Energy financing from the future.

• Author: Durkay, Jocelyn
• Position: TRENDS

Winter and summer extremes are especially harsh on many Americans--and their energy bills. Increasing energy costs put a crimp on economic development for industry, business and households. Since saving energy can help Americans save money and promote job growth, legislatures are exploring ways to improve energy efficiency and put money in consumers' pockets.

Improving energy efficiency offers a range of benefits to consumers and states, including lower energy bills, lower air emissions, a more productive economy, and the avoided capital costs of having to build new power plants.

In legislative sessions last year, lawmakers in several states enacted more than 100 energy efficiency-related bills, including legislation in 14 states--California, Colorado, Connecticut, Delaware, Florida, Kentucky, Maryland, Minnesota, Mississippi, North Carolina, New Hampshire, New Mexico, Oregon and Vermont--to help finance energy efficient building upgrades and technology enhancements.

The goal of energy efficiency financing is to remove the main barrier to upgrading older buildings: the high up-front costs. The method allows building owners to "pay" for improvements with the future savings promised from the upgrades. Typically, these projects pay for themselves within two to 20 years. This kind of financing may also help to lower loan default rates as well as increase property values.

There is, however, more demand for upgrading the energy efficiency of buildings than the current available...