CPUC Workshop - 2021-01-28
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California Public Utilities Commission
Follow its sittingsSpeaker 3
Well, thank you to the staff and to Commissioner Schiroma 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 in a transition that means clean energy for all. I want to ask Peter, if we may use the time that we're advantaged with by the introductions to proceed. And I believe that the panelists that we were seeking has joined us. Is that true?
Speaker 2
Yeah, Holmes, with the technology of WebEx and the virtual environment, what's nice is 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.
Speaker 3
I 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 or time of travel, not to mention the carbon footprint. And I also am 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.
Speaker 1
the Yeah. We're just I'm just making sure everyone can see the deck. Hold on one second.
Speaker 1
You can. Okay. Rory, if you could get that into presentation mode. Everyone can still see that now?
Speaker 4
We can 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.
Speaker 1
Okay, hold on. We're clearing this up, folks. Hold on one second. It's good we have some time.
Speaker 5
Hey, Rory. This is Joe Hager from CPUC IT. Go back one screen and uncheck use presenters view.
Speaker 6
Good morning, Holmes and everyone. While they're testing that, I just wanted to see if you could hear me.
Speaker 1
I think we're successful. And I just confirmed that for all of you, I did have a colleague check the 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.
Speaker 3
Well, terrific. Good morning to 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 Schiroma 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 will actually help shape the coming transition. It's an honor to be with you as a moderator for the opening panel of this workshop and 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 this proceeding.
And while the workshop is unusual in my experience by 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 comment 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 Shub, and Miriam Jaffe Block. I'm also invited to take moderator's license with a few opening remarks that are drawn from my own experience and background over the last decade. In fact, ten 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 ten years that provide additional context to the significance of our discussion today. Peter, is it you who was able to advance the slides? There you go. Move right
Speaker 3
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, 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 identified 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 about 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 finance has been stewarding that residential program. But I want to 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 $70,000,000 to the financing pilot programs, The Department of Energy published a total, 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 involved 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 tariff 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 thereafter in 2015, a 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 the 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 faced 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, or is being reported by the consumer loan programs that had been funded through the Recovery Act. That data was then published through the American Council for an Energy Efficient Economy in a couple of different points in 2015 and 2018 events, both of which were hosted in California. Roy, 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 $25,000,000 that had been allocated for residential financing and the pilot programs by the CPUC. The money had made its way from the CPUC, made it to the utilities in a form that could be available to the treasurer's office. All of 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, I believe May 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 were 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 the 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 would 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 barrier study was a landmark achievement at the end of sixteen 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 in 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 tariff 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 thereafter, however, was just as steep a decline. The lien backed loans were tied to home ownership 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. While today's workshop doesn't delve into that story, at least in this panel as part of the ten 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 SB 100 and SB fourteen seventy seven 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, Green Lighting 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 tariff on bill investment.
The following year, almost as if to respond to the champions for environmental and social justice in California, the Building Decarbonization Coalition pursued its own landmark report on a roadmap for decarbonization and buildings to search for financing solutions that would be open to all. The publication called Towards an Accessible Financing Solution was 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 Zaves. Both the San Joaquin Valley proceeding and the SB fourteen seventy seven 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 able to test ideas that come through this rulemaking for clean energy finance. Let's move forward. Bringing us very close to the current.
In April, the residential energy efficiency loan programs evaluation formally reached the commission. Opinion Dynamics and Dundsky 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 $25,000,000 allocated nearly seven years earlier, it was now known that in a space of twenty four months, two twelve homeowners had been able to benefit from the program. A third were underserved by the definitions of the CAL EnviroScreen 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 8,000,000 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 creditworthiness 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 and 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 raise it as the opening moderator to reflect my commitment and the 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 decision making process and to benefit from the CPC 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 administrative law judge that have created the construct 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, just 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.
Speaker 4
Thanks for the introduction, Holmes, and thanks to everybody at the California Public Utilities Commission for inviting me here today 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 multi state.
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 idea is 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, and try to share those across the region where they can be replicated and promote best practices across a range of areas.
The areas we tend to touch on are 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 the regional workforces on what are the best practices? How do you build to this new standard and getting the 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, 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, CS served as an administrator for the American Reinvestment Recovery Act, the Energy Efficiency Conservation Block Grant funds that came to the region. It was about a $20,000,000 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 find out, couldn't figure out revenue models to keep it going. So unfortunately, many of the programs went away.
Next slide. So this one, I'll 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 this space and find new opportunities and create some targeted products for energy efficiency. So what we did was actually use some legacy Ara 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 mechanisms, mostly risk reduction pools.
So we did things like loan loss reserves, interest rate buy downs, and other incentivizing mechanisms. Our central goal was, you your finance experts, you know your space, you know your market, you know how to design and move financial products. So we want to 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 $1,000,000 in capital available for energy efficiency loans. And we took a lot of learnings from that process.
Chief among them, traditional banks and credit unions just are not very good at that. The scale of the loans 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 there just weren't a terrible lot of motivation to move these products. Their 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 could be a pathway for them to then get their car note in 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, I guess, 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 of their experience, the Renew Financial product in Florida was only able to get about 12 loans processed over the two years they were 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. This was a similar experience by Sun State 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 because they just weren't seeing the volume. Folks over at Kentucky Housing Corporation, unfortunately, that was 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 the Mountain Association for Community Economic Development. It's an economic development group serving the Appalachian Region in the South. 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.
