTAL||$3,786||$ 5,138||$ 5,165|
Source: LBNL (2016), U.S. Energy Service Company (ESCO) Industry: Recent Market Trends
PACE financing for energy efficiency has grown rapidly to more than $3.5 billion in 2017, but this trend is slowing
ACEEE energy efficiency estimates based on PACENation 2017 Economic, Energy, and Environmental Impact Report
Green Bank investments catalyzed more than $3.5 billion into clean energy through 2018, but are decelerating
Source: Coalition for Green Capital
While overall energy efficiency-specific breakdowns are not available, the Connecticut Green Bank reports closing 1,329 energy efficiency projects in 2018, while the New York Green Bank has invested $52.4 million in energy efficiency projects to date and has $83.0 million in active pipeline projects.7 However, incremental Green Bank investments fell in 2017 and 2018 relative to 2015-2016.
- IEA (2019), World Energy Investment 2019
- AEE (2019) 2019 Market Report
- LBNL (2017), Updated Estimates of the Remaining Market Potential of the U.S. ESCO industry
- The drop in R-PACE investments has been largely attributed to California legislation passed in 2017 establishing new underwriting guidelines, including income verification and ability-to-pay standards.
Other U.S. Green Banks include: Michigan Saves, NYCEEC, Rhode Island Infrastructure Bank, the Climate Access Fund, Montgomery County GreenBank, DC Green Bank, the Solar and Energy Loan Fund, Nevada Clean Energy Fund, Colorado Clean Energy Fund, California Lending for Energy and Environmental Needs Center, and GEMS.
- Coalition for Green Capital (2019). Building a Green Bank Finance Business in Your Geography to Drive Clean Energy Investment.
- CT Green Bank (2019), FY 2019 Comprehensive Annual Financial Report; NY Green Bank (2019), Annual Review 2018–19 and Annual Business Plan 2019–2020