-: Okay, good morning, everyone.
My name is Peter Franzese.
I'm an analyst in the energy efficiency branch
at the California Public Utilities Commission
and I wanna welcome you to the CPUC's
Clean Energy Financing Workshop.
We have a one and a half day agenda,
comprised of six distinct panels,
each of which we hope help the CPUC and stakeholders
identify lessons learned
from the existing clean energy finance efforts
in California and nationally.
Identify priorities and objectives
for the CPUC's new financing OIR,
and begin to shape future decisions
on energy financing in California.
Each panel today and tomorrow
will consist of approximately one hour
of panelists' presentations and discussions,
followed by 15 minutes of the Q&A
among panelists and their respective moderator.
The public opportunity to comment
will come at the end of each day as noted in the agenda,
and we'll have a 15-minute moderator lightning round,
in which our moderators from each panel for that day
will convene and summarize their takeaways
from the panelists,
followed by 45 minutes of public comment.
In the public comment session
individuals who wish to ask a question
will use the calling line provided to the service list
on January 25th, 2021 via email
and if you don't have that number handy
in all of your email,
don't worry, we will have that number up on the screen
prior to each public comment session
both today and tomorrow.
Both days of our workshop will be recorded
and our entire discussion today and tomorrow
will be made part of this proceedings record.
A link to the recording will be available
at the admin monitor webpage link
that you're using right now to access this workshop,
and I wanted to note that we have the admin monitor link
for viewing the workshop.
There also was a call-in number provided
in the event that you need to for some reason just listen.
Just note if you're trying to follow along online
to watch the presentation, but also on the phone,
there is a delay between the two.
The internet broadcast is a bit behind the phone audio.
If you have any technical difficulties during the day,
please contact our CPUC IT department at 415-703-5263.
and we are scheduled now
to hear from our assigned Commissioner, Genevieve Shiroma,
and I'll pass it over to you, Commissioner Shiroma.
-: Great, good morning, and thank you, Peter,
and thank you to all of our moderators and panelists
for your time today and for everyone who is tuning in.
Yes, my name is Genevieve Shiroma
and I am the assigned Commissioner
at the California Public Utilities Commission
for this Clean Energy Financing Rulemaking, welcome.
In August of last year, the CPUC voted to open
this order instituting rulemaking or OIR
to investigate financing options
to support customer investment in micro grids,
energy efficiency, demand response,
building decarbonisation, distributing solar,
and other self-generation technologies, energy storage,
alternative fuel, both electric and gas vehicles,
reliving infrastructure and more,
all located on customer sites.
There's no question
financing will become increasingly important
as California pursues its ambitious goals
in the energy sector.
We can't just rely on the utilities or grants
to make investments,
and of course, the utilities
are supported by customer dollars.
We must leverage public and private dollars as well.
Achieving these goals will require
involvement of Californians at unprecedented levels
in all market sectors,
residential, commercial, industrial, agricultural,
including those living in urban, rural, tribal,
and disadvantaged communities,
as well as low moderate income customers and renters.
Our two-day workshop features, as Peter said,
six dynamic and diverse panels of financing experts
from California and across the United States.
Day one today of the workshop
is intended to lay the foundation
for California's financing initiatives,
and day two, tomorrow,
we'll look at how to prioritize unmet needs
for clean energy investments.
Each day we'll provide an opportunity
for public common questions.
We encourage your input.
Thank you again for attending today's workshop.
I look forward within these two days
for engaging in insightful discussions
to learn a lot on how California can provide
clean energy financing options.
It empowers all Californians.
I also want to thank our team
from the energy division staff,
our Administrative Law Judges,
and legal who have put a lot of thought
into this groundbreaking workshop
to be both innovative and inclusive,
and again, thank you to all of our moderators
and our panelists.
Thanks, back to you, Peter, thank you.
Peter: Okay, thank you, Commissioner Shiroma.
We do have a panel slated to begin at 9:15.
We have one individual joining
and still waiting for one other panelist to join,
but Holmes Hummel,
most if not all of you on the WebEx and phone
are aware of Holmes Hummel and the work they do.
I'll pass it over to you Holmes for panel one.
We might be a little early starting off.
You don't have to fill in the next 10 minutes
with song and dance, but I'll pass it to you.
Holmes: Well, thank you for that,
and to Commissioner Shiroma for leading this effort.
I also recognize
that we're joined by the Administrative Law Judge
who authored the order and that the Commission signed
on the eve of Labor Day
at the end of what I believe
is a decade's worth of pursuit
of answers to urgently raised questions
about inclusion and a transition,
that means clean energy for all.
I want to ask Peter,
if we may use the time that were advantaged with
by the introductions to proceed,
and I believe that the panelist that we were seeking
has joined us.
Is that true?
Peter: Yes, we are still waiting for Jeff Schub.
Holmes: I believe he is an attendee
and may need your assistance
to change his status. -: Okay.
Woman: Yeah, holds with the technology of WebEx
and the virtual environment
was nice as we can have a lot more people join in,
but then we also at times have to take a few extra minutes
to figure out the technical logistics.
Holmes: I can completely understand,
and as I was prepared to acknowledge in any case,
I experienced this type of technology
actually is an investment in inclusion
for the number of people who are able to participate
without the added expense of time of travel,
not to mention the carbon footprint,
and also I'm well aware
that the Commission has already established
a social and environmental justice action plan
that includes a goal of expanding participation
and making its proceedings more accessible,
and while technologies like these may give us some wrinkles,
overall, I think they expand opportunity
and I'm appreciative for the opportunity
to join this morning.
Genevieve: We're here, thank you.
Holmes: Peter, I'll wait your queue on the--
-: Yeah, I'm just making sure everyone can see the deck.
Hold on, one second.
Man: It appears Wesley, nothing, we can't see.
-: Can you see the panel one, 9:15 to 10:30?
Man: We can, yes.
-: You can, okay.
Rory, if you could get that into presentation mode.
Everyone can still see that now?
Man: We can't still see it,
but as in presentation mode
we're seeing the presenter version of the slide.
So we're seeing the slide, the next slide,
and the notes section.
I don't know if that's your intent or not.
-: Okay, hold on.
-: We're clearing this up, folks.
Hold on one second.
It's good we have some time.
Joe: Hey, Rory, this is Joe Hager from CPUC IT.
Go back on screen and uncheck use presenters view.
Miriam: Good morning, Holmes and everyone.
While they're casting that out
I just wanna see if you can hear me.
Joe: Go to slideshow.
-: I can hear you, Miriam.
Miriam: Wonderful.
Joe: Uncheck use presenters view over there to the right.
-: I believe we have achieved.
Peter: I think we're successful, yes,
and I just confirmed that for all of you
I did have a colleague check the admin monitor broadcast
and we appear to be good.
So with that, Holmes, I will officially pass it over to you
and your esteemed panel, and away we go.
-: Well, terrific, good morning to you all.
Certainly I want to acknowledge
the leadership of the entire Commission
in voting to open this proceeding
and order a new rulemaking,
and specifically, the leadership of Commissioner Shiroma,
whose vision for equity and inclusion
as a matter of policy frame,
has made its mark in California electricity policy,
and through this proceeding,
I think we'll actually help shape the coming transition.
It's an honor to be with you
as a moderator for the opening panel of this workshop
in a proceeding that in its order
lists a dozen other proceedings
that could be affected by the decisions made here.
That adds to the significance and the gravity
that I believe all of the presenters have ascribed
to their contributions to this proceeding,
and while the workshop is unusual in my experience
by it lasting not just all today,
but tomorrow as well,
is covering a territory that is investing in the success
of a rich and robust public common period
as the process moves forward past the scoping memo.
My task as moderator this morning
is to host for you three experts that you see on the agenda.
Wesley Holmes, Jeffrey Schub and Miriam Joffe-Block.
I'm also invited to take moderators license
with a few opening remarks
that are drawn from my own experience and background
over the last decade.
In fact, 10 years ago,
I served as the senior policy advisor,
the Department of Energy's Office of Policy,
and in that capacity
I founded the finance working group for the agency,
in what many of you will remember
was the heart of the Recovery Act period,
where we had a national policy
of investing in clean energy
as a major strategy for reigniting economic growth
in the wake of the mortgage market meltdown.
If you proceed with the slides,
which I believe you have control over,
I would like to quickly move through
some of the milestones and highlights of the last 10 years
that provide additional context
to the significance of our discussion today.
Peter, is it you who is able to advance the slides?
There you go.
Move, right. -: Rory, yep, there we go.
-: Rory, please, thank you.
Let's go to the next slide.
This slide covers more writing than I will say out loud.
All of you are eligible to read it,
but I want to point out that we are arriving in 2021.
I'm not asking some of the Commission's important questions
for the first time.
Very smart people and dedicated professionals
have been endeavoring to seek financing solutions
for distributed energy,
technologies in particular, for quite some time
dating back at least a decade.
It's important for me also to trace
as is already acknowledged in the order.
Where we are now, back to an important decision
made by the Commission in the advice of its staff
on the basis of a consulting product
that identify the ideal finance product as a consumer loan.
That's an important decision,
and it's a point that I know will come up in the workshop
over the next few panels,
but whether tracing all the way back to that point
gives us a fork in the road.
What happened from that point forward
was trying to figure out how to make consumer loans work,
and one of the first things that the Commission did discover
is that the utilities would lack clear authority
to become non-bank lenders and authorize loans to consumers,
and that allowed the Commission then to make a decision
to separate the portfolio
of the ratepayer-funded pilot programs
into those that would be administered
with the benefit of oversight
from the State Treasurer's Office
for the residential sector, small business and multifamily,
and the others that would be administered
under the auspices of the utilities
that are regulated by the Utility Commission.
We will hear from Miriam Joffe-Block,
who at the California Hub for Energy Efficiency Financing
has been stewarding that residential program,
but I wanna tell some of the story
that leads us up to that point.
Rory, please, let's move forward.
About one year
after California made its significant commitment
of $70 million to the financing pilot programs,
the Department of Energy published a tome,
literally 30 case studies researched by the National Labs
under the title financing energy improvements
on utility bills.
It could be read by some as an open letter to California,
but it was for all 50 states,
and it searched far and wide for examples.
All but one, used consumer loans
as the mechanism for capitalizing the upgrades.
It involves using utility bills
as a mechanism for performing debt service,
but there was one outlier
and it was in a very unusual place, Kansas,
and in Kansas there was a utility
offering a more inclusive solution
that used tariffed terms
to make the site specific investments
with site specific cost recovery
on terms that were deemed as just reasonable and fair
by the Utility Commission of the state of Kansas.
Please proceed forward once more
and we'll see where the story leads.
The following year,
after the Department of Energy's National Lab
sponsored report,
we saw adoption in other states.
Following Kansas, Kentucky, New Hampshire and Hawaii
had already introduced
tariffs for site specific investment and cost recovery,
and they're after in 2015,
utility in North Carolina
and the unanimous decision
of the Utility Commission in Arkansas
swept through another utility.
At that point we started to see not just points on the map,
but a trend,
that Utility Commissions and their legal advisors
in multiple states as diverse as ones you see here,
we're finding that it was just reasonable,
cost-based and fair
to allow utilities to make site specific investments
on terms of cost recovery that would make sure
there was consumer protections included.
The data of the market response to those programs
was truly arresting.
It showed that the addressable market doubled
when renters and low income customers
no longer face barriers to eligibility.
It showed that a majority of the customers
who are made an offer for investment were opting in,
and that the level of capitalization almost doubled,
compared to what was possible with the federal programs
for weatherization at the time
was being reported by the consumer loan programs
that have been funded through the Recovery Act.
That data was then published
through the American Council for an Energy Efficient Economy
and a couple of different points in 2015 and 2018 events,
both of which were hosted in California.
Rory, let's move forward.
The following year after those unusual decisions
that started to show us the trend
rather than outlier dots on the map,
we did see a big breakthrough in California
from that original tranche of $25 million
that had been allocated for residential financing
in the pilot programs by the CPUC.
The money had made its way from the CPUC,
made it to the utilities
and a form that can be available to the treasurer's office,
all the agreements there being duly negotiated,
and the team that set up
the California Hub for Energy Efficiency Finance
was able to recruit and enroll lenders,
recruit and enroll contractors
and execute the transaction of its first loan.
That was in mid-May of 2016
and an important milestone
because it shaped the timeline to come,
which is to say it wasn't actually easy
to start new conversations about financing in California
while the pilot projects was still underway.
It was an experiment for which there wasn't any data yet
and the experiment needed to run on.
The actual arrangements were made
that those pilot would proceed for two years
before it was evaluated.
At that point, the evaluation would take one more year
and at that point
the Commission will be able to review the evaluation.
Let's move forward.
In the meanwhile, the state legislature did not slow down.
It issued a mandate to the California Energy Commission
to study the question
of why low income communities were underrepresented
in some of the most robustly growing markets
in the California economy.
Rooftop solar, for example, or energy efficiency
and the emerging opportunities
in transportation electrification.
The low income barriers study was a landmark achievement
at the end of 16 months of robust stakeholder,
consultation, comments, hearings, workshops, drafts,
and all of the diligence that I think reflects well
on California's commitment to inclusion and public policy.
It was no surprise that the Commission found
that access to financing was a barrier.
I think it's important to note
that the first of the remedies
that it listed in its recommendations
was directly to the attention
of the Public Utilities Commission.
In fact, it indicated that the Commission's considered view
was that the California Public Utilities Commission
should consider developing a tariffed on-bill pilot.
It actually even went on to say
that it would suggest that that pilot
be developed specifically
to not pass a debt obligation onto a customer
and to include consumer protections
that would assure that the cost recovery charge
would be less than the estimated savings.
So the customers would be better off
for opting to participate.
Let's move forward.
Meanwhile, at the very same time in 2016,
when the landmark barriers report was being published
you will see that the Property Assessed Clean Energy program
met its height of loan throughput.
The loan volumes were skyrocketing.
It was attracting attention nationwide
and certainly at the Department of Energy.
What we saw there after however,
was just as steep a decline.
The lien backed loans were tied to homeownership
and had implications for both the sale of the property
and the terms of the mortgages.
I think many people attending today's workshop
will know some of the epilogue on the story
that is implied by the graph published by American Banker,
but in recent months
two of the largest vendors for the PACE loans
have filed bankruptcy.
Well, today's workshop doesn't delve into that story,
at least in this panel as part of the 10 year history.
I think it's an important mark
because at some points
it seemed as if PACE loans would be the answer
and the pressure to search
for new solutions to the Commission
might be somewhat lightened.
That wasn't true.
It's not true, now.
Let's move forward.
In 2018, the state legislature kept up its march
by passing both SB100 and SB1477 code language
for folks outside of California
for no more fossil fuels in the electric power sector
and no more fossil fuels in buildings either.
