Study finds energy-efficiency loan financing a solid investment

Lending agencies take note: Loans made to finance energy-efficiency upgrades have low default rates, according to a new study from the American Council for an Energy-Efficient Economy External link information (ACEEE).

The 24 energy-efficiency loan programs reviewed for What Have We Learned from Energy Efficiency Financing Programs? revealed default rates ranging from 0 to 3 percent, a number that has remained largely unchanged during the collapse of the housing bubble. Moreover, existing loan programs are just scratching the surface of the potential market, according to the report’s authors. Less than .5 percent of the targeted customer class is participating in the programs, suggesting a significant untapped market.

The loan programs provide funding directly to building owners or managers for projects that lower energy bills and reduce annual energy costs by an average of 12 to 17 percent. Small commercial banks and credit unions are the agencies most often offering these programs, sometimes in collaboration with utilities or local and state governments. The programs evaluated by the ACEEE report have loaned out over $1.5 billion. Subsidies and energy program funds keep interest rates for borrowers at about 3 to 5 percent annually.

Read the ACEEE press release.