Financing home energy improvements can be challenging because these types of investments often involve high upfront capital investments. This financial barrier can be prohibitive, especially for working families and seniors living on fixed incomes. To overcome these barriers, states should consider providing utility customers with on-bill financing, a simple and convenient tool for covering the upfront costs of efficiency improvements.

On-bill financing allows utilities (or financial institutions) to provide the upfront capital to finance energy efficiency improvements through a loan that is repaid over time on the customer’s monthly utility bill. Savings from energy efficiency upgrades are paired directly with monthly loan payments on the bill and regular payments are collected by the utility company until the loan is fully repaid.

Utilities could administer an on-bill program or partner with state Energy Service Companies (ESCOs), city or state governments, or investment firms. States could develop a state agency manual for performance contracting and a list of pre-qualified vendors. Utilizing a list of vetted companies, utilities could begin an on-bill financing program for their customers. Alternatively, utilities could recruit private lenders to fund on-bill loans while they provide payment processing, servicing, and other functions. Implementing on-bill financing through large utility providers in the state would help residential and commercial customers overcome the initial financial barrier to energy efficiency investments.