As a result and in response
to that very dynamic public policy dialogue at the time,
Greenlining Institute and Energy Efficiency for All,
a coalition in California
that actually has relations nationwide,
teamed up to bring together environmental
and social justice advocates and they produced
an equitable building electrification framework
that itself dedicates a chapter
to funding and financing solutions,
and in particular, it urges decision makers
to support environmental and social justice communities
by considering alternative financing
such as tariffed on-bill investment.
The following year,
almost as if to respond to the champions
for environmental and social justice in California,
the Building Decarbonisation Coalition
pursued its own landmark report
on a roadmap for decarbonisation and buildings
to search for financing solutions that would be open to all.
The publication called towards
an accessible financing solution
with very rigorously developed in a stakeholder process.
Some of you on the workshop were active in its engagement,
and during that process
we heard of other proceedings underway,
including the San Joaquin Valley proceeding
that was brought to us
and the attention of all stakeholders
at the opening remarks of the opening workshop
by Commissioner Guzman Aceves.
Both the San Joaquin Valley proceeding
and the SB1477 proceeding
that has presented us with tech and build pilot projects,
those of you who are working so closely
with the Commission will recognize,
have funding for pilot projects
and each of those proceedings have pilot projects
where financing is part of the scope.
I think that's important to flag here
because it may raise the opportunity of a fast track
to being little test ideas
that come through this rulemaking for Clean Energy Finance.
Let's move forward.
Bringing us very close to the current.
In April of this past year,
the Residential Energy Efficiency Loan program's evaluation
formally reached the Commission.
Opinion Dynamics and Dunsky,
and the other contractors that worked for a year
to develop this 200 page report
were able to convey to the Commission
that as a result of the $25 million allocated
nearly seven years earlier,
it was now known that in a space of 24 months,
212 homeowners had been able to benefit from the program.
A third were underserved
by the definitions of the CalEnviro screen framework,
and 8% were credit challenged.
The loan volumes are not very high
for the service area of all of the investor-owned utilities,
which is in the order of 8 million households I understand,
but the loan volumes were growing
and that was a promising indicator.
So the evaluation team
recognizing that the sample size was small,
did entertain further evaluation of the growth scenarios.
In the evaluation report,
the high growth scenario would reach about 0.01%
of the investor-owned utilities served customers,
and that was I think a very important signal
about the potential for scalability using consumer loans
if that was going to be the main response
to the clean energy divide
that was causing chronic pain in underserved communities.
The CPUC resolved nevertheless,
to make this program as it stands,
one of the permanent features
of programs that are eligible for continued funding
without declaring some of the details
that may in fact be taken up
in decisions such as the ones this rulemaking may tend.
Let's go to the very last slide.
So here we are.
We find ourselves today at the first workshop
invited by the Commission
after ordering a rulemaking
that in its opening paragraphs
declares that it will look to ensure
that new options will be accessible to populations
that face issues with credit worthiness
and barriers to accessing affordable capital.
It says almost immediately thereafter
that these strategies will be informed
by the existing efforts
to ensure equitable access to clean energy,
and an example of that is the low income barrier study
in a nod to the public process
undertaken by the Energy Commission
in response to the mandate from the state legislature.
So here we are, a decade in the making.
There's one last slide that actually acknowledges
that we are all gathering as part of a proceeding
that's subject to the environmental
and social justice action plan of the Commission
and it covers only the title page of the plan,
but I raised it as the opening moderator
to reflect my commitment
and commitment of our fellow panelists
to uphold and advance the action plan
that Commission has set forward
for inclusion and participation in process.
Rory, go ahead and tap to the next slide,
where you can see goals one and two
are specifically about integrating equity and access
in all CPUC proceedings and other efforts.
Goal number two,
to increase investment in clean energy resources
to benefit environmental and social justice communities
that have been underserved for so long,
and goal number five,
to enhance outreach and public participation opportunities
in environmental and social justice communities
to meaningfully participate in the decision making process
and to benefit from the CPUC programs,
frankly, those that can benefit all residents of California.
I hope that this has been a useful introduction
to the first panel,
and a welcome to all who are here
to participate in the rulemaking.
My true and sincere thanks to the staff
who've invited me to participate.
Clean Energy Works stands to be at your service
and to the Commission and an Administrative Law Judge
that have created the contract
for such a constructive conversation to unfold
in today's workshop.
With the next slide,
it is my privilege to introduce to you Wesley Holmes,
the director of strategy and development
at the Southeast Energy Efficiency Alliance,
which is based in Atlanta, Georgia.
In Wesley's career,
he has worked with numerous decision makers
at the Utility Commission, utility executive suites,
and community advocate organizations
seeking to advance upgrades to buildings,
in particular, with energy efficiency improvements
that are cost effective,
especially where they can be most lucrative
in underserved communities.
Wesley, thank you for being with us
and sharing the insights of your experience today.
Wesley: Thanks for the introduction, Holmes,
and thanks to everybody
at the California Public Utilities Commission
for inviting me here today
to share our story and our experience.
As Holmes mentioned,
I'm the director of strategy and development
for a regional energy efficiency organization
called the Southeast Energy Efficiency Alliance.
Next slide, please.
A little context on that.
So being a regional organization, we work multistate.
We cover 11 states across the southeast,
ranging from Florida to Virginia
and then westward including Arkansas and Louisiana.
Next slide, please.
The central theme of our ideas
that we try to find ideas that work across states.
A lot of our states there share similar geographies,
similar housing stock, similar demographic characteristics,
similar policymaking characteristics,
and so we try to find ideas
that work in different communities, different places,
try to share those across the region
where they can be replicated
and promote best practices across a range of areas.
Areas, we tend to touch on our energy efficiency policy,
where we're working with utility companies,
regulators, State Energy Offices,
on how to set a reasonable, achievable progression
on energy performance standards
and what kind of regulatory frameworks can support utilities
as all this new technology and all these new challenges
come into the space.
We also work on built environment issues.
So supporting states
with building energy code development and adoption,
also working with regional workforces
on what are the best practices?
How do you build to this new standard?
And giving resources to them
so that their work isn't disrupted.
We also work on energy efficient transportation.
So looking at opportunities
to expand electric vehicle adoption
and support states
and utilities and local governments on their plans
for electric charging infrastructure build out.
In addition to that,
we also try to just in general,
raise a flag for the southeast
as an opportunity of investment,
drawing federal investment, philanthropic investment,
and private sector capital into the region,
where we see lots of opportunity
for growth, business development,
economic development through investments
in energy efficiency.
One of the core things we did in that regard
was back in 2009, SEEA served as an administrator
for the American Reinvestment Recovery Act.
The energy efficiency and conservation
block grant funds that came to the region
was about a $20 million kind of Omnibus grant
that went to support
state and local energy efficiency programs
during that recovery effort,
and we supported a variety of financing projects,
investment portfolios across states and local governments.
Many of those actually, unfortunately, went away.
After the initial investment
when the grants went away, the funding went away.
A lot of states did not reallocate funding to keep it going.
A lot of cities couldn't figure out revenue models
to keep it going.
So unfortunately, many of the programs went away.
Next slide.
So I just wanna tell you a little bit
about the ones that did continue,
and where we were able to make new investments
and what we learned in terms of energy efficiency financing.
So our core goal in financing
is to make the availability and accessibility of capital
for energy efficiency investments.
There's too many people who just aren't able to get capital,
or don't even know that they need to make the investment.
So we wanted to stimulate the traditional market investors,
traditional banks credit unions, traditional lenders.
We wanted to incentivize that market
to be innovative in the space
and find new opportunities
and create some targeted products for energy efficiency.
So what we did was actually used some legacy ARRA funds
and we created what was called
the Southeast Energy Efficiency Fund,
and the projects listed there on the left
are a sample of some of the ones we put money into.
So they were commercial loan programs,
residential loan programs,
state-sponsored loan programs, utility loans.
We set up a variety of maximums,
mostly risk reduction pools.
So we did things like loan loss reserves,
interest rate buydowns,
and other incentivizing mechanisms.
Our central goal was your finance experts,
you know your space, you know your market,
you know how to design and move financial products.
So we wanna encourage you
to apply your expertise to energy efficiency
and create some targeted products for that.
So what we would do is essentially,
if they were willing to go down that path,
we would put up something like $100,000
as a loan loss reserve option
if a bank or credit union was willing to do
a million dollars in capital
available for energy efficiency loans.
We took a lot of learnings from that process,
CHEEF among them.
Traditional banks and credit unions
just are not very good at that.
The scale of the lessons is not terribly attractive to them.
Most energy efficiency investments
are in the range of about 7,500 up to $10,000
depending on the property.
It's not a very big loan,
and it's a lot of paperwork
the same amount of investment for a bank or credit union
to get that loan processed
for not as much payoff as a car note, or a house note,
or some other more lucrative investment vehicle,
and so they're just one of a terrible lot of motivation
to move these products.
They're thinking for the ones who did pursue
it was that it could be a hook to reach a new customer
by offering something unique in the marketplace,
and that can be a pathway for them
to then get their car note and their house note
and other things.
Unfortunately, most of them did not do terribly well.
Just to give you an example of some performance here.
So we had the benefit of working with folks
like Renew Financial,
veterans of California's PACE projects,
and they found that
without the, kind of broad marketing and cultural push
for investments in energy efficiency,
it was really hard to get individual consumers engaged
and interested in taking on these products.
So despite all their experience,
the Renew Financial product in Florida
was only able to get about 12 loans processed
over the two years they're operating
and then they had to close down.
Their main issue
was that they didn't have a robust contractor network
that felt motivated enough
to be their ambassadors and promoters
and sellers of those products.
'Cause there's a similar experience
by Sunstate Federal Credit Union.
They developed a loan product,
ended up only doing about 10 loans
over the course of their offering
and then decided to discontinue that offering
'cause they just weren't seeing the volume.
Folks over Kentucky Housing Corporation,
unfortunately, does another state led initiative
that unfortunately wasn't able to get off the ground
because during a Kentucky State budgeting process,
unrelated to this, their funding got pulled away
and so they weren't able to offer that program
even to get off the ground.
The most successful programs we did see though,
had a common characteristic.
So the program with MACED.
MACED is a Mountain Association
for Community Economic Development.
It's an economic development group
serving the Appalachian region themselves.
We made an investment with them
to support their on-bill financing products
throughout Kentucky.
They were one of the most successful projects in the space.
They did several 100 loans
across a team of utilities operating that program.
Most successful traditional loan program though,
was actually through Jax Metro Credit Union,
which is a credit union attached to the JA electric utility,
the municipal utility service in Florida.
So the key takeaways for us
from this whole experience with these folks
was that one, that traditional lenders and banks
really not well suited in this.
The role of utility is really critical
as a marketing and promotional partner on one end
to mobilize our contractor networks,
to send out billers and emails
and things to get the customer market aware of this.
While there's certainly trust issues between utilities
and certainly low income consumers,
they do tend to trust utilities about energy issues.
If the utility is saying if you make these investments,
you'll realize this level of savings,
they typically believe that,
and so we found that the utilities
are quite a critical partner,
but even in the case of Jax Metro Credit Union,
most successful loan program that was going at the time,
they peaked at about 312 loans in their program
and then it just sort of cratered off,
and they started only doing one to two a month.
So as you can see on the column on the right,
that's when we started to look at other mechanisms.
How do you get around this?
How do you address
the limitations of traditional credit lenders?
And what are some of the driving causes
of some of these barriers traditional credit and financing?
Next slide, please.
So the main takeaway we have from this
is that solutions that work for anyone,
that have to overcome income levels,
credit scores, renter status,
those are the solutions that work best for everybody,
and the reason that is,
one, a manifestation of the limitations
of the markets themselves,
but also the conditions of the consumers
and we have to take more of a closer look
at what are the conditions
of the consumers in the marketplace
to understand what's the barriers they're experiencing
of accessing capital.
So I wanna talk about that in a couple of slides.
Next slide, please.
So, key characteristic about the Southeast,
we often like them both.
We have the lowest energy rates,
but we also have the highest residential utility bills.
So energy is actually incredibly expensive in the Southeast.
Next slide.
Now, add to the fact that on top of high energy bills,
the Southeast is also where you find
the most pervasive rates of poverty in the country.
So you add that high rate of energy expense
to an already impoverished communities set
and that high utility bill just becomes another barrier
and another stressor on the household.
I've got some stats there on the right
talking about how many households
actually report feeling energy insecurity,
meaning that they're not sure
if they're gonna be able to make that bill month to month
and how often that actually happens.
About 7.5 million households have said
that they've gotten disconnection notices
at some point there over the course of the year,
and keep in mind, this is pre-pandemic numbers.
This is probably much, much higher now.
We've also noted that households have to leave their homes
at unhealthy temperatures,
they have to leave their AC units at low temperatures,
they have to leave their heaters at low temperatures,
and ultimately, this has a negative effect
on the population themselves
and this just becomes a financial stressor
that adds to their unwillingness
to take on additional debt, I'll say.
Next slide, please.
Now it's also important to note
that like so many of the other consequences of poverty,
this isn't a burden that's shared equally.
This map you're seeing here
is actually an overlay of energy burden populations
with the concentrations of minority community populations.
So where you have high concentrations
of Black communities, Hispanic communities,
assuming there's non-white communities across the South,
when you overlay that with energy burden data
what you find is that communities of color
are consistently pushed into the worst housing
that their communities have to offer.
So even when adjusted for income,
adjusted for utility territory,
adjusted for energy bill rates,
communities of color ultimately end up spending more money
and they ultimately end up
bearing more of the negative household effects,
health effects and financial effects of high energy burden,
and this is important for us to recognize.
If we're trying to come up with solutions
to systemic problems in the system,
we have to be honest with ourselves
about the systemic solutions
and we have to recognize that all of the social issues
that drove this conditions are so prevalent in market rates.
They're prevalent in market interactions
and they shape how people access capital
and where they can access capital,
and feed into people's psychology
about assessing the creditworthiness
of people who are seeking capital to make investments.
So we have to be thoughtful about how do you overcome that?
How you recognize that that's prevalent in our society,
and what models serve to overcome that.
So for SEEA, that was a big turning point to look
even closer at the utility lead programs
that demonstrated some characteristics
of overcoming those social hurdles
because they looked more intently at the housing themselves.
So that led us down the path to utility on-bill programs.
I'm gonna give you a little clarity
on some distinctions of those.
Next slide, please,
and so there's three different types of on-bill programs
you'll hear out there.
You'll hear on-bill financing a lot.
On-bill financing is a utility-sponsored loan,
where the utilities putting up the capital
and serving as the assessor of the occupants
of that capital, or the people asking for it.
On the repayment it's the same model.
It's run by the utility,
but they're partnering with a third party bank
who provides the capital, which ultimately means
that they have to pass through
that bank's risk management principles,
FICO score limitations,
income level limitations, all those other things.
So it adds to the cost of capital
and adds to the friction in the transaction.
Utility-sponsored loans are a little easier,
they've got a little more flexibility in who they can reach
because they can look at things like Bill Pay history,
rather than FICO score,
but it's largely up to the utility itself,
and what we found
is that even when the utility is driving the process
and recruiting the customers on loan programs,
they experience a similar condition
where there's this initial peak in participation
and then it drops off
because the number of people who are highly motivated enough
to make investments in energy efficiency,
motivated enough to take debt on
to manage energy efficiency.
