Hawaii’s On-Bill Financing Program Unlocks Energy Upgrades for the Masses
Hawaii may have a solution for the energy efficiency industry’s perennial landlord-tenant split incentive dilemma.
The problem: Landlords won’t reach into their own pockets for energy-saving improvements if their tenants are paying the utility bills; for their part, tenants aren’t likely to invest in energy-efficient equipment they could be leaving to another renter in a few years.
The Green Money $aver (GEM$) on-bill financing program, which officially launched in Hawaii in April, creatively solves the split incentive problem by tying the repayment obligation for energy efficiency upgrades to the utility meter rather than an individual.
Under the program, participating homeowners, renters, small businesses and nonprofits pay back the cost to install rooftop solar panels, solar water heaters, heat pump water heaters, and other energy-efficient equipment via a line-item charge on their monthly electric utility bills. Participants do so without upfront costs and with a fixed interest rate for loan terms lasting up to 20 years.
The GEM$ program is available to all customers of the Hawaiian Electric Companies (comprising Hawaiian Electric, Maui Electric and Hawaiian Electric Light Company), which together account for about 95 percent of the state’s population.
Designed for Hawaii’s many renters
In an interview, Gwen Yamamoto Lau, executive director of the Hawaii Green Infrastructure Authority (HGIA), the GEM$ program administrator, emphasized that the goal from the outset was to design a program that includes renters and low-income households. According to Lau, 43 percent of Hawaii’s households are renters.
Hawaii has both the nation’s highest average price of electricity (30.19 cents per kilowatt-hour) and highest average monthly residential electricity bill ($149.33), according to the latest U.S. Energy Information Administration data.
Two measures ensure expanded participant eligibility under the program: Approval is not based on the creditworthiness of the applicant, and the on-bill repayment obligation is transferable to the next owner or tenant.
Approval does not require a credit check or income verification. HGIA bases approval on a good utility bill payment history — no disconnection notices in the previous 12 months — and an estimate that the project will deliver a minimum 10 percent utility bill savings, including the repayment charge, after installation of the retrofit.