The most successful traditional loan program though was actually through Jax Metro Credit Union, which is a credit union attached to the JEA Electric Utility, the municipal utility service in Florida. So the key takeaways for us from this whole experience with these folks was that, one, the traditional lenders and banks really not well suited to do this. The role of a utility is really critical as a marketing and promotional partner on one end to mobilize their 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, the most successful loan program that was going at the time, they peaked at about three twelve loans in their program. And then it just sort of cratered off, 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 to 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 of 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 want to talk about that in a couple of slides. Next slide, please. So key characteristic about the Southeast, we often like to boast that 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 community set, and that high utility bill just becomes another barrier and another stressor on the household. You've got some stats there on the right talking about how many households actually report billing energy and security, meaning that they're not sure if they're going to be able to make that bill month to month and how often that actually happens. About 7,500,000 households have said that they've gotten disconnection notices at some point 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, as soon as 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 these 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 credit worthiness of people who are seeking capital to make investments. So we have to be thoughtful about how do you overcome that? How do you recognize that that's prevalent in our society? And what models serve to overcome that? So for Sia, that was a big telling point to look even closer at the utility led 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. And I'm going give you a little clarity on some distinctions of those. Next slide, please. So there's three different types of on bill programs you hear out there. You'll hear on bill financing a lot.
On bill financing is a utility sponsored loan where the utility is putting up the capital and serving as the assessor of the occupants of that capital or the people asking for it. On bill 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, it 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 of risk management, collateral requirements, or each additional dollar of profit motive for the capital investor, that window gets smaller and smaller of who is 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 tariff on bill investment model.
Tariffs are not loans. It provides a lot of functional similarity to PACE mechanisms by attaching investments to property. So rather than being based on an assessment of the person who lives in the house, the investment's determined based on the performance of the house. So if a utility or a contractor can go in and assess, if we make these kinds of investments and insulation, duct sealing, swapping out a heat pump, or swapping out a water heater with a heat pump, we can relatively engineeringly say that it's going to 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 an 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
Speaker 4
load switching technology, the ability to shape load 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 tariff 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 the whole system itself.
Next slide. So this is just a sample of some of the numbers of the utility program. Just give you example of kind of the scale and the distinctions and participation rates. So I won't 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 a dozen loans, 15 loans, 20 loans, and the same amount of time a utility sponsored tariff program is doing 200 loans, 300 loans, 500 loans. The force factor participation is just truly remarkable. And so you can see this is kind of a breakdown of the different tariff on bill 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 tariffed 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 other IRUs are we're looking really closely at how those are gonna to perform and see how they can adapt that model to serve the investor owned utility model. Next slide.
So this is just a quick kind of apples to apples comparisons 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 tariff 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 a Wachita 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 2015, got 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 tariff model the next year. And in the next year, they more than doubled the 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 it 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 going to work. So the next year, they switched it over to a tariff based model, And they actually got, I think it was two fifty 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 burdened life, or signing on to 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, they're not 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 get swept out. So not only are those people being left out, but the benefits to California, to the utility, to the, you know, 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 investment mechanism.
So with that, I will 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 and A afterward. Or you can go to my next I think it says thank you.
Speaker 3
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 Schub and Miriam Jaffee Bloch. Jeffrey Schub is the executive director of the Coalition for Green Capital. And he is a leading expert on green bank finance institutions that accelerate investment to cause equitable clean energy transition. Geoffrey.
Speaker 5
Thanks so much, Hamel and Holmes. 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 and 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 is 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 and 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, 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 of these good actors together. CDC 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. Maybe if can go to the next slide, I'm going to zoom way, way, way out much, much bigger context than the incredible expertise that Wesley and Holmes had sort of displayed in their remarks. Just really big question, I think one of the prompts here was sort of how far have we come, 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 $200,000,000,000 of investment into climate solutions per year for the next twenty years. That means basically quadrupling the amount of investment annually compared to the baseline. Globally, estimates are around 1.7 to $2,000,000,000,000 of marginal additive investment per year for the next several decades to stand or a two degree scenario. This is all just to say, we've got a long ways 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 up with 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 fifteen years, which means over the next fifteen years, have to grow from 12% to roughly about 75% market share, where the remaining is some combination of nuclear hydro other resources of that nature. So that's a six fold increase in the speed of deployment of, in the speed of sort of market adoption compared to the last fifteen years, so we have to start dramatically increase going straight up the vertical part of the S curve, so to speak. And just looking, zeroing in on California, looking at the transportation data that's easily available.
California has about 15,000,000 registered vehicles and 250,000 of them are electric vehicles. So if the goal is a 100% market penetration, we've got about 2% down and 98% to go. In 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 in scale and the amount of investment necessary to hit those targets is equally staggering. Next slide, please. So, there are 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 just put it this way, in a classroom setting, this looks like this shouldn't be a problem. Solar technology is cost effective 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 financing challenge.
Speaker 5
one, as everybody who's attending this has certainly heard it a 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 a 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 the demand side. There are collective action problems, there's information asymmetries or information sort of misperceptions, there's low consumer awareness, there's a mismatch between the form and structure of capital and the project needs. Think Rosalind Holmes did a really good job of explaining that the kind of form of capital and the way it reaches a customer, it makes a huge difference here. But I think also the point that Rosalind 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, bring it into context today, think we see perfectly well in our country how unbelievably hard it is to deliver vaccines into the arms of the three twenty five 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 and the amount of human beings and businesses that need to be working towards it is enormous. We just, frankly, the capacity doesn't exist to do it from a human workforce standpoint.
So all of these problems sort of add up together. Some of them are technical, some of them are sort of obvious on their face, 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, 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 a summary, I'm not here to sell green banks to you all in California, just giving you the label. There's over a dozen green banks now in The U. S. Collectively they've driven over $5,000,000,000 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 is working as a design to, it's about $3 of nearly $3 of private capital per public dollar per Green Bank dollar deployed. This is not just about energy, it's also a job and economic development in the in the case of the Connecticut Green Bank, they've created over 22,000 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's been, it demonstrates that it works.
This is also not a uniquely US phenomenon. There's National Green Bank in Australia, a multi billion dollar institution that new National Green Bank in New Zealand, a new climate bank created in Scotland. The UK had a national green investment bank, they privatized because they decided they didn't want to be in that business anymore. Lo and behold, now they're working to try to recreate it and relaunch it. I 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 the climate infrastructure package later this year.
That's a separate conversation, but need to put a plug into that because that's what I got to do every night. Next slide please. So this is hyper detailed, I've got a couple of slides in here. Our organization working with a lot of partners created 25 detailed technical use cases of the kinds of investments that the clean energy accelerator could or would make in partnership with either state green banks or utilities or local partners in general. Most of this activity, as you all know, is state locally based.
This was a schematic for a utility driven tariff based financing structure to do exactly what Holmes and Wesley are describing. The role for risk mitigation is clear. This money has to come from somewhere either public money or utility money considered reserved to 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 the single box in the bottom left where 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 technology you're trying to address. Next slide, please. And this is another one, looks just like an explosion of lines and graphs. And again, the objective is not necessarily to actually be able to read it in this brief moment on the slide deck, but this is an example of how to deploy solar plus storage projects, specifically targeting low to moderate income community facilities, be it a shelter or a health clinic, or a multifamily affordable housing community. Barriers here are complex.
It's a combination of technical know how, local capacity to actually deploy this. Commercial lenders 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, 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 and grants?
How do you work with the utility to bring in the different kinds of financial flows that can come from a utility for these kinds of projects? The solutions, as I said, 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 was no silver bullet pollution that really, really depends on the application that you're trying to hit here. Next slide. And then this is my last slide, just broad sort of 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 and they use 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 go find a private capital partner who wants to come to the table and do this collectively.
And it has to be someone's job to figure out how to generate demand. This is a pitch for 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, as I think it was Wesley said before, like having signing up a contractor to try to serve LMI households is really, really different than signing up a contractor who only exists to serve LMI households.
Those businesses need to exist because if they don't, those customers aren't going to be served. As I said, different markets require different solutions. So LMI residential electrification likely needs some sort of on bill 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 the ESA based lease structure.
Every market, every technology might need a completely different construct, and that's okay, but you have to be conscious of it in how we design it. And then specifically in the LOI space, the risk perception versus reality is a genuine barrier. And when it comes to lending, Wesley 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 just an important comment across cleaning and refinancing at large, making something available to 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 were talking about financing, the purchase of a television availability is probably all we would need to do because there's the government and society are not compelled to want every household to own a television. The customer can choose either they would do, 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 in conversions. We actually do need every household to make different decisions about how they use energy.
And so making something available, again, it's just the first step to actually achieving goal, but we really can only measure success through uptake and adoption, not through making financing sources 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 hasn't been made available to a customer. So I'm obviously happy to have more discussion with the panel if we get some time for Q and A, dive into this more deeply. This is my very rough attempt to capture lessons across the board into one slide, but happy to connect the department at home and in fact homes.
Speaker 3
Terrific. There we go. Jeff, thank you for that tour de force. Roy, 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 Chief.
It's important for me to acknowledge Miriam's leadership role in launching and improving the REAL program while developing commercial financing pilots that are also attended, through that same infrastructure. And to acknowledge the history and expertise that Miriam brings to that post for the state. Miriam previously worked at Beneficial State Bank and Foundation on an expedited underwriting process for small business lending, securing over $3,800,000 in CAFI fund grant awards to the bank. So with the kind of market experience that Merriam brings to the public policy implementation of the CPUC's financing pilots. We're here to the we are here to hear the lessons learned from administering the chief.
Miriam, please. Thank you so much.
Speaker 6
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 CAPA's administration of the California Hub for Energy Efficiency Financing. And there's a few key elements of the CPUC's decision to set up the chief and establish pilot programs that I want to highlight. So the first is the use of a rate payer 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 chief is not part of the financial transactions. And if you're familiar with the Go Green financing website, that's the public facing platform for these programs. Okay.
So next slide, please. First, I'm going to talk about what has worked or what is working. So we have seen that a credit enhancement can very successfully leverage private capital. So at the 2020, our residential program called REAL had done just about over 1,000 loans. And we deployed credit enhancement funds of $2,600,000 to leverage about $17,500,000 in private capital from seven enrolled lenders.
So a dollar in credit enhancement was leveraging about $6.60 in private capital. And as these loans are repaid, we recapture the credit enhancement, which can be revolved again to support new loans provided that 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, for 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.
Brewer, 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 a 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 out to fifty years compared to the typical five year term for an unsecured loan. And this allows customers to keep monthly payments pretty affordable for large purchases like HVACs 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, 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 able to make loans to customers with credit scores down to 600 FICO scores or five eighty, whereas normally without the credit enhancement, they would have a minimum of six sixty or six forty. So right now in our program, a customer with a credit score of 580 can walk, well walk metaphorically, into the real program and get access to a fifteen 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 sixty month term loan, and that's, as I said, the longest that they'll tend to go out. But with a credit enhancement, real lenders charge through our program an average of 5.02% across all terms, even out to fifteen years. So when we compare the rates that a customer gets with a real 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, 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 like windows and HVACs 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 ten fifty nine loans were made to upgrade properties and LMI census tracks, of which 23% went to tracks 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 want to 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, real is never gonna be a truly low income program.
So we think that real 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 rate payer source of funding behind it is going to incorporate a set of policy decisions that are going to 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 screen, 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've mentioned, is not going to reach all borrowers. But I do want to respond to Holmes opening comments about the limitations of debt and kind of REAL'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 hurdles 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 nuanced program requirements, some of these stem from very well intentioned PUC policy guidance at the time. Those are some real hurdles and obstacles to real scaling. And so moving on to the next slide in terms of how we might address these barriers.
So financing alone doesn't create a demand for energy efficiency. I think Jeffrey said it well that just because something is available doesn't mean people are going to 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 in 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. Next slide, please.
So I'll conclude by saying the chief was authorized to run pilots, and we learned a lot from the challenges of running them. And to get where California needs to be, we're going to need many good options to help customers make energy investments. So we're going to 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,
Speaker 6
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 micro loan 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 for 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.
Speaker 3
Terrific. Miriam, thank you so much. You have brought to this workshop the title of this panel's lessons ten years. What have we learned in ten years? And you've given it to us so directly and succinctly.
It's my understanding that contents from this workshop will be available as part of the proceeding to all who are taking service of the lists for people who are interested in this docket and that the scoping memo for the rulemaking that's forthcoming will present a common opportunity that could include comments on the proposed recommendations for reforms that would be seen at the treasurer's office own 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 hosts that there is a Q and A session for members of the public who are joining us for today that is designated at the end of the program today. So that it's my understanding as moderator, we're not going to public Q and A right now, but that one question definitely posed I hope to our panelists, allow us to close it out on time for a fifteen minute break.
And I would 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 a 100% target, a target that's less than reaching a 100%. But we have a climate change and public health policy that is reaching a 100% clean energy over obviously a much larger amount of time, but still with a 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 real 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 was also that that program alone will not be able to reach all of 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 enabled because some of the instruments we've talked about, including the ones that CAPRE is using are directly dependent and enabled by the ratepayer funding allocated by the commission. So I'm going to solicit comments from each one of the three of you on 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 into the next.
Wesley, would you like to start?
Speaker 3
The question is, do you see any reason that loan programs and tariff on bill programs could not coexist in a marketplace where customers have choices and options between the two of them?
Speaker 4
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 tariff 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 want to reach scale, we've got to reach the folks who are currently excluded from the market based debt based ones.
Speaker 5
Yeah, I totally agree. I mean, I just look at the easiest comparison is mortgage market and think about how many different structures and kinds of mortgages exist, different terms, different ways of financing them. Yeah, we need tailored solutions for different markets and different customers. I 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 customers to sort through that is a pretty high barrier, but multiple solutions absolutely do need to exist and they can.
Speaker 3
Thank you for that. Miriam, I'm going to 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 wanna 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.
Speaker 6
Thank you, Holmes. So, on 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 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 my comment about how solutions need to be statewide and we need to combine non ratepayer sources of funding in with the ratepayer sources of funding would still hold for a tariff on bill solution so that we avoid all of that complexity about eligibility and we figure out a way to support decarbonization measures across jurisdictions. And I think there's also I 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 tariff 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 finance that you layer it 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 CAFA 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 micro loan pathway that I mentioned. And the second is to make some operational improvements to REAL, reduce some complexity for lenders, and also add that micro loan pathway for REAL 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 on ours through our listserv and on our website and or feel free to contact me after this panel.
Speaker 3
Thank you so much for adding that information to the record 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 Miriam 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 going to return it to the commission staff to guide us forward. Thank you again, Mr. Saroma for convening.
Speaker 1
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, 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 thirteen minutes.
Good morning, everyone, welcome back to those of you who've been on since 9AM. 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 seventy five minutes long, consisting of a one hour presentation followed by a fifteen minute panel Q and 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, first fifteen minutes of which will be a moderator lightning round in which our day's moderators will summarize their key takeaways, followed by the forty five 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 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.
Speaker 8
Thank you, Peter. Thank you to Commissioner Schiromo and Commissioner 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 panellists, and then I'll give a few brief comments before turning to the presentations. If some of you are looking at an older version of the agenda, we do not have Jigar Shah of Generate Capital and formerly of Sun Edison. We have instead an upgrade in my judgment. Sorry, Jigar.
And Cisco DeBreeze, CEO of BoomConnect, 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'Neill, 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, serving on a multistate basis with some really groundbreaking financial products that Carrie will describe for us that speak directly to the state's agenda here. A couple of comments just on 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 and organize markets. They are active in 12 states or more.
They're some states have more than one serving particular market segments or 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 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 nascent or 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 kind. Briefly on what's happening out there in clean energy finance, 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 $500,000,000,000 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 $16,500,000,000 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 as a solution both for climate, but also just generally weaning off of natural gas is ready for prime time. 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 agenda here today.
The principal area of growth on a global basis was in the European Union considering that as a, you know, 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, really truly 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 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, you know, 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 real time here in California. So lastly, you know, the ambition for this panel, you can see that it is about imagining scale, what a 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, help 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, socioeconomically and geographically, frankly, to make sure that these solutions are reaching the customers that need them most. That is beneficially highlighted everywhere in the in the proceeding materials to date, 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 going to turn it over to Cisco DeVries from OMConnect for his presentation and comments on the agenda in front of us.
Speaker 7
Thank you, Dan. And thank you to the commission for having me. I am definitely not a step up from Jigger's shop, but I am excited to be here nonetheless and to share a couple of thoughts. I'm gonna be relatively straight clear. This is a complicated issue and I'm gonna make some fairly straightforward and simple recommendations.
Of course, there is 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, you know, background here is relevant and that I was at the US Department of Energy as an appointee of President Clinton back in the nineties, 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 OMConnect. And what I'd note is that in my previous world and at 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 OMConnect, we pay California families millions of dollars to reduce energy use at key times for the grid and just recently announced a $100,000,000 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 Schroeder 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 generate, 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 finance, if you have to finance something, it's a reason not to do something.
Quick example, if you wanna we finance cars. Most cars that are purchased in this country are financed. People do not 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 the 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 finance, 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 in energy and inefficiency, we've got, 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 of this is it 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, very fast, ubiquitous, well defined, easy access to the capital markets at scale, but tends to be difficult for lower 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'm, it's been 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 abilities 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 as 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 helps lower income renters and others participate.
It's great for smaller projects, generally speaking, larger $20.30000 projects and alike tend not to work. And I really wanna note the Hawaii GEMS program as 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, five ground rules. Overarching theme do not make the perfect theme me 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 $10,000,000 or $20,000,000 or even $50,000,000 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. And now, obviously, simpler then can conflict with number four, which is make it safe.
And when we actually have non COVID public things where 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 this is important for 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.
We shouldn't accept that. You should never think that they will. People, you know, if your HVAC breaks, you need new HVAC. How do we intervene using finance and other mechanisms to get people to get the right HVAC, to get a heat pump, to get something else that's better? How do we get people who's when they're 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. If we go to the next slide. I want to 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 want to mention these two.
The first is the US Department of Energy has a home energy score. It can be done in an hour, it costs about a $100. It can be done by a home improvement contractor, an HVAC 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, 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 behavior comes into it, but paper 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 so 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 OMConnect 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 Home Connect is that we have financed a new power plant. We have $100,000,000 to build a five fifty 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 macro scale for building the capacity to reduce 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 that's 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 managers, the CAISO then 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.
Speaker 8
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 behavior, 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 going to enable solutions like this. Obviously 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, it can create tension in the decision making process.
Speaker 7
Oh, that's great. So let's, so behavioral ask, so we do a lot of the behavioral 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 a 100,000 consumers are gonna do on average.
So Dan, I don't know what you're gonna do, but I do know what a 100,000 people like you are going to do. Some of them will opt out 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 like kind of appliances that allow us to reach in with the permission of the user, of 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 is an inconvenience, they can opt out. That said, the 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.
Speaker 8
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.
Speaker 7
Yeah, I mean, what I think changed what's allowed for, for example, us to build a 500 megawatt 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 7PM 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 at 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 with a lot of folks working together kind of like a symphony.
Speaker 8
Excellent. Thank you very much. Okay. Over to Carmelita Miller, please. Carmelie, don't know you have
Speaker 8
We 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.
Speaker 9
Absolutely. Good morning or afternoon, everyone. My name is Carmelita Miller, and I direct the energy equity team at the Green Line Institute. I thank commissioner Saroma, the CPUC staff, and all of the panelists here, Dan, for inviting me to participate today. I'm gonna change up, I think, the conversation a little bit and and talk about, the perspective of our communities.
I'm gonna start by, just introducing greenlining. For those of you who don't know, green lining's mission is to advance economic opportunity and empowerment for people of color. We say that green lining is the opposite of red lining and other manifestations of racism that have excluded people of color from home ownership, banking, and other forms of wealth building opportunities. Ongoing racist policies persist 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. Many 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 a green lining. 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 in our communities and LMI communities, and these investments can simultaneously help communities to become more resilient to and to present a way to 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 Holmes, earlier highlighted the incredibly high rate of energy burden in the Southeast. And, if you're in California, you all know that we're not hearing any better. While there's currently a moratorium against utility disconnections, we know that this protection will end sooner than when LMI residents have recovered from financial devastation caused by this pandemic.
Currently, we have more than 450,000,000 residents in growing utility debt. That's, as of the data that I got a couple of months ago, it might it might be different now, but, don't quote me on on this exact, number for 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 are in all three maps, show the impact of one 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 CALIN virus screen's results. We also see that the same community is affected and impacted by, incredible pollution. And then finally, to the to the right is the impact of, COVID, devastating impact of COVID on 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 jobs and income losses, high housing cost burdens, threats of eviction and foreclosure. We all know that in California, temporary there's a temporary ban on certain evictions, that prevented or at least delayed thousands of residents from losing their homes during a pandemic, for nonpayment. These income and job losses have hit rental households the hardest. According to UC Berkeley's Turner Center, it estimates that nearly 55% of renters in California have experienced some loss of employment income since March when the shelter in place orders began. And although homeowners have fared better than renters, still 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 and one before me, we are now talking about how to transition the state 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 homes, 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 that's why, it all matters, and 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 while it is often for me, as an advocate, hard to do, I will try my best to ride to the challenge, and theme that Dan and this panel had given me, which is to talk about aspirational, I don't know, hopes for our communities. And more than just a wish, we at GreenLining know that a better future is is truly attainable for people now. A couple of years ago, we launched our work on building decarbonization. We wanted to make sure and focus on ways that this transition is not only ways to prevent harm for for folks who might be left behind on an aging gas system when 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 to help with wealth building in our communities. Next up or next slide. So the next slide outlines the different steps. 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 pool process should, start with assessing our community's needs. As 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 can pay their electric bill, how they can 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 more than just we're doing more than just handing flyers or pamphlets to our our residents. We're actually asking for their input, asking for their experiences, and asking for for how they wanna see, you know, 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, we'll have to 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 streamlining along with other environmental justice groups are participating in order to figure out this issue. But how are we going to make sure that communities are not left out of the transition? Participation 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 it's not serving many of our community members, especially environmental justice communities.
We're also saying, and I'm saying now, that the commission has the foundation on which it can create through its environmental, justice, environmental and social justice action plan, its work in the SB three fifty barrier studies, and many other, proceedings. It has what what it means to create, a a better and more inclusive financing solution to address the gap. The fourth step of our framework calls for like I said, calls for the leveraging of programs and funding solutions, to address the gaps across multiple CPUC proceedings and during, the robust stakeholder engagement to create and implement the SB three fifty barrier study, green lining and many other environmental justice and racial equity organizations have highlighted repeatedly the barriers to increasing access and uptake of energy improvements in our community. 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 and obtain 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, demand 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 have spoken up repeatedly that we demand energy solutions that improve, the lives of our children, the lives of our neighbor, 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 as we've seen before and as we're we're proposing or presenting now, cost effective investment opportunities can be financed. Let us look at financing solutions that protect the consumers, but do not use criteria that systematically disqualify on the status, based on ownership, income, and credit score.
We've all heard that in in various speakers today that these are barriers to LMI, consumers. When these issues that I've just discussed are taken altogether, it truly becomes imperative, to consider some demonstrated ability, and we have them, demonstrated ability and of utilities to offer inclusive financing to all customers regardless of their income, credit score, whether you're a renter or homeowner. Let's look at examples where there are this is my aspiration for the commission and the current proceeding financing proceeding. For example, where there are high uptake of rates reported by other utilities offering inclusive financing, even persistent poverty areas. Right?
Because it's shown, and we have seen examples that we've heard of today, we'll 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 because I also don't know. My my Internet is pretty unstable at the moment.
But above all, if there's one thing that, one recommendation or one thing that I I I I want to leave everyone here is that whatever we do, we have to center and start with the needs of our communities first. Right? And in creating financing solutions, that that's our North Star because California and Californians cannot continue to suffer. I'll stop here and hopefully I can stick around and engage in the Q and A portion.
Speaker 8
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 can you'll be able to stay with us for later. You mentioned the need to focus on where we've seen 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 a 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 that's what I 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 the landlord relationship and the utility. But are there specific measures that seem obvious to you or that you'd want the Commission to have front of mind?
Speaker 9
Okay, so I hope this Okay. Sorry, my computer is going to tell me. Have stable 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 while I don't have specific recommendations of particular measures, I do know that there are ways that we can figure out how to balance the balance instead of talking about the split incentive, the balance incentive 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're paying for. They're keeping their families safe. If anything, if they can also get some more monetary investments.
For us, we've seen that actual bill savings or even credits have really skewed that kind of fear or alleviated the fear the concerns around participating in programs just in general. And so I would say that let's look to financing solutions that that would address all of that and and we'll we'll again bridge that gap and make the split incentive more of a balanced incentive for both parties.
Speaker 8
That's great. That's a great frame. Thank you so much. Okay, over to Carrie O'Neil, Inclusive Prosperity Capital, please.
Speaker 10
Thanks, Dan, and thanks everybody. So if we go to the next slide, as Dan mentioned in the intro, Inclusive Prosperity Capital is a spinout of the Connecticut Green Bank. We're a not for profit boundaryless Green Bank. If you can go to, to the next slide after that, if you'd like. And I'm going to talk about strategies for financing underserved markets and disadvantaged communities.
You can go to the next slide. And we're focused Oh, okay. All right. That's okay. So think about IPC as a piece of green bank infrastructure.
And
Speaker 10
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 going to 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 you 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. As Carmelita talked 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 going to be great. I want us to be thinking about LEGO pieces, building blocks, the tools in the toolbox that we're going to put together to put together the full range of solutions that we're going to need for all the different market segments. Next slide. I'm going to start with a punchline and then we'll go through some examples. So first of all, I just want to say financing does work for underserved markets.
It can be done, but it's not one size fits all. You've got to bring a range of financing tools and programs into the market. And, you know, let's walk out 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 in underserved markets. And just echoing what Carmelita had said, being grounded in the market data, What are the specific energy burdens and income and rent burdens and housing burdens and the issues in the properties that we're looking to serve, not just in residential but in commercial as well?
And then you've got to 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 about just financing.
There's all kinds of technical assistance and programmatic support, partner support that's needed to do it. And last, somebody's got to own the deployment target, and that deployment target needs to be high. These things don't happen on their own. And so if you don't have an owner for this, they're going to languish. And I'll just mention in Connecticut, through the Connecticut Green Bank, we've mobilized over $480,000,000 of investment.
Extrapolating to California, that would be $6,250,000,000 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 going to 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 this 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 20,000,000 that attracted a capital stack of $90,000,000 for Connecticut projects. We provided an elevated solar incentive.
We sponsored a solar for all program and everything that comes with that outreach support and marketing and running Solarize ish campaigns, solar for all campaigns. And then we at IPC really kind of behind the scenes, we were financing that before we are financing that performance based incentive, is important for the company who's trying to, like, manage their cash flow. And 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 were 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 is 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 there are good consumer protections, good quality work, all those things that you need. Go to the next slide, I just want to talk about impact. This has had tremendous impact.
There's a lot going on in this slide. You guys will get, you'll you'll get them. 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 tracts.
And then we also studied, communities of color and, again, greater proportional penetration, than in white communities. And again, this is only for homeowners and understanding, you know, you need different solutions for renters. But I just want to point out, if you focus on it, you can have impact, which is really exciting. Next slide, I'm going to 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 that 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 focused our time and attention on the social justice mission of the low to moderate income components here.
A lot of different tools, predevelopment 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 CDFI. We provided them with a loan loss reserve and low cost debt. C PACE is in the market.
It's got specific applicability, and so there is an aggregation play there. For 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, benchmarking, capacity building, housing consultants.
The UHUB focuses on co ops and condos. Trainings, we we manage a peer to peer network of leading industry practitioners that are focused on, for instance, Passive House. We ran Solarize campaigns with our housing authority. So go to the next slide. And as of today oh, couple of case studies.
I'm not going to spend a lot of time here on that unsecured 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 a that might be another case study there. No. Okay. Impact. Great.
So the impact to date in Connecticut, 100 projects. Again, these are multifamily properties. We've touched about seven and a half percent of the low to moderate income multifamily housing units in the state. So scale that up to California, that $4,546,000,000 dollars of energy improvements would be about 600,000,000 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 $4,000,000,000 in housing improvements going on, in California.
Next slide. I'm actually going to run through a couple of like what else could you do if you had this full panoply of tool tools or Legos in in your toolbox, what could you do? Love the pay as you say program. You guys heard from home, so you know all about this. So from a financing perspective, a loan loss reserve and either subordinate 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 to loan product to homeowners. I know you guys have the REAL program. I just want to give you some stats on scale. Connecticut, Michigan, Colorado statewide program, 16 lenders. We've done over $250,000,000 20 3,000 loans.
Over 1,000 contractors are participating. In Michigan, over half of these are happening in LMI census tracts. Connecticut goes down to five eighty. 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 REAL could be vastly scaled up. Next slide, a couple more examples. Partnering with housing developers is a really cool opportunity. So you could help portfolio owners green 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 foot 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 challenge credits, again, to attract in other capital that may be 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, you know, credit enhance again, loss reserves or subordinate debt or co investment to get at that or alternative underwriting.
Next slide. There are some proof of concept models that you could use. IPC has done this with Block Power, 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.
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 smaller minority contractors. Last slide, I think this is the last slide. Oh no, okay, this one we can skip over, keep going, but there's all kinds of ways you might work with your housing and your MedicaidMedicare 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 you want to put out, and targeted outreach is critical.
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 protections you want. And to repeat, no one size fits all.
You're going to need a range of approaches. You ought to 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.
Or you can skip through the rest. Thanks, Dan.
Speaker 8
Intense overview, a lot of content in there. Need your slides myself to dig in, but let me put 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 sort of regulatory environment, the equivalence of the PUCs out there that touch the markets you're trying to address, Is there anything that stands out for you as kind of an obvious sort of 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 the sort of high level guidance you would put to the regulatory community that enables your innovation?
Speaker 10
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, you know, loss reserves, credit enhancements, you've got Onbill, you've got direct bill, 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 want to answer it the opposite way. What we see, which is unhelpful, is commissions saying, I'm just going to launch this one program. Pick up any program you want, this one on bill finance program, that's it, we're done, resi 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 that's the success. No, like quantify if you've got, I don't know, in this country, we've got what a $100,000,000, a 100,000,000 LMI homes, like that's the successes we've done a 100,000,000 homes, whatever that number is in California successes, we've gotten to all of them, not we ran a pilot and got $10,000,000 in the market.
Speaker 8
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 a participant's list anymore. Maybe I wasn't surprised otherwise.
But I actually wanted to build from that last question to to Carrie 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 wanted to I've got a couple of questions in this category for 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 the split incentives problem, how do that's perennial inefficiency. It's frustrating that we still wrestle with it, but we we do need to face up to it. Another would be, Cisco, as 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 the financial incentives they face.
But the core question of what 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 hadn't spoken in a while.
Speaker 7
I mean, I I think you've you've hit on a couple of things. I I mean, I generally think that from a a policy, a POC perspective, we haven't solved a challenge. You mentioned a couple of goings, 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 at the city of Berkeley and we were I was trying to this is trying to solve the problem. How do we get people and every you know, 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 does the money gonna come from? And as we started to design the very first Berkeley PACE program, was before he even called it PACE, called it the SOFT program, and you can tell I'd spent 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 that anyone else does. And as I say, you can then, 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 because 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, 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 when Art Rosenfeld called me and gave me the what for, because that first PACE program was just for solar.
That very first program 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 struggle 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 going to do to Carrie's point, we're gonna do 10,000,000 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 ways of looking at, but I do think that's really critical.
The thing from a finance perspective at scale is, you know, a finance entity, like back putting my finance company hat on is we looked for that. That's what wrecked me and while 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 it'll give people a lot of confidence. When we look at the data, we look at the energy data, the smart meters have now created a real opportunity we did not have twelve, fifteen 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.
Speaker 10
I think about it as like the organizing the market. I think that's what you're talking about. The rules of engagement, right? Says go for organizing the market. And one of the things that we've realized now that we've worked 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 energy office, our energy environmental folks, with the Department of Consumer Protection at the table with us meeting quarterly on contractor issues, and then Department of Housing, like bringing people together and working with it.
Finances working within a broader policy framework and then intervening in dockets as necessary, you know, 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. Woah, my head is exploding thinking about it. And we often get like, why are you doing more in California? It's like, tell me where to start, Like, tell me how.
I'd love to, but it's so complicated. And we need a partner on the ground, you know, who wants what we can bring. And in the absence of an organized market, we're going go where it's easier to operate.
Speaker 8
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, you know, 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? Carrie, you hit on the end there, the sort of broad category of pre development, if you're financing incentives upfront, people can go for things. Read this across the board.
Speaker 10
I resist the one thing, it's the tool set, you know, having the ability to have a tool set. In some cases you want to credit enhance, in some cases you want to put capital out the door in 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 going to address 100% of that market segment.
Speaker 8
So I wanna hear from you too, Cisco. So maybe it's a capitalized flexible vehicle, a green bank, 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.
Speaker 7
I mean, I think that absolutely can be the case. Although you could create a green bank kind of methodology or approach and and still come up against exactly the challenges in California that Terry just talked about, which is, you know, you can have a great you can have a great intention there until we make certain definitional approach approach changes. Carrie's right in in the sense that it is a toolbox. I I would tag as I would attack that question slightly differently. I'd say, problem what are you trying to solve?
What problem are you 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, you know, California firms like Mosaic or others who are doing it. You can look at smaller credit union programs.
Then the question is, how do I get those in the That exists. There's already billions of dollars flowing there. How do I get that to shift down the credit spectrum? What is required? Is it you know, and you're talking to folks.
Is it a loan loss reserve? Maybe. Is it some other kind of mechanism? It could well be. Similarly, what we're doing with Home Connect and in terms of 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. There's a lot of renters. A third of them are renters. Third of our customers are renters.
So they haven't had access to this before. They don't notice. 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 to 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 a problem they have with what we need to do? So again, that framing of a 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 that the state's, you know, frankly gotten wrong quite a bit over its history.
Speaker 8
Mhmm. Mhmm. Okay. Last one, lightning round style, then you can 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 that 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 advice on, you know, thinking about outreach? Sorry, we don't have Carmelita on this key question, but when you think about what, again, the POC could do and empowering actors to go and make markets addressable, what would be your recommendations at the top level?
Speaker 10
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 got to be funded. Don't expect them to do it out of the goodness of their hearts.
Speaker 7
Yeah, Carrie, mean, that's spot on. Folks are telling you, right? We hear it all the time. I mean, Cuddly did a great, I mean, the COVID situation, the number of our customers who lost their jobs, 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 we do constantly, which is the pain point of the utility bill, really understanding who is it who's struggling, who's 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 then how do you reach those people and talk to them and how do those communities get their information is important, but we, this is not one size fits all. We have to listen to communities. We have to listen to what they're telling us is is their challenge.
And right now their challenge is not, hey, I wanna be energy efficient. That is not a thing.
Speaker 7
Yeah. Exactly. Yeah, that's- We do talk about kilowatt, KWH, kilowatt hours, and we're out doing focus groups with our members and they would refer to them as quas, and we didn't know what they were talking about. It's 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.
Speaker 8
Well said, excellent last words. Thank you both so much. Thank you to Carmelita in absentia and back over to you, Peter.
Speaker 1
Thank you guys. 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 one p.
M. For our third panel of the day that will cover the magnitudes of investment needed. That will run from one to 02:15. 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.
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