With every additional layer you add
a risk management collateral requirement,
or each additional dollar of profit motive
for the capital investor,
that window gets smaller and smaller
of who was actually able to access that.
You end up leaving a whole lot of people,
thousands of people who are motivated enough to do this,
but get screened out of these processes,
and that's what pointed us
towards the tariffed on-bill investment model.
Tariffs are not loans.
It provides a lot of functional similarity
to paste mechanisms by attaching investments to property.
So rather than being
based on an assessment of the person who lives in the house,
the investment is determined
based on the performance of the house.
So if the utility or contractor can go and assess,
if we make those kinds of investments
in insulation, duct sealing, swapping out a heat pump,
or swapping out of water with a heat pump,
we can relatively engineeringly say
that it's gonna save this much money,
and if it pencils out to where it's a low to no cost
or a debt neutral investment opportunity for the occupant,
then they can move forward with the process,
and that has been pretty game changing
in terms of who can access and how they access.
It also reflects the important kind of shift in the thinking
about how we think about investments in energy efficiency
and who really benefits.
Next slide, please.
Historically, we have this habit
of thinking about investments in housing
and energy efficiency
as really only of a benefit to the person who lives there,
but increasingly, it's starting to be understood
that an investment in residential energy
is actually an investment in the energy system as a whole.
As low switching technology,
the ability to shape low demand
by manipulating water heater levels,
or change AC unit levels,
or set the charging time for electric vehicles.
As all that technology becomes more ubiquitous
and the pricing for it goes down
and more consumers adopt it,
it's increasingly the case
that houses are not just the end of the line for electrons,
but they're a two-way street,
and increasingly buildings
are a functional transactional part
of our electrical grid system
and test ongoing investments recognize that role of housing
and maintaining the grid,
and so we think they appropriately
apply the tariff mechanism,
which is broadly defined by the utility.
If it serves the greater interest of the utility system,
it can be incorporated
into the tariff charges that they apply.
This recognizing that housing has a really key role
in the energy system
and that investments there definitely pay off,
not just for the occupant,
but for this whole system itself.
Next slide.
So this is just a sample
of some of the numbers of the utility parameters.
This give me an example of kind of the scale
and the distinctions and participation rates.
So I'll go through all of these numbers specifically.
Holmes alluded to this in her intro,
but the main takeaway
is that utilities who have done loans before
and then have moved into doing tariff models,
they're seeing volume way beyond,
like multitudes of the volume
that we saw in traditional loans,
where experienced loan providers
in the traditional credit union bank sector
put everything they had towards it,
they would get dozen loans, 15 loans, 20 loans,
and the same amount of time
the utilities-sponsored tariff program
is doing 200 loans, 300 loans, 500 loans.
The force factor of participation is just truly remarkable,
and so you can see this is kind of a breakdown
of the different tariffs on both programs
that are available across the Southeast,
as well as in Kansas.
Most of these are being led
by cooperative utilities around the region
who have been the first to really embrace this idea,
but there are investor-owned utilities in the country
who are taking it on now.
Georgia Power was scheduled to develop their first pilot
of a tariff on-bill model here in Atlanta in 2020,
but then 2020 happened
and so now they're looking at doing it this year as well.
So we're really optimistic about that investment
and there are other IOUs we're looking really closely
at how those are gonna perform
and see how they can adapt that model,
serve the investor-owned utility model.
Next slide.
So this is just a quick kind of apples to apples comparison
in these slides.
I won't go too deep into them,
but this is just an example of electric cooperatives
who started with a loan program
and then moved to a tariffed program.
There's something really important,
not just about the functionality of the tariff,
but something in the psychology as well, I think.
So this is Ouachita Cooperative in southwest Arkansas.
So a small utility
serving one of the more impoverished
lower income communities in southwest Arkansas.
It's not a low income minority community,
but it is a low income community
and they have all the same kind of barriers and stressors.
They did a loan-based program
from April to December of 2015.
There were about 70 single family homes
who were willing to participate in that loan model.
They weren't getting the traction they wanted to see,
so they went to the back of the house, restructured it,
set it up as a tariffed model the next year,
and then the next year
they more than doubled their participation rates.
118 single family homes,
82 multifamily units, two commercial units.
Like Holmes said initially,
the tariff got people to sign a lot faster,
got a lot more people to sign and they found
and applied to a whole lot more customer types,
commercial, industrial, renter, homeowner.
All kinds of customers were willing to do tariffs
who were not willing to do loans.
Next slide.
So this is another one.
This is Roanoke Electric Cooperative,
which is in eastern North Carolina.
This is serving a predominantly African American community.
Lots of high rates of poverty,
lots of high rates of energy burden.
They similarly tried to create a loan model
to make available to their consumers in 2015.
They were able to get one person
who was actually interested enough
and met all the qualifications
to be able to access this loan.
So they realized that wasn't gonna work.
So the next year
they switched it over to a tariff-based model
and they actually got,
it was 250 signed on to do it in the first year.
So it's just night and day
in terms of the consumer perception of attaching more debt
to their already financially burden life,
or signing onto a tariff which is transferable,
which stays with the property,
which benefits them immediately,
but if their life circumstances change
and they move to a new property
without carrying that debt burden with them.
That seems to be a huge security factor for the consumers
that makes them willing to say yes
in a way that loans have not proven to make them say yes.
Next slide, please.
So, final parting thought for the folks in California.
If you're pursuing scale, the pursuit of scale
is really about the pursuit of equitable access.
As much as you can design programs
that do not pass through the risk management mechanisms
or the profit motives of private sector capital,
that increases equity, that increases access,
and it's not that the loan programs don't work.
They do functionally work,
but they leave out so many people
and they leave out the places
where the greatest potential for energy savings,
the greatest potential for financial savings.
Those are the problems that it gets swept out.
So not only are those people being left out,
but the benefits to California, to the utility,
to the reducing waste energy and reducing lost capital,
those tend to get narrowed down more and more
that you add risk reduction and profit motive
into the investment mechanism.
So with that, I'll stop.
I probably went long, I apologize for that,
but if you have any additional questions,
I'm happy to answer and look forward to the Q&A afterwards,
or you can go to my slide, thank you.
Holmes: Wesley, thank you very much
for that extensive and expansive tour of the experience
that the Southeast Energy Efficiency Alliance has had
over almost a decade as you pointed out.
To capitalize on the time that we have,
which is we have enough time
for the two full presentations of our panelists,
Jeff Schubb and Miriam Joffe- Block.
Jeffrey Schubb is the executive director
of the Coalition for Green Capital,
and he is a leading expert on Green Bay finance institutions
that accelerate investment
to cause equitable, clean energy transition, Jeffrey.
-: Thanks so much, Holmes.
It's wonderful to be here with all of you.
Really excited to be able to join
this really critical discussion
with the California Public Utility Commission.
California, obviously, is a leader in so many respects here,
but I hope I can bring
a little bit of information in context
and lessons learned from organizations
from around the country
that have been trying to crack this knot
in all sorts of ways to accelerate investment
in clean energy solutions
across different technologies,
different kinds of market segments
definitely focused on low
and moderate income households as well.
Just for a little bit of background,
the Coalition for Green Capital
we're a nonprofit organization
that's been working for over a decade
to try to expand and stand up the Green Bank model
at the national level and at the state local level.
We've been lucky enough to work with many state green banks,
helping to stand up.
The first state Green Bank in Connecticut,
the largest state Green Bank in New York,
working across the country and many other venues,
Colorado and Nevada,
supporting efforts in Florida, Wisconsin, Minnesota,
legislation in Maine, Alaska,
supporting the efforts in Hawaii.
We operate the American Green Bank Consortium,
which is an industry association
pulling all these good actors together.
CGC does not claim
the credit for creating or operating all of them,
but we try to do what we can
to help get those organizations and new ones up and running
with best practices and technical assistance,
as well as advocating for the creation of new ones.
So this is an idea that now has,
I think been firmly established as a proven model
across the country and increasingly around the world,
but we can dive into that in a little bit more detail.
So if can go to the next slide.
I'm gonna zoom way, way, way out, much, much bigger context
than the incredible expertise
that Wesley and Holmes sort of displayed in their remarks.
Just a really big question.
I think one of the problems here was
how far have we come and how far do we have to go
when it comes to climate change
and the amount of investment necessary?
The really simple answer here is we have a long way to go.
Estimates on the amount of investment necessary
are all over the place,
but some round numbers are about $200 billion of investment
into climate solutions per year for the next 20 years.
That means basically quadrupling
the amount of investment annually
compared to the baseline.
Globally the estimates around 1.7 to $2 trillion
of marginal additive investment per year
for the next several decades
to the next standard two degree scenario.
This is all just to say, we've got a long way to go.
Breaking it down into specific markets,
just looking first nationally.
Let's look at the power sector.
President Biden has laid out a target
of 100% clean electricity by 2035.
Following that I put a lot of really important announcements
and executive orders yesterday, but where are we?
If we look just at non-hydro renewable power market share
grew from 2% to 12%, nationally over the last 15 years,
which means over the next 15 years
we have to grow from 12% to roughly about 75% market share,
where the remaining is some combination of nuclear, hydro,
and other resources of that nature.
So that's a six fold increase
in the speed of sort of market adoption
compared to the last 15 years.
So we have to start dramatically increase,
go straight up the vertical part of the S curve,
so to speak,
and just looking, zeroing in California,
looking at the transportation sector,
this is data that's easily available.
California has about 15 million registered vehicles
and 250,000 of them are electric vehicles.
So if the goal is 100% market penetration,
we've got about 2% down and 98% to go,
and California obviously, is the leader in the country
and so you're ahead of the rest of us.
I'm sad to say I'm not in California.
I'm in New Jersey
and I really wish I was in California right now,
but you all are leading the game here on EVs,
but there's a long way to go,
and so I think sometimes it's useful
just to look at that big context
of the numbers we're talking about here
are staggering and scaling,
and the amount of investment necessary to hit those targets
is equally staggering.
Next slide, please.
So, there are so, so, so many reasons why this is difficult
and why it's challenging,
but if we sort of zero in on the core question of,
let's put it this way.
In a classroom setting,
this looks like this shouldn't be a problem.
Solar technology is cost effective,
is at or below grid parity in many parts of the country
and certainly in California.
Energy Efficiency is cost effective everywhere,
EVs are increasingly cost effective everywhere,
storage is increasingly cost effective in more markets.
So on a purely economic rational decision making basis,
there should be endless demand
and abundant and cheap capital
to finance what is largely proven technologies,
and so why is this not happening?
I think it took our organization a while to learn
that this really is not purely a financing challenge.
For one, as everybody who's attending this
has certainly heard it 100 times in their life.
Every capital provider says
that they have a limitless supply of capital,
they can't find projects, and every developer says
they have limitless supply of projects, can't find capital.
So obviously, that tells you
that this is a market efficiency problem to some extent,
but the barriers don't just sit on the capital side,
they definitely sit on the customer side and on demand side.
There are collective action problems.
There's information asymmetries
or information sort of misperceptions.
Low consumer awareness.
There's a mismatch between the form
and structure of capital and the project needs,
which I think Wesley and Holmes did a really good job
of explaining the kind of form of capital
and the way it reaches a customer
makes a huge difference here,
but I think also the point that wasn't made
about the sort of low penetration
of some of the loan products that they experienced
being attributed to sort of a dedicated sales force.
That's essential.
If we think about the number of homes
that need to be retrofitted
for electrification or efficiency,
it's an astronomical task
from just a business execution standpoint.
I mean, to bring it into context today,
I think we see perfectly well in our country
how unbelievably hard it is to deliver vaccines
into the arms of the 325 million Americans who need shots,
and that's when the entire government apparatus,
top to bottom,
is at least now trying to actually solve that problem.
It's really, really hard to do this stuff at scale on email
to human beings and businesses
that need to be working towards it is enormous
and we just, frankly, the capacity doesn't exist
to do it from a human workforce standpoint,
and so all of these problems sort of add up together.
Some of them are technical,
some of them are sort of obvious on their phase,
some of them sit deep
in the sort of capital market structures,
but some of them sit at the customer's level.
These are the barriers that need to be addressed
and thinking about them holistically,
I think, is what green banks have learned over the years.
It's not about just sort of plugging money
into a part of this problem.
It's about delivering that capital in a very specific form
and a well-designed construct
alongside private sector partners
to actually reach customers
and try to achieve some market penetration.
Next slide, please.
So just in summary.
I'm not here to sell green banks to you all in California.
I'm just giving the label in.
So there's over a dozen green banks now in the US.
Collectively, they've driven over $5 billion of investment.
This data is now officially a year old.
So the number is actually higher than this now.
In the leveraging of private sector
capital was worth many designs and it's about $3,
nearly $3 of private capital for public capital
a green bank dollar deployed.
This is not just about energy,
it's also about jobs
and economic development in Connecticut.
In the case of the Connecticut Green Bank,
they've created over 23,000 new jobs
through their investment activity.
These green banks also have a huge project
of opportunity pipeline identified
and so like all of you in California,
you've identified the need,
you've identified the scale
and green banks are showing how their institutional model
is trying to address this need,
and it demonstrates that it works.
This is also not a uniquely US phenomenon.
The national green bank in Australia
a multibillion dollar institution,
that new national green bank in New Zealand,
a new climate bank created in Scotland.
The UK, it had a national Green Investment Bank.
They privatized because they decided
they didn't wanna be in that business anymore
and for now they're working
to try to recreate it and relaunch it.
They wouldn't be doing my job
if I didn't name that the National Green Bank in the US,
called the Clean Energy Accelerator
is quickly moving towards implementation and passage
as part of climate infrastructure package later this year.
That's a separate conversation,
but I need to put a plug in for that
'cause that's what I gotta do every day.
Next slide, please.
So this is hyper detailed.
I've got a couple slides in here.
Organization, we're working with a lot of partners.
We've got 25 detailed technical use cases
of the kinds of investments
that the Clean Energy accelerator could or would make
in partnership with the state green banks for utilities,
local partners in general.
Most of this activity, as you all know,
is state locally based.
This is a schematic
for a utility driven tariff-based financing structure
to do exactly what Holmes and Wesley were describing.
The role for risk mitigation is clear.
This money has to come from somewhere,
either public money or utility money,
considering reserved support utility investments
in the kinds of upgrades
that Wesley and Holmes were talking about.
I put this up here,
one, to just demonstrate that this stuff is technical
and being thoughtful about how money moves
and the participants, who the participants are,
you gotta be careful about it,
but also being like holistic about it
and thinking it's not just a single box in the bottom left,
but there's a reserve fund and that money needs to exist.
The existence of that money in that fund is necessary,
but not sufficient for success.
You have to be thinking holistically
about the entire structure of the market
and the technologies you're trying to address.
Next slide, please.
And this is another one again.
