WHEEL Deals: Retrofit Financing for the SE

posted in: Energy Efficiency Loans, Investment | 0
 Jen Weiss  By Jennifer Weiss, Sr Finance Analyst, Environmental Finance Center at UNC Chapel Hill

photo-innofinance

The energy efficiency industry is filled with tongue-twisting program names and whimsical acronyms and the finance sector is no exception. Recently added is the term “Warehouse for Energy Efficiency Loans,” or WHEEL. But make no mistake, the WHEEL platform is more than just a creative name. It is a new initiative gearing up to make a big impact in the energy efficiency financing space — especially in the Southeast.

Understanding WHEEL

Still relatively early in its development, WHEEL is a new approach to residential energy efficiency funding that leverages public monies (from government, utility or another sponsor) together with private capital to offer low-cost, large-scale financing for home retrofit programs. An innovative financing mechanism, the WHEEL platform was developed with early support from the Ford, Surdna and Energy Foundations, and The Pennsylvania Treasury, all of whom saw tremendous potential in its innovative approach.

As an all-inclusive loan platform, WHEEL is designed to provide standardized, streamlined loans that are easy for a sponsoring agency, such as a state energy office or utility, to administer. Proven successful in Pennsylvania (Keystone HELP) and Kentucky (Kentucky Home Performance), WHEEL is on-track to launch new programs in four additional states, including Florida and Virginia, in the first half of 2015.

SEEA Wheel

SEEA’s Support of WHEEL Programs
As part of its commitment to expanding the use of innovative financing programs in the Southeast, SEEA is serving as a sponsoring agency for WHEEL programs in Florida and Virginia.

SEEA’s financial investment in these WHEEL programs will be used as subordinate capital, serving as a flexible credit enhancement that can be applied based on each individual borrower’s credit quality. In other words, using capital provided by SEEA, the Florida and Virginia WHEEL programs will be able to offer a single, standard low rate (for example, 7.99% unsecured) to homeowners who meet standardized underwriting criteria (for example, having a minimum credit score of 640).

Retrofit loans will be offered to homeowners through a managed network of qualifying contractors, and can be applied to a broad range of eligible energy and water measures, such as HVAC replacement, insulation and ENERGY STAR appliances. Proceeds from the loan principal and interest payments will be used to repay investors and sponsors (in this case, SEEA), who can then re-lend the funds to other homeowners.

While certain types of borrowers will not qualify for a WHEEL loan, it remains a good first step for bringing energy efficiency financing into the mainstream by providing a sound mechanism for homeowners to obtain affordable retrofit financing. And as WHEEL-based retrofit financing gains traction in the Southeast, the scope and breadth of energy efficiency retrofit projects can expand just like the spokes of a . . . WHEEL.

Answers to Some Frequently Asked Questions about WHEEL

Where in the Southeast is WHEEL-based financing available today? 
Already successful in Pennsylvania and Kentucky, WHEEL is on-track to launch new programs in four additional states in the first half of 2015, including Florida and Virginia in the Southeast.

What makes WHEEL so appealing?
As a turnkey financing platform, WHEEL can be implemented without requiring staff or financial support from sponsoring states and agencies. In addition to capital markets financing, the WHEEL platform includes marketing, contractor training and oversight, quality assurance/quality control, and energy outcomes data reporting for participating states and sponsors.

Why WHEEL especially important for the Southeast?
The WHEEL platform provides benefits that are particularly valuable in the Southeast, including the following:

  • WHEEL is easy for homeowners to work with:  In a WHEEL-based program, a homeowner gets a streamlined, low-cost loan with which to make energy efficiency improvements.
  • WHEEL is standardized for sale on the secondary market:  WHEEL’s standardized and credit-enhanced loans can be sold in volume on the secondary market to private investors. This reduces the cost of capital and loan administration for the sponsoring organization.
  • WHEEL builds sustainability into loan programs:  If historical loan performance holds true, sponsoring organizations can expect to receive back all of their principal investment plus a small return. These funds can be used to recapitalize a WHEEL program so that it eventually becomes self-sustaining.

Why is SEEA involved as a sponsor of WHEEL financing?
SEEA believes the WHEEL platform makes good business sense in the Southeast. SEEA sponsorship will help expand interest in WHEEL financing across the region, where it can benefit homeowners through good financing options for residential energy efficiency improvements.

For more information on SEEA’s Innovative Finance initiatives, please contact Tim Block at [email protected]. For additional information on WHEEL, please contact Colin Bishopp at Renewable Funding[email protected].