How can on-bill payment help you realize your energy goals?
By Andrew More, Director of Business Development - November 09, 2021
Seeing more line items on a bill typically invokes horror, but your utility bill can actually be a blessing in disguise. Instead of dreading your monthly energy bill you should be looking forward to it, as it can be a powerful and convenient way to pay for investments in renewable energy and cleantech.
On-bill financing (OBF) lowers the financial barriers to entry for cleantech investments and simplifies financing by including repayments in utility bills
Different types of OBF exist, either tied to account holders or the property, and financed by utilities or third-party lenders
EnPowered offers on-bill payments, an alternative to OBF that facilitates risk-free project funding that does not lock customers into paying fees on their electricity bills
For too many companies, electricity bills are painful reminders of their energy expenses. Proactive and agile companies realize the need to invest in energy efficiency and cleantech projects, but even with a clear return on investment (ROI), a lack of funding and motivation continues to bog down firms in the status quo. Energy solution providers are also aware of the backlog of projects that are being held up due to a confusing marketplace, lack of offering differentiation, and insufficient capital.
Financing energy investments through utility bills offers companies an alternative funding stream and simplified billing. On-bill financing (OBF) allows the utility (or third party) to incur the cost of clean energy upgrades which are then repaid as an item on a utility bill. OBF has great potential but uptake is limited due availability, customer uncertainty, and other restrictions. The rate of cleantech adoption needs to accelerate but there have been few convenient and transparent options on the market, until now. EnPowered Payments is our on-bill payment platform that turns capital expenses into operating expenses, and lets you pay for upgrades on your electricity bill in a transparent and easy to use way so you’re free to get back to the important things.
How does on-bill financing work and what are the different types?
Before we go further, let’s take a minute to look over the finer details of OBF, so that we are all on the same page. EnPowered does not offer OBF, but many energy users are unfamiliar with our new offering that is disrupting cleantech funding. To avoid confusion, we’ve laid out how the two main types of OBF work, to differentiate them from EnPowered Payments. There are two main kinds of OBF — on-bill loans, and on-bill tariffs. On-bill loans offer businesses a way to mitigate the high upfront costs of energy improvements by accessing zero-to-low interest loans, the capital for which comes directly from utilities. On-bill tariffs are similar but the funding comes from non-utility third parties, like a bank, or energy financing company.
On-bill loans are typically not transferable, as they are tied to an individual account holder, rather than the property in question. This means that when the relevant property is sold, the outstanding loan amount must be paid prior to the sale, which means borrowers may not be able to enjoy all potential savings if they sell early.
"EnPowered does not lock in customers into paying fees on their electricity bill [...] the only risk is from waiting too long"
The second type of OBF — on-bill tariff programs — add rates or charges to a customer’s utility bill. On-bill tariffs are transferable, as they are tied to where the upgrade is, not who owns it. This allows tenants and renters to access OBF, and lets property owners transfer financing payments to new owners. On-bill tariffs are generally capitalized by public or private funds, rather than the utility.
OBF provides a greater guarantee of repayment for solution providers, since they are paid in full by the financing partner, so any risk of incomplete or non-payment is shouldered by the financier, not the solution provider. Fortunately, the rate of defaults for on-bill programs are generally low, between 0-3%, and the average default rate for OBF in particular is less than 0.1%, according to the American Council for an Energy-Efficient Economy (ACEEE).
Residential OBF programs have been running in the USA for over three decades, and as of 2016 there were approximately 45 on-bill programs nationwide. A good example is the Tallahassee Energy Efficiency Loan Program in Florida, which was founded in 1983 and as of 2019 has lent $130 million for energy improvements. Over the years, the Tallahassee program has only had a default rate of 1%, and has developed a relationship with local contractors whereby they market the program during service calls. As a result, 18% of customers are participating in the on-bill program.
Why wait, start saving today
EnPowered takes this relationship one step further by enshrining partner collaboration as the backbone of Payments. Putting our partners in the driving seat means we can help them unlock the backlog of projects currently hindered by capital limits, while helping their customers save money at the same time. To be clear, unlike OBF, EnPowered does not lock in customers into paying fees on their electricity bills. When it comes to Payments the only risk is waiting too long. Customers could already be paying for projects today with part of their future savings instead of stalling for years and paying more for energy than they actually have to.
On-bill payments can be a powerful tool for businesses looking to fund their cleantech projects. Combining hardware billing with utility bills simplifies the process and makes it easier for clients to understand the impact of their energy investments. Dealing with hesitant utilities and searching for funding can be frustrating and time-consuming, so why not let EnPowered do the legwork for you? By liaising with utilities, finance partners, and energy solutions partners, EnPowered Payments can be your customer’s one-stop-shop for energy projects. Reach out to EnPowered today to discover how Payments can work best for you and how on-bill payments can be the key to jump-starting your sales pipeline, and your customers’ energy projects.