It looks just like an explosion of lines and graphs,
and again, the objective
is not necessarily to be able to read it
in this brief moment on the slide deck,
but this is an example of how to deploy
a solar plus storage project, specifically targeting
low to moderate income community facilities,
be it a shelter, or a health clinic,
or a multifamily affordable housing community.
The barriers here are complex.
It's a combination of technical know how,
local capacity to that.
To deploy this, commercial lender don't have experience
with this kind of lending
and so if the objective is to engage private capital
making sure that there's somebody whose job it is
to actually work with that commercial lender,
to train them on how to make these loans
and get comfortable with it,
and then being thoughtful
about how to bring in the other components of the ecosystem.
How do you take advantage
of federal tax credits from grants?
How do you work with utility
to bring in the different kinds of financial flows
that can come from utility for these kinds of projects?
But solutions, as I said, are not,
I mean, as you can see here
the schematic here is wildly different
than for a residential LMI upgrade,
and so those structures,
they all require money and they all require public money
or concessional capital of some kind
to play a key role here,
but the way it actually gets deployed matters a lot
and it's project specific, it's technology specific.
There is no silver bullet solution
It really, really depends
on the application that you're trying to get here.
Next slide.
And then this is my last slide.
Just drafts for summing up some lessons learned.
I think maybe the simple summary here
is this is not Field of Dreams,
meaning this is not a market
where if you build it they will come,
in they is both customers and capital.
There is an enormous amount of work to be done
to do the hard work here.
It has to be somebody's job to do it.
It has to be someone's job to figure out
these kinds of structure, financing structures.
It has to be somebody's job to find private capital partner,
who wants to come to the table and do this collectively.
It has to be someone's job
to figure out how to generate funds.
This is a pitch, but the construct of institutions overall.
If we're actually talking
about the task of dramatically and rapidly
changing our entire built environment,
it probably makes sense
to have an institution whose job it is to do that.
Again, this isn't me pitching a green bank.
It's just thinking
about how to solve these problems holistically,
and not just think about this
as a capital problem or risk problem.
The go to market barriers here are real.
I think it was what we said before,
like, signing up a contractor to try to serve LMI households
is really, really different
than signing up the contractor
who only exists to serve LMI households.
Those businesses need to exist,
because if they don't
those customers aren't gonna be served.
As I said, different markets require different solutions.
So LMI residential electrification
likely need some sort of ongoing repayment structure.
If we're talking about converting commercial heavy duty
trucking fleets to electric vehicles,
that's almost certainly a different structure,
that's probably an ESA-based restructure.
Every market, every technology
might need a completely different construct.
That's okay, but you're onto something and how we design it,
and then specifically in the LMI space,
the risk perception versus reality is a genuine barrier,
and when it comes to lending,
Wesley and Holmes spoke about this at length.
Being thoughtful of having the right tool for the job,
but again, I think just creating a reserve fund
and expecting people to show up and use it.
We have to be more programmatic
about pulling people to the table,
and then last but not least,
I think this is an important comment
across creating financing really large.
Making something available for a customer is not success.
It's only uptake that actually matters.
Yes, we should celebrate
that there is availability to customers
who want to do something,
and in a world in which we're talking about financing,
the purchase of a television availability
is probably all we would need to do
because there's no,
the government and society are not compelled
to want every household to own a television.
The customer can choose either they will do,
if they want it or they don't
and they should have financing if they want it.
We actually do need everybody
to make these kinds of changes and conversions.
We actually do need every household
to make different decisions about how they use energy,
and so making something available,
and again, it's just the first step
to actually achieving a goal,
but we really can only measure success
through uptake and adoption,
not to making financing solutions available,
and I just think it's important
for us to think about designing financing solutions,
no matter the market,
in terms of measuring success based on uptake and adoption
and not just declaring victory
when something has made available to a customer.
So I'm obviously happy
to have more discussion with the panel.
If we get some time for Q&A,
we'll dive into this more deeply.
This is my very brief attempt
to capture lessons across the board into one slide,
but talk and back to Holmes.
-: Terrific, there we go.
Jeff, thank you for that tour you did for us.
Rory, thank you for advancing the slides.
We're still on track for the remarks
that have been prepared by Miriam Joffe-Block,
the senior manager
for the California Hub for Energy Efficiency Finance,
known to many of us as CHEEF.
It's important for me
to acknowledge Miriam's leadership role
in launching and approving the real program,
while developing commercial financing pilots
that are also attended through that same infrastructure,
and to acknowledge the history and expertise
that Marian brings to that post for the state,
having previously worked
at Beneficial State Bank and foundation
on an expedited underwriting process
for small business lending.
Securing over $3.8 million
in CDFI Fund grant awards to the bank.
So with the kind of market experience
that Marian brings to the public policy implementation
of the CPUC's financing pilots,
we're here to hear the lessons learned
from administering the CHEEF.
Miriam, please, thank you so much.
-: Thank you, Holmes,
and thank you to all the Commissioners,
and for the CPUC staff
for organizing this really important workshop.
So we'll go to the first slide,
and like Holmes said,
the perspective that I'm gonna share today
results from papers administration
of the California Hub for Energy Efficiency Financing,
and there's a few key elements of the CPUC's decision
to set up, achieve and establish pilot programs
that I wanna highlight.
So the first
is the use of a ratepayer-funded credit enhancement
to leverage private capital
that would be made available to customers
in the form of unsecured
or equipment secured loans or leases.
So as Holmes mentioned earlier,
the choice was to set up a loan program,
to set up a debt program,
but these are non real estate secured loans.
Another kind of key decision at the time
was to set up an open market transaction design,
meaning that a wide range of lenders
could connect with contractors and customers
and agree on deals,
and so the CHEEF is not part of the financial transactions,
and if you're familiar with the GoGreen Financing website,
that's the public facing platform for these programs.
Okay, so next slide, please.
First, I'm gonna talk about what has worked
or what is working.
So we've seen that a credit enhancement
can very successfully leverage private capital.
So the end of 2020, our residential program called REEL,
had done just over 1,000 loans
and we deployed credit enhancement funds of 2.6 million
to leverage about 17.5 million in private capital
from seven enrolled lenders.
So a dollar in credit enhancement
was leveraging about 660 in private capital,
and as these loans are repaid,
we recapture the credit enhancement,
which can be revolved again to support new loans
provided the customer doesn't default,
and the credit enhancement contribution rate
that you can see there
is higher for loans made to underserved customers,
who are either LMI based on a household income calculation,
or a property census track lookup,
or borrowers who are credit-challenged
with a credit score of less than 640.
All right, next slide, please.
So looking at our residential program,
we see four concrete ways.
Rory, are you able to advance the slide?
Thank you, so we see four concrete ways
in which that credit enhancement contribution
allows the lender to offer concrete benefits
to the customer that they wouldn't otherwise be able to,
and so right now,
all of the participating lenders in the residential program
are nonprofit credit unions.
They're really participating in the program
as a service to the community.
They don't have the same profit motive
as for profit lender,
and we can talk about that a little bit more later on.
So the first benefit we see
is that the lenders are granting access to more capital.
So customers are able to access up to $50,000,
as opposed to the more typical $20,000 cap
that one finds on personal unsecured loans.
Importantly, also lenders extend terms up to 15 years
compared to the typical five year term on an unsecured loan,
and this allows customers to keep monthly payments
pretty affordable for large purchases like Ajax or Windows.
We also see big reductions in interest rates,
especially at the lower end of the credit score band.
So including in some places,
we see interest rates lowered 1,000 basis points.
So from a non-real rate of 18%,
down to a rate under 8%, and then we also see
lenders are able to make loans to customers
with credit scores down to 600 FICO scores or 580,
whereas normally without the credit enhancement
they would have a minimum of 660 or 640.
So right now in our program,
a customer with a credit score of 580
can walk, will walk metaphorically,
into the REEL program
and get access to a 15 year unsecured loan at 5.99%,
which is just not available anywhere else on the market
without this program.
Next slide, please.
So zooming in a bit on the interest rate benefit.
Credit unions in November were charging 10.4% on average
for a 60-month term loan, and that's, as I said,
the longest that they'll tend to go out,
but with a credit enhancement
REEL lenders charge through our program
an average of 5.02% across all terms even up to 15 years.
So when we compare the rates
that a customer gets with a REEL loan
compared to if they got that same five-year loan
without the program from the same credit union,
we see the customer saving
almost $2,000 on average in interest,
and we see similar types of benefits
in our small business program
with lenders being able to approve industries
they otherwise wouldn't,
like restaurants, or customers with less time in business
and also able to lower rates and extend terms.
Next slide, please.
So more on what has worked.
We see that customers will make energy upgrades
with financing without any rebate or incentive,
and we also see customers willing to make upgrades
for things windows and H-backs
that won't necessarily have payback
through energy efficiency savings
because customers have a lot of motivations
beyond energy efficiency, like health and comfort.
We also see that a loan program
can reach underserved customers to a degree.
So 57% of loans, the first kind of 1,059 loans
were made to upgrade properties in LMI census tracts,
of which 23% went to tracts that are considered low,
meaning income of less than 80% of area median income.
As we mentioned, we incentivize lenders
with a higher credit enhancement amount
for loans to LMI customers, but I wanna note
that that doesn't actually dramatically change
lender approval rates
because lenders are really sensitive to credit score,
and they're looking at debt to income ratios,
or the ability for a customer to repay a loan.
So that's important
because we only want lenders to make loans to customers
that have the cash flow to repay them.
So a credit enhancement
is really important for broadening approvals,
especially to borrowers with lower credit scores,
and making those repayments more affordable
through extended terms and lowered interest rates,
but as a debt product,
REEL is never gonna be a truly low income program.
So we think that REEL is a good option
for customers sort of in that median,
or 80% of AMI income range,
as opposed to down to the 30, 50% very low and low.
Next slide, please.
Okay, so moving on to what hasn't worked.
Private lenders are really good
at evaluating risk, pricing for it, funding and servicing,
and any program
that has a public or ratepayer source of funding behind it
is gonna incorporate a set of policy decisions
that are gonna filter down into program eligibility rules,
and in our sort of front end model,
where lenders originate directly with customers,
too much of that eligibility screening,
data collection burden falls on the lenders,
and also in some cases falls on the contractors.
That's been a real challenge.
Next slide, please.
So continuing with what hasn't worked,
and related to the complexity
is the geographic complexity of our state.
So lenders, customers and contractors
really do not view the world
through the lens of IOU and POU jurisdictions.
So the fact that a heat pump
is an eligible measure in West Sacramento,
but across the bridge in Sacramento
it's not an eligible measure
because there's a public utility there,
that just makes the programs complex
and less desirable for key partners to participate in,
and that complexity sort of trickles down
through all of our program operations.
So similarly, restrictions in which we allow
energy efficiency to be financed,
but not storage or solar,
that doesn't make sense to program participants.
So there's a high learning curve to use the programs,
and high learning curves are really not good for scale.
So a debt program, as I mentioned,
is not gonna reach all borrowers,
but I do wanna respond to Holmes' opening comments
about the limitations of debt
and kind of REEL's trajectory for growth
is that let's not conclude that a debt program can't scale
just because it's a loan program.
The operational hurdle that I've described,
the complexity, the delivery mechanism,
the kind of lack of demand generation
that Jeffrey touched on,
the burden on lenders and contractors
to understand new ones program requirements.
Some of these stem from very well-intentioned
privacy policy guidance at the time.
Those are some real hurdles and obstacles to REEL scaling,
and so moving on to the next slide,
in terms of how we might address these barriers.
So financing a loan
doesn't create a demand for energy efficiency.
I think Jeffrey said it well,
that just because something is available
it doesn't mean people are gonna do it.
Financing really removes an upfront barrier,
and the demand has to be generated elsewhere,
and there's a lot of discussion
around how to deal with credit risk
when thinking about clean energy financing
and making it broadly accessible,
but in our experience,
the generation of that demand
and the operational details and the delivery of the program
can be as big or bigger challenges to tackle.
So related to that, we really see
that there needs to be an effective intermediary
between the customer and the lender
for that eligibility screen.
Some state programs use a single originator model,
some use dedicated program staff,
there are also some specialty financing companies
that can act as screeners or brokers.
We see the need for that to be incorporated.
At the time the pilots were set up,
there was a lot of interest,
like I said, in the open market
for all lenders to kind of participate on the front end,
but we think having
some being able to participate on the front end
and other lenders just being able to purchase loans
after they've been originated
would be something that would be really helpful
and attract more forms of private capital.
Kind of most importantly,
making financing offerings available statewide
will reduce complexity significantly
and we believe lead to greater uptake
and much greater uptake in IOU territory as well
because program partners
will be attracted to the simplicity and ease of the program.
So that means we need to figure out
how to incorporate non-ratepayer sources of funding
and combine them with ratepayer program funding sources
in order to have truly statewide measure eligibility
and just truly statewide offerings available.
Rory, next slide, please.
So I'll conclude by saying
the CHEEF was authorized to run pilots
and you've learned a lot
from the challenges of running them,
and to get where California needs to be,
we're gonna need many good options
to help customers make energy investments.
So we're gonna need debt and non-debt solutions.
We have some exciting developments in the works.
We're working to set up a point of sale offering
for residential customers
to purchase energy efficient appliances online
with real financing,
which would help reach tenant occupants,
help with distressed purchases and bring the cost
of kind of that emergency financing much down.
We're also setting up a microloan pathway
in our small business program
to help facilitate lenders
to get very, very small loans of under $5,000,
to mom-and-pop type small business customers,
where the utilities on-bill financing programs
kind of leave off at that $5,000 mark,
and we are working very hard
to try and reduce the operational burden
for lenders in our programs
using a variety of things, including some IT.
So we invite you to reach out to us.
Stay in touch with the announcements
and be part of our public rulemaking development process
this spring for both the residential
and small business program
as we make some of these modifications.
I look forward to the rest of the conference
and the rest of the discussion, thank you.
-: Terrific, Miriam, thank you so much.
You have brought to this workshop,
the title of this panel's lessons,
10 years, what have we learned in 10 years?
And you've given it to us so directly and succinctly.
It's my understanding that the contents from this workshop
will be available as part of the proceedings
to all who are taking service of the list
for people who are interested in this docket,
and that the scoping memo
for the rulemaking that's forthcoming
will present a comment opportunity
that could include comments on the proposed recommendations
for reforms that would be seen at the treasurer's office
on rulemaking later this year,
and I think that is really exciting also.
The time on the clock gives us just a slice of time
for one round amongst us all
and I want to acknowledge
that I've understood from our workshop host
that there is a Q&A session for members of the public
who are joining us for today
that is designated at the end of the program today.
So it's my understanding as moderator,
we're not going to public Q&A right now,
but that one question
definitely posed a hook to our panelists
allow us to close it out on time for a 15 minute break,
and I have to say I was arrested
by the comparison that Jeffrey brought
to the historic challenge
that our country is facing right now
to try to vaccinate people with not even 100% target.
