By Claire Cowan
Director of Program Design and Delivery, Slipstream
“Yeah, but how do we pay for it? That’s the question that stymies the mission to decarbonize every building in the U.S. The costs involved with decarbonization upgrades in homes challenge homeowners, program managers, and policy leaders alike. An inclusive model would allow homeowners to install energy upgrades without taking on consumer debt.
A new partnership between Slipstream and EEtility will drive equitable decarbonization while reducing that initial cost barrier by scaling the Pay as You Save (PAYS)® model. This partnership melds Slipstream’s expertise in contractor engagement, training and retrofit program delivery with EEtility’s analytical tools for identifying PAYS opportunities and success in delivering PAYS programs for multiple utility clients.
PAYS: Energy upgrades with no consumer debt
For most people, a comprehensive home energy retrofit that upgrades insulation, air sealing and mechanical equipment comes with a catch: “Even if the project might lower my energy bills, how am I supposed to pay for it?” With the PAYS model, a utility invests in cost-effective efficiency upgrades on behalf of its customers. The utility recovers its investment over time through a tariff charge on each participant’s energy bill. The fixed monthly charge is tied to the utility meter and not to the PAYS participant, so when a participant decides to move, the new occupant—with proper advance notice—assumes payment of the tariff charge until the repayment term is complete. This makes sense because the new occupant is getting the benefits of living in a more energy-efficient home.
With PAYS, the utility is not a bank
This investment and cost recovery approach is called tariffed on-bill financing. It is not a loan, and the utility is not acting like a bank. Rather, the PAYS model is an inclusive utility investment program that helps people live in homes that are healthier, more comfortable and more energy efficient. Utilities routinely make investments to upgrade generation and distribution assets. Forward-thinking utilities are using PAYS to expand the reach of energy efficiency programs, strengthen the local retrofit market, and help customers reduce energy bills while improving the quality of their homes.
The 80% rule protects consumers
The tariffed charge is limited to 80% of the participant’s expected annual energy bill savings. The duration of the payment term cannot exceed 80% of the expected lifetime of installed measures. This built-in safety factor is a requirement of the PAYS program and increases the potential that participants will benefit from lower energy bills.
Accessible decarbonization for the households that need it most – even for renters
PAYS reduces or eliminates the up-front cost of a home energy retrofit. PAYS streamlines implementation by connecting customers with pre-qualified contractors. Work is performed by contractors trained in the PAYS process who commit to a high level of quality assurance. The implementation team analyzes participant billing data one year after the retrofit to identify outliers. We then follow up to identify and correct any issues that may be attributable to flawed workmanship. PAYS works for renters because the utility’s cost recovery is calculated to yield a cash-positive result for the tenant while eliminating or significantly reducing a landlord’s up-front contribution.
PAYS benefits for utilities
Rural electric cooperatives and municipal utilities, as well as a growing number of investor-owned utilities, have successfully administered PAYS programs. Utilities benefit by offering a comprehensive home energy retrofit solution that customers love, all the while boosting energy efficiency in markets that need greater support.
Across the board, PAYS programs have achieved top-notch customer satisfaction scores. PAYS programs achieve significantly higher conversion rates than typical home audit and retrofit programs. When shown a cost-effective PAYS offer, more than 80% of participants decide to move forward with implementation—and for investor-owned utilities, PAYS investments can earn a regulator-approved rate of return just like other assets the utility is investing in.
How to bring PAYS to your customers
Slipstream and EEtility are looking to partner with innovative utilities that want to offer the many benefits of PAYS to their customers. Contact Claire Cowan at Slipstream to find out more about our PAYS delivery team.
Originally published on January 26, 2022