Last week, Senate Majority Leader Harry Reid met with the chairs of six committees that might have some hand in developing the clean energy bill. The question at issue was whether the bill should be pushed back in favor of a short-term focus on finance reform, jobs, and the deficit. Though John Kerry argued vigorously that the clean energy is a jobs bill that won’t grow the deficit, it looks like he lost out and there will be some kind of standalone jobs bill in the interim.
Sen. Jeff Merkley (D-Ore.) is now advocating that any jobs bill include support for building retrofits to create jobs and reduce energy bills. What he’s got in mind is a variation on his S. 1574: Clean Energy for Homes and Buildings Act of 2009. It’s designed to overcome the main barrier to retrofits involving energy efficiency and small-scale renewables: financing. Most such investments are predictable and profitable over time, but they involve high upfront costs.
The “cash for caulkers” program the White House is floating would effectively dump a bunch of stimulus money on the retrofit market—which is good! it needs money—but Merkley has something more ambitious in mind. The idea would be to have the federal government offer loan guarantees or other credit assistance in order to leverage private investment far beyond what the feds can provide directly.
Here’s the background, from Merkley’s office:
In recent years, a number of innovative financing models have emerged to allow consumers access to loans that they can pay off using all or part of the energy bill savings they see as soon as the retrofit is completed. Some cities and states are encouraging property-tax-based financing, where the building owner gets a loan from the local government and repays it through a property tax surcharge. Some utilities (in some cases in partnership with cities or states) are offering on-bill-financing, where the loan is repaid through a surcharge on the utility bill. Some private companies can offer building owners performance savings contracts or, in the case of solar electric systems, leasing arrangements to that the cost is paid off in monthly payments, out of the savings on the utility bill.
The challenge with all these options is finding stable backing and/or collateral for the loans. That’s what Merkley wants the jobs bill to do:
By offering direct lending, loan guarantees, or other credit support, the federal government can leverage private capital and state and local investment. If, for example, $2 billion were restored to the loan guarantee program, between $20 and $40 billion in financing could be provided, which would leverage even more in state, local, and private funds.
This is a way of using the power of the feds as lever rather than a hammer.
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