A target that's less than reaching 100%,
but we have a climate change and public health policy
that is reaching 100% clean energy
over obviously a much larger amount of time,
but still with the degree of urgency
that's challenging now every federal agency
with orders from the President in the last week.
So I think that it is a moment where all tools are welcome.
All ideas, all instruments have applications and uses.
We do know from Miriam's remarks
that the REEL program can grow much faster
than the high growth scenario
that was reported to the Commission.
I think that's an important update on the evaluation
that was submitted to the Commissioners in April,
but it brings me to an open question
if Miriam's remarks is also that that program alone
will not be able to reach
all the underserved market segments in California?
Can we see them coexisting
in ways that they would nevertheless be compatible
in a portfolio of utility regulator-sponsored programs?
Or if not directly sponsored, let's call it inable
because some of the instruments we've talked about,
including the ones that CHEEF is using
are directly dependent and enabled by the ratepayer funding
allocated by the Commission.
So I'm gonna solicit comments
from each one of the three of you
on the compatibility of multiple solutions
in the marketplace, in case any of you hold a view
that there's a mutual exclusion
that we need to examine before we move on
from today's dialogue in this panel to the next.
Wesley, would you like to start?
-: Yeah, happy to second.
Can you tee up your question?
-: The question is do you see any reason
that loan programs and tariffed on-bill programs
could not coexist in a marketplace
where customers have choices and options
between the two of them?
-: Yes, I can answer that question.
They absolutely can coexist.
There is a market for both products.
There is a market for debt-based financing
and it makes financial sense
for a lot of residential consumers and commercial consumers,
but if we're really approaching scale,
you've got to have tariffed on-bill
to reach all of those communities
that are otherwise squeezed out of those opportunities.
They can coexist.
There's a market and a customer
for all of these great products,
but if we really wanna reach scale
we've got to reach the folks who are currently excluded
from the market-based debt-based ones.
-: Jeffrey.
-: Yeah, I totally agree.
I mean, I just look at the easiest comparison
is mortgage market,
and I think about how many different structures
of kinds of mortgages exists,
different terms, different ways of financing them.
Yeah, we need tailored solutions
for different markets and different customers.
I think the burden has to fall on somebody
other than the customer for the customer to understand that,
meaning somebody needs to be bringing to the customer
the right solution that meets their needs.
I think asking the customers to sort through that
is a pretty high barrier,
but multiple solutions have to have some improvements
to exist when they can.
-: Thank you for that.
Miriam, I'm gonna amend.
My question to you is please join us in engaging that point
and I've seen
that you've made a contribution to the chat box
for everyone who's with us today
and I want to give you a chance
to vocalize that and explain.
So please just take a moment to say
what you want to say to both of those points.
-: Thank you, Holmes.
So the answer to is there any mutual exclusivity?
No, and I think we need all solutions
to get where California needs to go
in terms of climate adaptation
and our greenhouse gas emissions.
We need all options on the table.
I think there's a few important points.
I think my comment about how solutions need to be statewide,
and we need to combine non-ratepayer sources of funding
and with a ratepayer sources of funding
would still hold for a tariffed on-bill solution
so that we avoid all of that complexity about eligibility
and we figure out a way to support
decarbonisation measures across jurisdictions,
and I think there's also,
it would have to be done very carefully
to make sure that the simplicity and ease
is still preserved, but I think there's a scenario
in which a tariffed on-bill type program
allows customers to install certain measures
and then there's other measures
that require that customer to pay out of pocket
and the finance be layered on top,
and we see that right now with rebates for customers
will pay for the portion that's not covered
by a rebate or incentive,
and so I think there's also
some potential linking and connecting of the two
for some customers.
In terms of the comment that I wrote to Holmes in the chat,
I just wanted to be clear that CHEEF
is going to be engaged
in two public rulemakings this spring.
The first is to add the on-bill repayment element
to our small business program,
and the microloan pathway that I mentioned,
and the second
is to make some operational improvements to REEL,
reduce some complexity for lenders
and also add that microloan pathway for REEL
for point of sale financing.
So this is happening prior to the Commission
issuing a decision on long-term direction
for the statewide pilot program.
So everybody is invited
to be part of both public engagement processes,
and we'll have more information
through our Listserv and on our website,
or feel free to contact me after this panel.
-: Thank you so much for adding that information
to the records here today.
We're exactly at time.
I apologize to those
who may have heard the audio quality deteriorate
while I had my microphone on while Miriam was speaking,
but I trust that you could hear what Marian had to say
that it will also be part of the transcription
and available to anyone to continue to engage in
and the fact that the State Treasurer's Office
has its own rulemaking process
assures that we have access and visibility.
Thank you so much
for all of your participation this morning.
I believe that our schedule is to turn to a break,
but I'm gonna return it to the Commission staff
to guide us forward.
Thank you again Commissioner Shiroma for convening.
-: Thank you, Holmes, Wesley, Jeff and Miriam
for kicking off.
Thanks, audience for your patience,
and thanks to our CPUC IT support staff
for getting us up and running.
We are going to take a break
and we'll resume again at 10:45 with panel two,
what success might look like.
That will run from 10:45 until noon.
So we'll see you in about 13 minutes.
Good morning, everyone
and welcome back to those of you who've been on since 9 a.m.
For those of you
who are just joining our CPUC Clean Energy Finance Workshop,
welcome to you.
Some quick housekeeping items.
Bear with me folks who've been on since nine.
For the new folks,
each of our panels today is 75 minutes long,
consisting of a one hour presentation
followed by a 15-minute panel Q&A
that's between the moderator and panelists.
The public comment section will come at the end of the day,
that's going to be a one hour session.
The first 15 minutes
of which will be a moderator lightning round,
in which our day's moderators
will summarize their key takeaways
followed by the 45 minute public comment period.
Today's workshop is being recorded
and will be included in the record for the rulemaking,
the Clean Energy Financing rulemaking.
There is a delay.
If folks are for some reason watching the webinar,
but dialed into the telephone audio,
which we recommend not doing
because there is a delay on part of the webinar broadcast,
and lastly, if you have any technical issues
you may call our CPUC IT department technical support group
at 415-703-5263.
So panel two we have what success might look like
and I will hand it over now to our moderator, Dan Adler.
-: Thank you, Peter.
Thank you to Commissioner Shiroma and Commission and staff
for putting this conversation together.
It's great to join you all this morning.
I should say that I started my professional life
as an analyst at the Commission
and left to try and work on creative financing solutions
that helped advance the state's clean energy policy agenda
and in the very long time since then
we've made a fair amount of progress
certainly in certain categories,
but there's still a great deal of work to be done.
So this remains a timely and fascinating subject for me.
Now, let me introduce our panelists
and then I'll give a few brief comments
before turning to the presentations.
Some of you are looking at an older version of the agenda.
We do not have Jigar Shah generate capital
and formerly of SunEdison.
We have instead an upgrade in my judgment, sorry, Jigar.
We have Cisco DeVries, CEO of Ohm Connect,
known to many of you
as the originator of the PACE financing mechanism.
So great content and experience,
as well as a very enjoyable presentation to come from Cisco.
We also have Carmelita Miller,
the director of energy equity
from the Greenlining Institute.
Many of you will know Greenlining
as really a central player in the state's conversations,
not just around clean energy and climate,
but economic inclusion, justice,
and really thought leaders for a long time
in the agenda that the state is catching up with
and rushing to implement,
and then lastly, Kerry O'Neil,
good friend and colleague from Inclusive Prosperity Capital.
Part of the cohort that Jeff Schubb described this morning
of state green banks.
This is a fascinating entity
born from the Connecticut Green Bank,
now serving on a multistate basis
with some really groundbreaking financial products
that Kerry well described for us
that speak directly to the state's agenda here.
A couple of comments just in the context
of the kind of broader clean energy financing landscape.
You did hear from Jeff Schubb
and the Coalition Green Capital
about what's happening in states around the country
with state green banks.
These are crucial entities
that help form capital in organized markets.
They are active in 12 states or more.
Some states have more than one
serving particular market segments
are using different financial products.
The point being there is a rising interest
in how policy meets finance
and what both civil society and private finance actors
can do to innovate and advance that agenda.
This is timely because as you've also heard,
there is a push from the federal government
to provide new capital into these structures.
So to the extent
California has models that are new center proven,
or can be created in time.
We can, all things being equal look to federal support
for these new financing vehicles
with non-dilutive federal capital which is the best guide.
Briefly on what's happening out there
in Clean Energy Financing.
There's some new data literally in the last week
from Bloomberg New Energy Finance,
summarizing what happened in 2020,
and I think it's worth reflecting on it.
Despite COVID in 2020,
the world saw for the first time over $500 billion
of private capital
flowing into clean energy and climate solutions
across the board.
This is up by 9%, despite obvious recessionary forces,
and just the difficulty of addressing markets.
China was in the lead,
but its share declined US in its second position,
also down by about 11%,
but categorically where we saw some progress in the US,
fascinating to me,
and this I had frankly not anticipated.
In third place was funding for residential heat pumps
coming in at $16 1/2 billion up 7% from the prior year,
really close to the second category of transportation,
innovations and infrastructure.
Now, obviously a lot of attention
on where the transportation sector is going.
I think some of us have been aware
that heat pumps has a solution both for climate,
but also just generally weaning off of natural gas
is ready for primetime.
This data suggests that markets are catching up.
So it's now a question for us,
how do we capitalize on that momentum
for behind the meter solutions in that category,
and use that momentum, capital forming and innovation
to broaden the set of solutions we can deploy
behind the meter,
which is the key issue for this for this agenda here today.
The principal area of growth on a global basis
was in the European Union,
considering that as a continent of coordinated economies
and if we think about how that is taking shape
it is really through state policy directed,
national policy directed, infrastructure ambitions.
I think we see that
in the recovery out of the European Union,
probably more than anywhere else in the world,
where it's really building back better
with green and climate solutions.
That suggests more engagement
from public policy from government,
less of a belief that private markets alone
can solve this problem.
What's California's version of that hybrid model?
And how does that speak to what we heard this morning
about financing being a part of the solution,
but we really need other tools, techniques and actors
to open up markets?
So that's gonna be key for us
and hopefully key in the discussion.
In California, we continue to have great advantages
on the innovation front.
We continue to lead the world
in clean energy venture capital.
The trend, beneficially in my mind
is towards the later stage edge,
meaning towards commercialization
and getting ready for scale.
Smart Grid as a category has been rising for several years.
I think that's relevant
for certain aspects of this proceeding,
but we don't have good disaggregated data
on Smart Grid as a category
behind the meter and in front of the meter.
It still is lumped together categorically
when we track investment trends,
which brings me to a broader point.
We don't really have good deployment data for the state.
How are we doing in mobilizing capital
in a relatively near term basis
and tracking where money is going
for our infrastructure goals.
We do great on innovation.
We need to continue to nurture the innovations of today
for infrastructure of tomorrow,
but we could spend some more time
focusing on where the money is flowing in real time
here in California.
So lastly, the ambition for this panel.
You can see that it is about imagining scale,
what success might look like,
what are models that are proven,
but just the frame
that we put towards our panel members here
is really about financing structures.
In the experience of these experienced professionals,
mobilizing resources, looking at policy,
what is working in terms of moving capital broadly
and also specifically for the behind the meter solutions
that this agenda is concerned with?
How do we get from observations
about what's working and not working to recommendations
for the state and the Commission to consider,
and we need to, in the course of doing that,
hone in on a few principal things
that this community would suggest the Commission explore.
Helps set the agenda for this proceeding as it unfolds,
but always bear in mind as was said this morning,
keeping up inclusivity central to the conversation.
It's no longer sufficient to say
that we are in aggregate improving our energy performance,
or our climate performance,
we need to look across all aspects of society,
socially, economically, and geographically frankly,
to make sure that these solutions are reaching the customers
that need the most.
That is beneficially highlighted everywhere
in the proceeding materials today and I'm hopeful
that the conversation that we're about to have
keeps that front and center
and I'm confident with the speakers that we have before us
they will do so.
With that, I'm gonna turn it over to Cisco DeVries
from Ohm Connect for his presentation
and comments on the agenda in front of us.
-: Thank you, Dan,
and thank you to the Commission for having me.
I am definitely not a step up from Jigger Shop,
but I am excited to be here nonetheless
and to share a couple of thoughts.
I'm gonna be relatively straight and clear.
This is a complicated issue
and I'm gonna make some fairly
straightforward and simple recommendations.
Of course, there's more complications to it all,
but I think it's helpful
just to kind of set some boundaries.
Let me just start a little bit, as Dan,
my background here is relevant
in that I was in the US Department of Energy
as an appointee of President Clinton back in the '90s
working on a whole variety of issues there.
More recently, chief of staff
to the mayor of Berkeley, California.
A number of years ago,
where I created the PACE financing model
and then helped get the first program up and running
there in Berkeley,
left and started a company to do it.
Today, I am the CEO of Ohm Connect
and I what I know is that in my previous world,
in my previous company, we didn't just do PACE.
I did a billion dollars of PACE financing there,
but we also worked to do the very first securitization
of unsecured energy loans in Wall Street history,
and also had the opportunity
to run two statewide on-bill finance programs.
So pretty significant experience
bringing private capital at some scale to solve this issue.
Today, at Ohm Connect
we pay California families millions of dollars
to reduce energy used at key times for the grid
and just recently announced $100 million
to finance what will become
the world's largest virtual power plant,
which is simply just a network of California homes
that will engage with the grid dynamically
as the need arises.
So let's jump in and go to the next slide.
I wanna start with saying finance is critical.
As Commissioner Shiroma said at the very beginning,
this is super critical.
We cannot decarbonize our economy,
nor can we democratize clean energy without finance,
but people often mistake its importance
for its abilities to actually create demand.
People hate finance.
It does not generate demand.
In fact, in my career in this space,
what we've learned about finance is that,
if you have to finance something,
it's a reason not to do something.
Quick example, we finance cars.
Most cars that are purchased in this country are financed.
People want the car, they wanna get around.
They do not want to finance,
but they're willing to finance to get the car.
Now, important thing to understand is that finance,
if car companies get this,
if you adjust finance, subsidize or make it easier,
or do other things advanced,
it could direct people's car buying choices,
but it does not make people want to buy a car.
They've already chosen that
and I think energy and then efficiency,
generally speaking, we get this wrong all the time.
Finance is often thought of
as something that will generate demand.
Oh, people don't want an energy project.
If we can finance it really cheaply, they will,
and the answer to that
is something to keep in mind through all this is just false.
People do not want to finance things.
However, if they want an energy project,
finance is an important tool to allow that to be possible.
Go to the next slide please.
Second is we know how to do this.
So what does success look like?
And I'm gonna say in this particular slide,
if we look at success as large scale, low cost,
capital markets capital billions to trillions of dollars
flowing to individual customers, residential consumers,
we know how to do it.
This is actually really important.
We don't need to break a ton of new ground.
We need to take models that exist and move them slightly.
The three basic structures that exist are unsecured lending,
unsecured loans or lightly secured UCC loans
are very fast, ubiquitous, well-defined,
easy access to the capital markets at scale,
but tends to be difficult for low and moderate income
and lower credit score folks to participate
for a variety of reasons.
Second, property secured lending.
PACE is obviously the one I spend a lot of time on,
but we also know a lot about home equity and mortgages.
We can talk more about PACE,
but what I'd say about pace in general
is that it was very successful,
perhaps one of the most successful
government interventions and programs in finance
to ever deliver capital at scale where we want it
and when we want it to the people we want it.
It served low and moderate income families.
The problems that we ran into with PACE
were not about its ability to deliver lower cost capital
to important segments of society,
but with other issues
associated with the quality of projects
and the channel that it was delivered under.
The one note I would say on property secured lending
is lending that comes
as part of a primary mortgage origination tends not to work
and we can talk more about that.
It's a very complex transaction.
So looking at home equity
and looking at PACE for existing homeowners
is much generally happier
than looking at first time mortgages,
and last utility secured lending
and Holmes talked about this.
I know this is a big topic of conversation.
There are a lot of examples of what has not worked
in this space,
and there are good examples of what has worked.
They particularly help lower income,
renters and others participate.
It's great for smaller projects, generally speaking,
larger 20, $30,000 projects and alike tend not to work
and I really wanna note the Hawaii GEMs program
has a really unique way to use the utility
to finance large scale capital using utility fee
that are paid by consumers.
Go to the next slide.
Okay, so again, oversimplifying,
but I think really important,
a couple of five ground rules.
Overarching theme, do not make the perfect
the enemy of the good.
There is no way to retrofit a million California homes
and have every one of them go perfectly.
We have to think big.
You need large scale volume
that's inclusive of lots of different people
and types of people,
and let's make sure we keep it easy
and that the consumer and the contractor
wanna do it and are advocates.
So I mentioned to begin with,
we have finance mechanisms that work.
Let's take those and adjust them,
rather than trying to create something brand new.
Brand new can be great,
but it takes a lot of time.
Make it big.
Volume, volume, volume.
If you want large scale capital,
you have to start from the notion
of hundreds of millions of dollars to billions of dollars.
Pilots that do $10 million, or $20 million,
or even $50 million simply won't do it.
You cannot get to large scale capital,
unless you are large scale capital.
So how do we get to scale?
Third, simplicity, and this is one we have failed,
in my opinion, in this state over and over again.
We have to keep it simple.
This has to be something that contractors
and consumers find easy, straightforward,
or they won't do it.
Often we think, oh, we'll make it cheaper,
interest rates will be lower.
You know, cheaper is not always better, simpler is better.
Now, obviously simpler then can conflict with number four,
which is make it safe,
and when we actually have non-COVID public things
when we all get together I'll ask people,
hey, how many people own a home?
How many people have done a remodel
or a home improvement with a contractor on that home?
Most people say yes.
Say for how many of you has that gone awesome?
And most hands come down.
The reality is that the home improvement industry is messy.
It is one of the most complained about,
most challenged home services
or consumer services that exists.
The current systems in the state to manage home contractors
are flawed and do not protect consumers adequately.
So we have got to figure out
how people can make safe choices,
but it's as important to the finance providers too,
as we saw with PACE, which is asking a bank
to be a home contractor project police agency is a problem.
They're not good at it.
Banks finance entities are good at delivering capital.
A great role for the PUC, for the state, for other entities,
is how do we ensure that we have simple projects that work
and that we can have confidence in?
Lastly, I call it the hide the spinach in the smoothie.
That's my image there.
People don't wanna buy efficiency.
You should never think that they will.
If your H-back breaks, you need to H-back.
How do we intervene using finance and other mechanisms
to get people to get the right H-back,
to get a heat pump, to get something else that's better?
How do we get people who when their hot water heaters,
natural gas hot water heater breaks
to switch to an electric heat pump water heater?
Those are moments where choices exist,
and we can sneak in and get the right outcome,
but if you come to people and say, hey,
how about a new water heater and they don't need one,
it's an irrelevant conversation.
So we wanna make sure that the efficiency,
the policy benefits are part of something people want.
They're in the smoothie that they already want,
and maybe I'm just a parent
who has snuck a lot of vegetables in the smoothies,
but I think I'm not the only one.
Go to the next slide.
I wanna deep dive for just a moment on a couple of ideas,
and these are just two ideas
about how at scale we deal with the safety issue.
This is the thing we talk about PACE
and the success and failures of PACE,
but this is true of solar leasing and loans.
This is true of lots of other types of products,
which is how in the world
does anybody know what a good efficiency project is?
What is success?
How can I check a box to know that that worked,
that that was sufficient?
And we don't have that today in this industry.
There are two very different ways of approaching it.
Both have benefits and flaws
and there's lots of other ways to approach it,
but I wanna mention these two.
The first is the US Department of Energy
has a Home Energy Score.
It can be done in an hour, it cost about $100.
It can be done by a home improvement contractor
or an H-back contractor,
and it does a very good job
of providing a simple, understandable way
of saying what is the home efficiency score now,
and what would it be with improvements
and recommending improvements?
Now, it's not super accurate,
but it has the benefit of being straightforward,
fairly easy to do,
and something that we could build into these systems
without dramatically having to change
the mechanisms of delivering home improvement projects.
I did a bunch of work on this a few years ago.
The second is very near and dear to my heart, data.
How do we pay for performance?
What we care about is did we move the end?
Do we reduce the amount of energy being used by the home,
or do we move around the use of energy
to a more appropriate times
when solar or other less expensive power is available?
This has some complications
because it's hard to know exactly
what energy savings you're gonna get until afterwards,
and a lot of occasions comes into it,
but Pay-for-Performance is the wave of the future,
and giving people large scale abilities to finance projects
based on the future energy savings or energy movement,
because a lot of times right now we don't want savings
as much as we want energy electricity
to be used at different times.
The value is there,
and of course Recurve has done a lot of work on this
within the state of California.
I grabbed this one from New York,
this example from New York.
Last slide, please.
Now I wanna talk about one other thing,
and this is not a consumer loan.
This is a different set of things
and this is more related to what I'm doing at Ohm Connect
and related to our issues with embedding finance
and using data and actual energy,
the cost of energy and electricity in real time
to pay for things.
So what we've done recently
and announced recently with Ohm Connect
is that we have financed a new power plant.
We have $100 million to build a 550 megawatt power plant,
except there's no infrastructure on this power plant.
This financing, which is from large scale New York capital,
sidewalk infrastructure partners
is coming in to pay for individual consumers to sign up
and get small devices
that allow for control of energy in their home for free,
or very reduced prices.
So the financing is at the macroscale
for building the capacity
to reduce the energy needed on the grid in real time.
The way a consumer experience it is not alone,
but they're experiencing getting a benefit,
a Nest thermostat or smart plugs or other things,
and getting paid in order to deliver a service over time.
So the way this again,
really simple, the way that it works here
is when wholesale energy prices spike,
people reduce their energy use in their homes,
the grid manages the chico that actually pays
for that energy reduction
and then consumers receive that benefit.
So this is a way of hiding the finance,
being the finance at the large scale infrastructure level,
but actually delivering real benefits savings and dollars
to individual consumers.
So another way of approaching finance
that doesn't involve a consumer taking out a loan,
but involves finance at a different level
embedded into the energy system,
and I think a really exciting way to go.
So I will stop there and turn it back over to Dan,
and thank you very much for having me today.
-: Thank you, Cisco,
before we go to Carmelita
I'm gonna use my moderator preference
and ask you one question about this last slide.
Talk a little bit about the distinction
between customer behavior in this instance
and an automated response.
How that shows up in both your business
or maybe in the sort of policy architecture,
you would suggest if we're gonna enable solutions like this.
Obviously, the behavior is a little bit unpredictable
from a policy perspective,
and so if you're setting up a program
that relies on this solution to deliver at critical moments,
that can create tension in the decision making process.
-: Oh, that's great.
So we do a lot of the behavior of work
and all of our users have behavioral elements.
Here's the thing.
It is very hard to predict
what an individual user is going to do.
It is actually not that hard to predict
with time, energy and data
what 100,000 consumers are gonna do on average.
So Dan, I don't know what you're gonna do,
but I do know what 100,000 people like you are going to do.
Some of them will opt out in an event
and some will participate,
and within that we can become very, very predictable.
So this is a combination.
The way we approach this is a combination of communication
directly to individual users
with text messages and information
about what reductions we want
and allowing them to manually make adjustments,
but increasingly, we are relying on devices in their homes.
Smart plugs, thermostats, car charging systems,
hot water heaters and other allied kind of appliances
that allow us to reach in
with the permission of the user or the consumer
to reach in and reduce the energy use
or cycle off that device for a period of time,
and this means that it is entirely predictable
and entirely replicable.
The consumer often doesn't know what's happening,
but if it isn't convenient, they can opt out.
That said, that device control,
and this is why we can pay upfront
for a device to go into a home
allows us then to monetize those savings
over the course of the years to come
in ways that are very valuable to the grid
and valuable to the consumer themselves.
-: Got it, so you're talking about sort of an equivalent
to the expected uptime
or availability factor of a traditional power plant,
which is knowable has some deviation around it,
but has been a pretty good data and performance behind it.
-: Yeah, I mean, what I think changed
or what's allowed, for example,
as to build a 500 mega watt virtual power plant
made up of a network of homes,
is that we have figured out that at scale
you can get very predictable megawatt reductions.
So we can say we need 50 megawatts for this hour at 7 p.m.
and we can hit 50 megawatts almost exactly,
and with the level of specificity
that a traditional power plant can
because of the scale and the data that goes into it,
and this allows us now using the smart meter data
to actually cut the homeowner, the resident, the renter,
anybody in on the deal, right?
They can actually then get paid for that reduction
because the price of electricity, the wholesale market,
even with time of use rates can vastly exceed
the retail price of energy that they're paying.
So we're trying to connect those dots back to the consumer,
cut them in on the ability to make some money
by reducing energy use
when the price at the wholesale energy market is very high.
You can't do this as an individual consumer.
You can only do this aggregated at scale
with all but a lot of folks working together
kind of like a symphony.
-: Excellent, thank you very much.
Okay, over to Carmelita Miller, please.
Carmelita Miller you're on.
-: Can you hear me okay?
-: We've got you so far.
I know you're having some connection problems.
Hopefully we're stabilized.
Thank you so much for joining us.
-: Absolutely, good morning or afternoon everyone.
My name is Carmelita Miller
and I direct the energy equity team
at the Greenlining Institute.
I thank Commissioner Shiroma, CPUC staff,
and all of the panelists here again
for inviting me to participate today.
I'm gonna change everything in the conversation a little bit
and talk about the perspective of our communities.
Let me start by just introducing Greenlining.
For those of you who don't know,
Greenlining's mission is to advance economic opportunity
and empowerment for people of color.
We say that Greenlining is the opposite of redlining,
and other manifestations of racism
that have been excluded people of color from homeownership,
banking and other forms of wealth building opportunities.
Ongoing racist policies versus today,
this is not a surprise,
and the effects of this historic and current discrimination
are reflected in the racial disparities
across income, wealth,
and health or well-being of our people.
People of color are experiencing
the lowest levels of wealth in decades
compared to their White counterparts,
who are achieving record wealth at the moment.
Next slide.
I'm outlining here the energy equity principles
that we live by at Greenlining.
We say that we want affordable access to clean power.
We want healthier, safer,
and thriving homes and neighborhoods, communities.
We wanna be actively engaged
in the energy decisions that impact our lives,
and attain wealth-building opportunities in a green economy.
Climate change, adaptation and mitigation investments
can be tools for wealth building
in our communities and alumni communities,
and this adjustments can simultaneously help communities
to become more resilient
and to present a way to really prevent
all of the harmful impacts of racism,
compounded with climate change
and now a pandemic that's affecting their life.
Next slide.
Wesley and Holmes earlier highlighted
that incredibly high rate of energy burden in the southeast,
and if you're in California
you all know that we're not fairing any better.
While there's currently a moratorium
against utility disconnection,
we know that this protection will end sooner
than when Illinois residents
have recovered from financial devastation
caused by this pandemic.
Currently, we have more than 450 million residents
in growing utility debts.
That's as of the data that I got a couple of months ago.
It might be different now,
but don't quote me on this exact number for today,
but it's bad, right?
Whatever the number is,
and on your screen are three versions of the map of Oakland,
where you can see that in the darker shades of red
for East Oakland, specifically,
are in all three maps show the impact of lying
to the very left historic redlining
that echoes across multiple issues
in this particular community,
and this is true with many redline communities
across the state.
So to the left, the lack of financial investment.
This is what we call actual redlining.
In the middle is the Cal EnviroScreens result.
We also see that the same community
is affected and impacted by incredible pollution,
and then finally to the right is the impact of COVID,
the devastating impact of COVID on our community's health.
Next slide.
For renters and homeowners in California,
the pandemic's economic fallout is far from over.
Before the pandemic we were already in a housing crisis
and now hundreds of thousands of households
are confronting housing insecurity
from the combination of job and income losses,
high housing cost burdens
and threats of eviction and foreclosure.
We all know that in California
there's a temporary ban on certain evictions
that has prevented or at least delayed
thousands of residents from losing their homes
during a pandemic for non-payment.
For use, income and job losses
have hit rental households the hardest.
According to UC, Berkeley's Terner Center,
it estimates that nearly 55% of renters in California
have experienced some loss of employment income
since March of last year
when the shelter-in-place orders began,
and although homeowners have steered
better than renters bill, 40% of homeowners
have experienced a loss of employment income.
So why does this all matter, right?
It matters because,
like many of the speakers that went before me,
we are now talking about how to transition to stay
into a cleaner energy,
and a cleaner economy, and cleaner environment,
and we cannot do that, and I can honestly tell you
that many of our community members
are currently not thinking
about how to electrify their home,
not even how to make it energy efficient.
When their homes that we're talking about
they're about to lose because they cannot pay the rent.
So that's why it all matters
and I just wanted to put the context here,
but I think most of us know
that this is already happening in our state.
Next slide.
So all of this is disheartening,
and well, it is often, for me as an advocate, hard to do.
I will try my best to rise to the challenge
and theme that Dan and this panel had given me,
which is to talk about aspirational
on the hopes for our communities,
and more than just a wish.
We at Greenlining know
that a better future is truly attainable for people now.
A couple of years ago,
we launched our work on building decarbonisation.
We wanted to make sure
and focus on ways that this transition
is not only ways to prevent harm
for folks who might be left behind on aging gas system,
when others and especially more affluent residents
have already transitioned,
but also how can we benefit?
How can we use electrification?
How can we use decarbonization as an actual tool
to help with wealth building in our communities?
Next up, sorry, next slide.
So the next slide outlines the different steps.
I'm summarizing here, please go to our website,
you'll find our framework, a copy of our framework there.
So I'm summarizing here
to show you the different steps
and I'll be talking about step number four after this slide,
but really quickly, we have recommended
that in order to truly and equitably transition,
this whole process
should start with assessing our community's needs.
As I said earlier, many of our community members
are not thinking about buying an induction stove, right?
Many of our community members are thinking about
how they're gonna pay their electric bill,
how they're gonna pay their rent,
and so how do we reconcile all of this
that's happening in our communities
while we're also figuring out how to transition the state.
The second step is to establish
a community-led decision making process.
So that we're doing more than just handing flyers
or pamphlets to our residents.
We're actually asking for their input,
asking for their experiences
and asking for how they wanna see clean energy investments
transform their lives.
Third, we were saying that we need to develop
equity-driven metrics from the get go
because without this we can't possibly measure
whether a program is achieving its equitable goals.
Fourth, leverage program benefits and funding,
like I said, I'll talk a little bit more about this
as it relates to financing,
and then lastly we say that
you have to keep tracking and improving
the performance of policies and programs
to ensure that they're really meeting our people's needs.
Next slide.
Now, the CPUC is also tasked to help create a plan
to transition our economy away from fossil fuels, right?
There's another proceeding
where we're also participating,
Greenlining along with other environmental justice groups
that are participating in order to figure out this issue,
but how are we going to make sure
that communities are not left out of this transition?
Currently, participation of rates and energy programs
suggest that we're likely to again be left behind.
In our framework,
we talked about making sure that we leverage the funding
and the programs that currently exist
because currently, it's not serving
many of our community members,
especially environmental justice communities.
We're also saying that,
I'm saying now that the Commission has the foundation
on which you can create
through its environmental and social justice action plan,
its work in SB350 barriers studies,
and many other proceedings.
It has what it needs to create
a better and more inclusive financing solutions
to address the gap.
The fourth step of our framework calls for,
like I said, calls for the leveraging of programs
and finding solutions to address the gap
across multiple CPUC proceedings
and during the robust stakeholder engagement
to create and implement the SB350 barriers study.
Greenlining and many other environmental justice
and racial equity organizations have highlighted repeatedly
the barriers to increasing access
and uptake of energy improvements in our communities.
As pointed out to the fact
that scale of funding rebates and subsidies is inadequate,
the current scale is inadequate
to address the needs of our people
who have largely been left out in the energy investments
that the state is making.
I want to quickly note,
in case I need to restate the obvious
that in our case, at least personally,
we don't think demand is the issue.
Demand is not the issue in our community.
The demand is there.
We want these solutions, right?
We want clean energy in our communities.
We want to improve our lives.
We've spoken up repeatedly that we demand energy solutions
that improve the lives of our children,
the lives of our neighbors, the lives of our family.
I take part in these financing conversations,
not to figure out how financing options can drive up demand,
but how financing solutions
can augment the financial gap that is needed
to make our communities more resilient and sustainable.
If available, funding is insufficient,
as we've seen before and as we're presenting now,
cost effective investment opportunities can be financed.
Let us look at financing solutions
that protect the consumers,
but do not use criterias
that systematically disqualify on a status
based on ownership, income and credit score.
We've all heard that and various speakers today
that these are barriers to LMI consumers.
When these issues that I've just discussed
are taken all together,
it truly becomes imperative
to consider some demonstrated ability,
and we have them,
demonstrated ability of utilities
to offer inclusive financing to all customers,
regardless of their income credit score,
whether you're a renter or a homeowner.
Let's look at examples where there are,
so this is my aspiration for the Commission
and the current proceeding, the financing proceeding,
with examples where there are high uptake of grades reported
by other utilities offering inclusive financing,
even persistent poverty areas, right?
Because it's showing,
and we have seen examples that we've heard of today
and I'm sure we'll hear about more
this afternoon and tomorrow.
Examples where there's a viable solutions for our community,
and now is the time to do that.
Next slide.
And, again, wanting to keep my presentation quick
'cause I also don't know,
my internet is pretty unstable at the moment,
but above all, if there's one recommendation,
or one thing that I want to leave everyone here
is that whatever we do,
we have to center and start with the needs
of our communities fist, right?
And in creating financing solutions that's our North Star
because California and Californias
cannot continue to suffer.
I'll stop here and hopefully, I can stick around
and engage in the Q&A portion.
-: Thank you so much, Carmelita,
and just reflecting the fact that we might lose you.
Let me ask you one follow-up question now
and hopefully you'll be able to stay with us for later.
You mentioned the need to focus on where we see an uptake
in similar markets, similar programs,
and I'm thinking about the dynamic
of the renter and the landlord,
which is fraught and complicated and diverse
even in non-pandemic times,
but it makes me wonder if you have recommendations
about specific things, specific measures,
that LMI communities
are more likely to find attractive in their homes
that we should be focusing on
from sort of the behind the meter technology solution set,
which is of interest to this proceeding.
Things that if we could figure out
the partnerships and financing for
we'd have more residents saying,
yeah, that's what I'm looking for,
that meets my family's needs,
and then we'll figure out how to get it paid for
through the landlord relationship and the utility,
but are there specific measures that seem obvious to you,
or do you want the Commission to have front of mind?
-: Okay, so I hope to.
Okay, sorry, my computer again is telling me
again unstable connection.
I hope you can hear me okay
and everyone can hear me okay.
I would say that first and foremost,
and in the way that we have surveyed
and studied LMI renters.
One of the things that really drive up fear and anxiety
is the idea that they will not financially benefit
from something that they're paying for, right?
And so I don't have specific recommendations
of particular measures.
I do know that there are ways
that we can figure out how to balance
instead of talking about the split incentives
with balance incentives between the renters and the owners.
At the end of the day,
really what folks are looking for
is to make sure that they're getting what they need,
or they're getting what they're paying for,
they're keeping their families safe,
and if anything,
if they can also get some more monetary investments,
and so for us we've seen that actual bill savings,
or even credits have really skewed that kind of fear,
or alleviated the fear and the concerns
around participating in programs, just in general,
and so I would say that led to financing solutions
that would address all of that
and will, again, bridge that gap
and make the split incentive more of a balanced incentive
for both parties.
-: That's great, that's a great frame.
Thank you so much.
Okay, over to Kerry O'Neil,
Inclusive Prosperity Capital, please.
-: Thanks, Dan, and thanks, everybody.
So if you go to the next slide.
As Dan mentioned in the intro,
Inclusive Prosperity Capital
is a spin out of the Connecticut Green Bank,
we're a not for profit boundaryless green bank.
If you can go, okay,
and you can go to the next slide after that if you'd like,
and I'm gonna talk about strategies
for financing underserved markets
and disadvantaged communities.
You can go to the next slide,
and we're focused, okay, all right, that's okay.
So think about IPC as a piece of green bank infrastructure,
and if you just go to the prior slide, really quickly.
I just wanted to echo what Carmelita discussed about
in terms of financing can help have all these additional,
they can enable all these additional benefits
of clean energy.
So the sort of things that Carmelita was focused on
in terms of we want our communities to be cleaner,
and more resilient, and healthier, and have jobs,
and what have you.
So I'm gonna be talking about underserved market strategies,
which we defined as low to moderate income credit-challenged
and places where capital is not currently flowing.
So if we go to the next slide just really quickly,
we think about approaching this problem
in terms of where are there gaps in the market?
Solutions that don't exist that need to exist,
or, again, where capital isn't flowing?
And then where are the intersections
that we can kind of join up with
and get our solutions into the market?
This is all about who you partner with,
and at the end of the day
it's really about going to school on the ecosystems
and the specific communities that we're looking to work in.
Energy and energy affordability and clean energy,
these things don't exist in a vacuum,
is commonly to talk about
there are many, many, many challenges
communities are facing.
So we got to figure out how to plug into these other issues
and make ourselves part of the solution.
Next slide, I just want us to think quickly about,
instead of like a silver bullet,
if I just had this one piece of the puzzle,
everything's gonna be great.
I want us to be thinking about Lego pieces, building blocks,
the tools in the toolbox that we're gonna put together
to put together the full range of solutions
that we're gonna need for all the different market segments.
Next slide.
I'm gonna start with the punchline
and then we'll go through some examples.
So first of all, I just wanna say
financing does work for underserved markets.
It can be done, but it's not one size fits all.
You've gotta bring a range of financing tools
and programs into the market
and it's all down here.
Subordinated debt, co-investment concessionary debt,
bridge and incentive financing, warehousing, aggregation,
loan loss reserves, other forms of credit enhancement.
You're going to need the full panoply
to solve issues and underserved markets,
and just echoing what Carmelita said,
being grounded in the market data.
What are the specific energy burdens,
and income, and rent burdens, and housing burdens,
and that issues in the properties
that we're looking to serve,
not just from residential but in commercial as well
and then you gotta tailor solutions.
Partnerships are going to be absolutely critical.
You need to get into communities
that haven't always been well served,
and so to do that
you need partners on the ground that are trusted,
and as Cisco mentioned,
this is way more than about just financing.
There's all kinds of technical assistance
and programmatic support, partner support,
that's needed to do it,
and last, somebody is gotta own the deployment target
and that deployment target needs to be tight.
These things don't happen on their own,
and so if you don't have an owner for this,
they're gonna languish and I'll just mention.
In Connecticut through the Connecticut agreement
we've mobilized over $480 million of investment,
extrapolating to California that would be $6.25 billion
in underserved markets, right?
That's pretty cool.
So let's go to the next slide
and let's dig into some examples.
I'm gonna give one example
of a low to moderate income-targeted lease
for solar and energy efficiency for homeowners.
So very specific market segment.
The reason we focused here was that in 2014 we realized
that the penetration of residential solar was lagging
10X in lower income communities
than it was upper income communities,
and that was unacceptable.
So next slide.
We put a range of tools together
to bring the solution into the market.
For the Connecticut Green Bank,
we administered a financing RFP to find partners who had,
or were willing to bring into the market solutions.
We provided subordinated debt
to the tune of 15 to 20 million
that attracted a capital stack of $90 million
for Connecticut projects.
We provided an elevated solar incentive.
We sponsored a Solar for All program
and everything that comes with that,
outreach support in marketing
and running solarize campaign, Solar for All campaigns,
and then we had IPC really kind of behind the scenes.
We are financing that performance-based incentive,
which is important for the company
who's trying to like manage their cash flow.
So you bring all these things together,
and go to the next slide
just speaking a little bit about the product itself.
We came to this from the perspective
of we are trying to bring solar and efficiency together
in a lease product for homeowners
that's going to eliminate the affordability gap,
bring that energy burden down to where it would be
if you're affluent.
So really aspirational goal and we hit it
and we did it through the combination
of all the things on the previous page.
We've done this with an alternative underwriting product,
so no credit score required,
and importantly, this product while it's available to all,
it's focused on low to moderate income consumers,
and because public dollars are at play,
we get to ensure they're good consumer protections,
good quality work, all those things that you need.
Go to the next slide.
I just wanna talk about impact.
This has had tremendous impact.
There's a lot going on in this slide.
You guys you'll get them and you can study them,
but what it says on the left essentially
is today we are beyond parity.
We actually have greater proportional installations
of rooftop solar in lower income census tracts
than we do in higher income census tracks,
and then we also studied communities of color,
and again, greater proportional penetration
than in White communities.
Again, this is only for homeowners
and understanding you need different solutions for renters,
but I just wanna point out.
If you focus on it, you can have impact,
which is really exciting.
Next slide, I'm gonna talk about another category,
affordable multifamily housing.
Really challenging market segment,
and here, this is all about the ecosystem.
We went to school on the housing finance ecosystem,
who the players are,
and we tried to come up with a roadmap
that really focused on where the gaps were in the market
and there are a couple of products were needed
and a lot of capacity and technical assistance.
We've partnered with our State Housing Finance Authority,
our Department of Housing, CDFIs,
the nonprofit trade association, our utilities.
I should have put them in here as well,
and again, while these programs are open to all multifamily,
we've focused our time and attention
on the social justice mission
of the low to moderate income components here.
A lot of different tools.
Pre-development, brought to the market
through foundation PRI and a CDFI partner
for below market loans.
One of the missing products in the market
was a lightly secured loan, quasi unsecured.
In partnership with a CDFIs
we provided them with a loan loss reserve and low cost debt.
CPACE is in the market.
It's got specific applicability
and so there was an aggregation play there.
So solar power purchase agreements
for those nonprofits and housing authorities
were providing the solar ownership platform
and the debt, and the aggregation,
and tax equity should have been on here as well.
Health and Safety, huge issue,
these barriers and multifamily properties
that are old and disinvested for decades.
So state gave us dollars
to provide a below market rate loan to address those
so that energy could happen,
and then a range of programmatic and technical support.
Bench marketing, capacity building, housing consultants.
The UHAB focuses on co-ops and condos.
Trainings, we manage a peer-to-peer network
of leading industry practitioners
that are focused on for instance, passive house.
We have solarize campaigns with our housing authority.
So go to the next slide, and as of today,
oh, a couple of case studies.
I'm not gonna spend a lot of time here.
On that lightly secured loan,
we pay for the debt service out of the energy savings
and in some of these properties you can get,
for instance, a whole new roof out of the energy savings
and financing that too, really exciting.
Next slide, there might be another case study there.
No, okay, impact, great.
So the impact today in Connecticut, 100 projects.
Again, these are multifamily properties.
We've touched about 7.5%
of the low to moderate income multifamily housing units
in the state.
So scale that up to California,
that 45, $46 million of energy improvements
would be about 600 million in California.
On the total investment,
because remember, a lot of these are having
other housing work done
that's paid for through housing dollars,
that would be the equivalent of like $4 billion
in housing improvements going on in California.
Next slide.
I'm just gonna run through
a couple of like, what else could you do?
If you had this full panoply of tools or legos
in your toolbox what could you do?
Love the Pay As You Save program.
Holmes you know a lot about this.
So from a financing perspective,
a loan loss reserve,
and either subordinated debt or co-investment
if utilities need a third party capital source
to be able to attract other private capital.
Loan loss reserves to mobilize local lenders
to offer a standardized product,
loan product to homeowners.
I know you guys have the REEL program,
I just wanna give you some stats on scale.
Connecticut, Michigan, Colorado,
statewide program, 16 lenders.
We've done over $250 million, 23,000 loans,
over 1,000 contractors are participating.
In Michigan, over half of these are happening
in LMI census tracks.
Connecticut goes down to 580.
Michigan comes down to 600 in the credit score.
California is a bigger market
than all three of those combined.
So I think something like REEL could be vastly scaled up.
Next slide, couple more examples.
Partnering with housing developers
is a really cool opportunity.
So you could help portfolio owners
greening up their portfolio.
You could take a standardized loan product
and kind of tailor it to their specific needs,
and that gives you access to a whole footprint
of deploying capital and greening up multifamily housing.
The virtual power plant model.
Cisco touched on that, so cool,
and so here you could be providing
subordinate debt or co-investment
specifically for those LMI communities
or credit-challenged credit,
again, to attract in other capital
that maybe a little skittish on that.
For your big efficiency and solar financiers,
their Wall Street capital
doesn't like credit-challenged borrowers
and these guys are having to turn away good projects
that they know will save folks money.
So you could help credit enhance again,
lost reserves, or subordinate debt, or co-investment,
to get at that alternative underwriting.
Next slide.
There are some proof of concept models that you could use.
IPC has done this with BlocPower,
who's focused on a lease,
a heat pump lease in underserved markets,
and so we're basically the first money
in their credit facility, and then as they scale,
big money like Goldman Sachs kind of money
can come in, right?
So that's another way to think about getting a model going.
Being that first money in
that then will attract other money,
and then don't forget about your friction points
in the market.
This is just like making sure
the trains are running on time,
especially coming out of COVID time
and getting your contractors back to work.
Smaller contractors really struggle with working capital.
So provide bridge financing
to bridge that period of getting paid
from the utility, or out of the RECs,
or what have you on incentives.
This is a really big one,
especially for small and minority contractors.
Last slide, I think this is the last slide.
Oh, no, okay, this one we can skip over.
Keep keep going, but there's all kinds of ways
you might work with your housing and your Medicaid dollars
to unlock dollars from the Medicaid side
to come into housing and energy
and address those health and safety issues.
So wrapping up ingredients for success.
Partnerships are absolutely critical.
Think about how to fill the gaps in a data-driven way.
Understanding what the energy burdens are.
What sort of product do you wanna put out?
And targeted outreach is critical,
and often, we've seen the product itself wasn't the problem.
It was our execution,
we weren't focusing on the right market.
So let's focus on contractors serving our target markets,
and consumer protections.
Remember, if the public dollars are at play,
you can get the consumer protection you want,
and to repeat, no one size fits all.
You're gonna need a range of approaches,
you gotta have a long horizon,
think about how to sequence out your product roadmap,
and aim high on your goals.
Make sure someone owns the targets, that's it.
Rory, you can skip through the rest.
Thanks, Dan.
-: Thank you, Kerry.
Wow, that was-- <v ->That was a whirlwind.
-: Intense overview, a lot of content in there.
I need your slides myself to dig in,
but let me put one one to you based on what you just shared
and then I'll do a few questions for the full panel,
but when you think about this,
the different states you're operating in,
and the role of those regulatory environment,
the equivalents of the PUCs out there
that touch the market you're trying to address,
is there anything that stands out for you
as kind of an obvious or binary type choice,
like Commissions that do this,
make the kind of work you're pursuing,
more feasible, more effective,
or Commissions that do something else
just sort of stalls all progress?
What's sort of high level guidance
you would put to the regulatory community
that enables your innovation?
-: Yeah, so I think about it this way.
I think about it as setting the table.
So that strategies like,
Cisco talked about, or I'm talking about,
or the challenges that Carmelita talked about
can be addressed.
So it's about setting the table in the policy framework
and thinking about stacking policies.
You've got incentives,
you've got leveraged finance tools,
loss reserves, credit enhancements,
you've got on-bill, you've got direct bill,
but you've got to enable a range of things
so that the creative building blocks can be put together
to put the right solution in place
for the right market segment.
I almost wanna answer it the opposite way.
What we see which is unhelpful
is Commission saying, I'm just gonna watch this one program.
Pick up any program you want.
This one on-bill finance program.
That's it, we're done raising homeowners,
everybody 100% solved, no problem, like go on to the next.
Let's go on to commercial next.
No, no, no, no.
Lots of different behaviors and motivations
amongst all our market segments,
all sectors of society.
So the one and done silver bullet thinking,
that to me is the biggest challenge.
Set the table and allow a lot of different things to happen.
I think the other thing is,
maybe the other thing is like not aiming high
on what success looks like.
Cisco talked about this,
a pilot program and not select success.
No, like, quantify, if you've got, I don't know.
In this country, if we've got what?
100 million LMI homes,
like that's successes we've done 100 million homes,
whatever that number is in California.
Successes we've gotten to all of them,
not we ran a pilot and got $10 million in the market.
-: Yeah, death by pilot is a real phenomenon
in the clean energy business.
Thank you for that.
Okay, let me put a few questions to the full panel,
but I think we may have unfortunately lost Carmelita Miller,
is that correct?
I'm not seeing her in our participants list anymore.
Maybe I'll just pleasantly surprise otherwise,
but I actually wanted to build
from that last question to Kerry
about since this is a PUC proceeding,
it has ambitions in the marketplace,
it has partnerships with other state entities,
it's got great kind of industry partnerships as well,
but starting with the core things
that the Commission can consider doing
to advance this agenda.
I've got a couple of questions in this category
for the two or maybe three of you.
When you think about policy design,
what are the key elements that enable success in the market
that you're trying to address
with creative finance for behind the meter solutions?
A couple of things that have come up so far already
have been split incentives problem,
that's perennial and efficiency.
It's frustrating that we still wrestle with it,
but we do need to face up to it.
Another would be,
Cisco, was you touched on the structure and dynamics
of real time market pricing
and how we connect what's really happening on the grid
all the way through to customers
and in the financial incentives they face,
but the core question
of what about policy design that enables capital
as opposed to directly providing capital
from the policy community?
Whoever wants to go first.
Maybe I'll pick on Cisco
since he's kind of spoken in a while.
-: I mean, I think you've hit on a couple of things.
I mean, I generally think
that from a policy of PUC perspective,
we haven't solved a challenge.
You mentioned a couple of things,
but I wanna reiterate what I said earlier,
which is we haven't solved a particular problem
around the projects themselves,
particularly when we're dealing with a home,
folks who live in homes,
and maybe they're not as sophisticated,
or they're financially are not as sophisticated technically,
and I wanna go back.
Actually, when I was in the city of Berkeley
and I was trying to solve the problem,
how do we get people
and anybody who wants or could use solar,
or an inefficiency project in their home
to be able to have one?
And obviously, finance just as now was a huge issue.
Where is the money gonna come from?
And as we started to design
the very first Berkeley PACE program,
is before he even called it PACE.
He called it this SEFD program and you can tell
it's been too long in government at that point.
Sustainable Energy Financing District.
We were like, okay, well, solar, the CEC has rules
about which solar panels and inverters are accepted.
There is interconnection requirements from the utilities.
It might be messy,
but at least it exists as a set of rules
and people are operating in it.
So I can just say, okay, our program will require
that you, contractor, and you, consumer,
must follow the same rules for a solar project
like anyone else does,
and as I say, you can hang your hat on that, right?
You can say, as a finance entity,
as a city, as a government,
you can say, okay, there's a set of statewide rules
that govern this and we're going to require
that everybody follow those rules,
and that really helps
'cause it's not that every solar project is perfect,
it is however, that there is a set of rules
that are bigger and broader for the industry
that we can follow.
Now, at the time,
I was like, well, we have to do efficiency too
and we couldn't figure out how to do it
because there was no standard.
Now things have improved some, but not nearly enough.
One of my proudest moments was Art Rosenfeld called me
and gave me the what for
because that first PACE program is just for solar.
That very first program partly we did was just for solar,
and he said, "How could you possibly,
"everything you know we've talked
"Cisco you've just disappointed me so totally and utterly
"that you're not doing efficiency."
And my answer was what is an efficiency project?
Like, we can talk about it,
but there's no standard, there's no rule,
there's no thing that says
this is a good project and this isn't,
and we struggled with that all the way through PACE.
We struggled with that through a lot of things,
and so what I think happens now
is from a regulatory perspective
defining that in a simple, straightforward way
for the industry
so that we can say, yes, we're gonna do, to Kerry's point.
We're gonna do 10 million projects
and we know that this is the floor,
they can't be underneath,
and it's simple and straightforward,
but we know we've defined success.
It's not perfect, but it is success.
We've never done that,
we've never been able to do that for efficiency.
So I've provided a couple of ways of looking at,
but I do think that's really critical.
The thing from a finance perspective at scale
is a finance entity
like back putting my finance company hat on
is we looked for that.
That's what wrecked me
and well, I couldn't do it in Berkeley
and it's why we struggled with PACE
all the way through the years.
So I'd love for that to be a real focus of effort
because I think it will clear up
the ability to deliver capital
and will give people a lot of confidence.
When we look at the data, we look at energy there,
the smart meters have now created a real opportunity
we did not have 12, 15 years ago.
We know what actually happens in the house with that energy
and that data has value.
So we can use that to define success.
We can use that to put financial incentives in place
in a way we didn't have before,
but we need some standards as to what success looks like
if we're gonna use the data as the arbiter.
So all of that requires somebody somewhere to say,
this is an acceptable project, go for it,
and until we have that,
I think we're really gonna struggle
with both consumer protection and scale.
-: I think about it as like organizing the market.
I think that's what you're talking about,
the rules of engagement, right Cisco?
For organizing the market
and one of the things that we've realized
now that we work across the country
is how fortunate we were in Connecticut
to have a Green Bank that's part of the policy framework,
with our PUC, with our Department of Energy Office,
or in our short energy environmental folks
with the Department of Consumer Protection at the table
with us meeting quarterly on contractor issues,
and then the Medicaid like bring it
and then Department of Housing
like bringing people together and working with it.
So finances working within a broader policy framework
and then intervening in dockets as necessary
because you have to go through that process with the PUC
informing the legislation,
and California is like the Wild West man.
You guys are super complicated,
like, whoa, my head is exploding thinking about it,
and we often get that,
like why are you doing more in California?
It's like tell me where to start man.
Like come out, I'd love to,
but it's so complicated
and we need a partner on the ground,
who wants what we can bring
and in the absence of an organized market
we can go where it's easier to operate.
-: Yep, well, I can tell you
that Kerry it makes perfect sense
when you're inside California government.
-: That's great.
-: We got it all figured out.
Another category of things that need to be influenced
that arguably the PUC has the ability to influence
is the capital itself, organizing money,
either from rates, or incentives to utilities to invest,
or working within the state context
to find pools of capital to put to work.
If we were to consider that,
or there was an opportunity to do that,
what would be the highest leverage point of intervention
as it specifically relates to money?
Well, Kerry you hit on the end there
the sort of broad category of pre-development,
if you're financing incentives upfront
so people can get things done.
-: I read the--
-: It's actually across the board.
-: I read this to one thing.
It's the tool set.
You know having the ability to have a tool set.
In some cases, you wanna credit enhance,
in some cases, you wanna put capital out the door
and a co-investment, or a subordinate debt investment.
I resist that, like if you just had this one tool
that's what you would do,
unless you're talking about a very specific market segment
and you've analyzed that market segment
and you know that tool is gonna address 100%
of that market segment.
-: Yeah, okay.
So I wanna hear from you too Cisco.
So maybe it's a capitalized flexible vehicle,
green back if you like, that can take that money
and use it in a range of different ways
based on markets that are needed from a policy perspective.
-: I mean, I think that absolutely can be the case,
although you could create a green bank
kind of methodology or approach
and still come up against exactly the challenges
in California that Kerry just talked about,
which is you can have a great intention there
until we make certain definitional approach changes.
Kerry is right in the sense that it is a toolbox.
I would attack that question slightly differently.
I'd say what problem are you trying to solve?
What problem are we trying to solve?
And then what's out there that is close to that.
So for example,
if you want more people to get unsecured loans
and you wanna make those cheaper and easier
and more democratized to folks in the community,
there are unsecured loans
that are happening at scale in a variety of ways.
You can look at California firms like Mosaic
or others who are doing it.
You can look at smaller credit union programs.
Then the question is okay,
how do I get those that exists?
There's already billions of dollars flowing there.
How do I get that to shift down the credit spectrum?
What is required?
And you're talking to folks.
Is it a low loss reserve?
Maybe.
Is it some other kind of mechanism?
It could well be.
Similarly what we're doing with Ohm Connect in homes
is 40% of our customers are lower and moderate income,
and we are often, they tell us,
we have 150,000 customers in California.
They tell us that we are often the first tangible benefit
they have ever seen
from the clean energy change that we're making,
because they don't have access.
Most there's a lot of renters, a third of them are renters,
a third of our customers or renters.
So they haven't had access to this before,
they don't know this.
So partly with that
we're saying like what problem are you trying to solve?
And I would say,
what problem are they trying to solve, right?
What is the financing thing?
What is their problem, right?
And this is where we get back to like,
our problem is when we change over the grid
and electrify all these things, that's important.
What problem are they trying to solve?
And what they're trying to solve is very different, often,
and so then how do we intervene in that
to help them solve the problem they have
with what we need to do?
So again, that framing
of what problem we're trying to solve
and then using different tools to solve the problem
without trying to reinvent everything
feels like a really critical thing.
The states frankly have gotten wrong quite a bit
over its history.
-: Okay, last one, lightning round style
then you guys can bring us home for the noon hour.
A lot of talk about the importance of outreach,
who should be doing it?
How the entities that do that
and the relationships they have in the communities
affects the outcome of a financing or policy program?
What would be your thinking about outreach?
Sorry, we don't have Carmelita on this key question,
but when you think about what again the PUC could do,
and empowering actors to go and make markets addressable,
what would be your recommendations to the top level?
I listen to the community,
the community knows who's trusted in that community
and figure out how to empower that community
to bring the right solutions to that community,
and it's gotta be funded.
Don't expect them to do it
out of the goodness of their hearts.
-: Good point, good point.
-: Yeah, Kerry, I mean, that's spot on.
Folks are telling you, right?
We hear it all the time.
Currently did a griding,
I mean, the COVID situation,
the number of our customers
who lost their jobs during things like,
they know what their pain points are.
They know what they're trying to solve for.
We have an analysis we've just done,
for example, that said we do constantly,
which is the pain point of the utility bill.
Really understanding who is it who's struggling,
who to the utility bill is a pain point.
However big it is, isn't painful relative to their income.
Those folks have a very specific economic challenge
that they're trying to solve,
and we can help them solve it,
and so how do you reach those people and talk to them?
And how do those communities
get their information is important,
but this is not one size fits all.
We have to listen to communities,
we have to listen to what they're telling us
is their challenge, and right now their challenge
is not hey, I wanna be energy efficient.
That is not a thing.
-: Humility goes a long way too.
-: Yeah, exactly.
-: Yeah, that's--
-: Just a sec.
We do talk about kilowatt, kwh, kilowatt hours,
and we are doing focus groups with our members
and they would refer to them as quads
and we didn't know what they were talking about.
This sounds like we live in a world
that is very different from the vast majority of people
in terms of policy and understanding what's happening
and we gotta hear that and listen to that
and make sure we're reflecting it.
-: Well said, excellent last words.
Thank you both so much.
Thank you to Carmelita in absentia
and back over to you, Peter.
-: Thank you guys.
Two panels this morning so far,
both of which have come in at the wire.
So the challenge has been laid to our two afternoon panels
to come in on time.
We are going to take a break for lunch.
We'll be back at 1 p.m. for our third panel of the day
that will cover the magnitudes of investment needed,
that will run from one to 2:15.
Thanks, get away from your screen for a while.
If you can go outside and take a walk
or do something other than stare at your screen,
please, by all means do,
and we'll see you in an hour.