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Montpelier Launches Revolving Loan Fund for Energy Saving Projects

 
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Sample screen from GRITS database.
Photo credit: Kate Stephenson

Source: Kate Stephenson

Montpelier Launches Revolving Loan Fund for Energy Saving Projects

The Montpelier Energy Advisory Committee (MEAC) is focused on helping the City of Montpelier identify energy-related projects that help the municipality reduce fossil fuel and electricity use while also saving money. After the successful completion of several major initiatives including bringing a district heating system on-line in downtown Montpelier, installing one Megawatt of municipal solar, and seeing significant savings at the Water Resource Recovery Facility, MEAC wanted to find out if there was a way the City could reinvest savings from these municipal projects into additional energy-related initiatives.

In 2016 MEAC approached City Council with an idea: instead of always having to come to Council for budget approval of each potential energy-saving project, what if we created a revolving loan fund to be used for energy innovation projects? The annual dollar savings from each project would be used to pay back into the Fund, and grow it over time. Based on MEAC’s past success, Council approved $20,000 from the city’s Reserve Fund as the initial seed money for the new Net Zero Revolving Loan Fund, and Efficiency Vermont agreed to match with $10,000.

[Sample screen from GRITS database.]

Sample screen from GRITS database.

With the funds committed, MEAC looked to other cities who had created similar funds for tips on how to administer a revolving loan fund. They connected with the Sustainable Endowments Institute, which runs a program called the Billion Dollar Challenge. This program primarily works with colleges, universities, and other nonprofit institutions to invest in self-managed green revolving funds, and SEI was interested in expanding their work to include municipalities. They also offer access to an online database for tracking revolving loan projects, energy savings and financial savings over time called GRITS, the Green Revolving Investment Tracking System (Note: The cost for using GRITS varies depending on the size of your fund, but in our case costs $200/year). By signing on to the Billion Dollar Challenge, Montpelier received access to guidance from SEI staff, including a toolkit for setting up a new fund and sample fund guidelines from other institutions.

The Net Zero Revolving Loan Fund was established for the purpose of financing municipal energy efficiency and renewable energy investments in the City. The Fund is administered by City staff with the support of MEAC. The purpose of the Net Zero Revolving Loan Fund is to capture and track savings from sustainability projects and to utilize part of those savings for subsequent projects. In addition to funding stand-alone energy efficiency and renewable energy projects, the City can also use the fund to pay the marginal costs of energy improvements within larger capital projects.

Once the Fund was officially established, and the application process and guidelines put in place for approving and tracking projects, then it was time to identify appropriate projects.

The Fund’s guidelines include:

  • Projects that directly address one or more of the City’s Net Zero goals through energy efficiency, renewable energy production, or reduction of energy-related costs.
  • Funding should primarily cover equipment, materials and other ‘hard’ costs that have a high impact.
  • Projects must be on City-owned/leased/operated property and reduce overall operating costs.
  • Feasibility studies that support energy projects can be funded if either paid back within 2 years or rolled into the repayment schedule of a funded project that results from the feasibility assessment.

 

Net Zero Revolving Loan Fund Benefits

  • Creates flexibility and allows the City to develop and implement projects quickly;
  • Reduces the need to incur debt and maintains positive cash flow for each energy efficiency project;
  • Works through and reduces deferred maintenance projects, lowering overall operating costs;
  • Leverages capital improvement project funds to significantly improve the efficiency of equipment;
  • Leverages Efficiency Vermont incentives to invest in future energy savings retrofits;
  • Improves the energy performance ratings of the municipal building portfolio; and
  • Decreases the city’s energy usage to reach the Net Zero by 2030 goal.
     

The first project funded was a capacitor at the Water Treatment Plant. This $2,700 investment saves the plant approximately $100/month in peak demand charges, resulting in a payback period of about two years. In order to identify other projects, MEAC then went back to City Council to request funding for energy audits of the six main municipal buildings: City Hall, Police Station, Fire Station, Water Treatment Plant, Water Resource Recovery Facility, and Department of Public Works. They then put out an Request for Proposals (RFP) for Level 2 audits of these buildings, Cx Associates was selected as the contractor (in partnership with Zero by Degrees) and the audits were completed in the Fall of 2017. Once the audit report was received, MEAC members met one-on-one with building operators to review the recommendations from the audits and identify projects with short paybacks (return on investment) that would be appropriate for funding with the revolving loan funds. The full list of “recommended measures” from the audits included over $400,000 of projects, which was far beyond the capacity of the Fund, so the focus has been on selecting projects that are fairly straightforward to implement, wouldn’t happen without this source of funding, and have a payback of less than four years. MEAC expects to issue a second RFP for weatherization and efficiency work in Summer 2018 for a number of projects identified in the audit report. Potential projects include installation of LED fixtures in specific high-use locations, installation of interior storm windows, air sealing and insulation.

All projects are tracked through GRITS according to the following formula:

  1. Until the project’s cost is recovered, all savings will accrue to the Fund.
  2. After the initial “payback” has been achieved, 50% of the savings will accrue to the Fund for an additional two years.
  3. After this period, all further avoided cost savings will accrue to the City.

Savings can be accrued either via actual savings (if metered or easy to track) or via estimates provided by engineers or Efficiency Vermont. At the end of each fiscal year the committee will verify each project’s savings for tracking in GRITS, and the fund balance will be adjusted accordingly.

For MEAC, it has taken about two years getting this fund off the ground and lining up projects, but it’s anticipated that by the end of 2018 that the initial $25,000 available will have been spent and then, as savings accrue, MEAC will be able to initiate additional projects in the future.

 

Steps to Establishing a Revolving Loan Fund

  1. Join Billion Dollar Green Challenge (City Council Resolution)
  2. Approve funding sources
  3. Draft Fund guidelines and application
  4. Appoint a committee to review applications
  5. Review applications to select projects
  6. Enter projects into GRITS database
  7. Solicit projects from City staff (ongoing)
  8. Annual review of actual savings ("true up")

 

Resources:

Net Zero Revolving Loan Fund Guidelines

Net Zero Revolving Loan Fund Application

Net Zero Revolving Loan Fund Proposal to City Council

For more information -https://www.netzeromontpelier.org/blog/loan-fund