OVERCOMING THE BARRIERS TO ENERGY-RELATED INVESTMENTS WITH AN ON-BILL FINANCING PROGRAM

This guide, prepared by Collaborative Efficiency and Michigan Saves with support from the Environmental and Energy Study Institute (EESI), introduces on-bill financing (OBF) as a mechanism for municipal utilities and electric cooperatives to overcome financial barriers to energy efficiency and renewable energy investments.

• On-bill financing (OBF) is a financial collection mechanism where the costs of energy improvements are repaid by the customer through their monthly utility bill. It is often used to address high up-front costs and lack of accessible financing, which are primary barriers to energy investments.
• OBF programs can increase accessibility by using utility bill payment history for underwriting instead of traditional credit scores. This approach reduces application rejection rates by approximately eight times compared to traditional underwriting.
• OBF is considered a low-risk lending strategy because default rates are typically very low, ranging between 0 and 3 percent. This low risk allows administrators to offer more attractive terms, such as lower interest rates or longer loan periods.
• The Midwest Energy 'How$mart' program in Kansas uses a tariff-based OBF model tied to the location rather than the individual, allowing for disconnection for non-payment. Since 2008, it has resulted in 1,411 upgrades with a total loan value of approximately $8.2 million, saving 3.1 million kWh of electricity and 385,745 therms of natural gas.
• The City of Tallahassee Utilities in Florida has operated an OBF program since 1983, loaning $130 million for 17,000 retrofits. The program uses a 'utility credit rating' system (out of 1,000 points) for eligibility and secures loans with property liens, meaning debt is not transferable upon sale.
• The Eugene Water and Electric Board (EWEB) in Oregon offers zero-percent interest loans for residential members, subsidized by a four-percent interest rate for commercial participants. Participation doubled after the city council approved a Community Climate and Energy Action Plan in 2010, with 1,000 residential loans approved in 2014 alone.
• A pilot program by South Carolina’s Central Electric Power Cooperative (CEPCI) launched in 2011 for 125 homes, utilizing a U.S. Department of Agriculture loan. The pilot achieved an average electricity reduction of 34 percent, with monthly energy savings exceeding loan repayments by $288 per year.

APA

Environmental and Energy Study Institute (2015). OVERCOMING THE BARRIERS TO ENERGY-RELATED INVESTMENTS WITH AN ON-BILL FINANCING PROGRAM. https://www.eesi.org/files/OBFprimer.pdf

Chicago

Environmental and Energy Study Institute. OVERCOMING THE BARRIERS TO ENERGY-RELATED INVESTMENTS WITH AN ON-BILL FINANCING PROGRAM. 2015. https://www.eesi.org/files/OBFprimer.pdf.

Wikipedia

{{cite report |author=Environmental and Energy Study Institute |title=OVERCOMING THE BARRIERS TO ENERGY-RELATED INVESTMENTS WITH AN ON-BILL FINANCING PROGRAM |date=September 2015 |url=https://www.eesi.org/files/OBFprimer.pdf |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{environmentalandenergystudyinstitute2015overcoming, author = {{Environmental and Energy Study Institute}}, title = {{OVERCOMING THE BARRIERS TO ENERGY-RELATED INVESTMENTS WITH AN ON-BILL FINANCING PROGRAM}}, institution = {Environmental and Energy Study Institute}, year = {2015}, month = sep, url = {https://www.eesi.org/files/OBFprimer.pdf}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }