Financing programs should be seen as a valuable complement, not replacement, for traditional utility programs. Financing programs are one of today's fastest growing types of energy efficiency program, in part because they offer policy makers and utilities the tantalizing possibility of replacing taxpayer and ratepayer funding with private capital. This was an argument I heard applied from states as diverse as Connecticut to Ohio at the 2014 ACEEE Finance Forum.
The challenge with the idea that financing programs can replace traditional utility programs is that financing by itself does not overcome all of the barriers that traditional utility programs target through rebates, marketing, and education. Take rebates, for example. While financing can help overcome customers’ barriers related to high first cost and lack of capital, these are not the only reasons utilities offer rebates. Rebates can be necessary when a project that is not cost-effective for an individual customer is economical for the utility. This can occur because customers make decisions about efficiency project payback based on their current energy rates, while utilities' cost-effectiveness is based on the higher marginal costs of investing in additional supply or generation. By helping align customers' payback with the value of efficiency for the utilities, rebates can be an important tool to help utilities meet demand at the lowest cost possible. Financing programs do not address the underlying differences in the economics of efficiency for customers and utilities.
Of course, money isn't everything. The growing field of behavioral programs is showing us just how much factors other than payback matter to customers. At least as currently designed, financing programs do not provide customers with information, education, and non-financial motivators that utility programs have found can drive efficiency.