A nonprofit “green bank” that finances residential and commercial clean energy projects continues to grow, surpassing $175 million in private investment since 2009.
Officials with Michigan Saves Inc., which provides low-interest loans for energy efficiency and renewable energy projects, have an ambitious goal of $1 billion of investment by 2023.
“That went into people’s homes, businesses and nonprofit buildings,” said Selma Tucker, a spokesperson for Michigan Saves. “That private capital is able to cover everybody and create a market in the state. It’s really been taking off.”
Officials reported this month that residential loan volume increased 67 percent and commercial loan volume grew 30 percent in 2018. To date, the program has financed about 17,000 projects in homes and commercial buildings, according to Michigan Saves’ 2017 annual report, the most recent available. The combined annual savings on utility bills was $11.4 million, or $268 for residential customers and $7,122 for commercial customers, on average.
Michigan Saves secured a $2.5 million commercial installation late last year, the program’s largest to date. Tucker couldn’t provide further details at this point.
The nonprofit provides favorable, low-interest loans through a network of credit union lenders to residential and commercial utility customers. It has a network of about 600 authorized contractors, which it hopes to grow to 900 companies. Michigan Saves maintains a loan loss reserve that reduces the risk for lenders.
“These lenders are lending because of the security Michigan Saves provides,” Tucker said.
A majority of projects financed through Michigan Saves are for energy efficiency, which officials underscore in light of the recent harsh winter weather and high demand on the electric grid.
But an increasing amount of the funding is for renewables, particularly solar. In 2017, Michigan Saves surpassed 1 megawatt worth of solar capacity built under the program.
“Solar has been exploding,” Tucker said.
Michigan Saves is a separate option from Property Assessed Clean Energy financing, which is geared toward larger projects.
Curt Monhart, president of Grand Rapids-based project developer E3 Prime Environments LLC, said each program is a favorable alternative to traditional commercial bank loans.
“For the energy efficiency business in total, we’re just seeing the tip of the iceberg. There are so many buildings that could benefit from these programs,” Monhart said. “Michigan Saves is a nice alternative where you can get down to smaller value projects.”
Michigan Saves was created with an infusion of cash under Public Act 295 of 2008 — which also created the state’s first renewable energy standard — and the American Recovery and Reinvestment Act of 2009 under President Obama. Those programs created a roughly $10 million starting point for a loan loss reserve, which is being held in trust to provide security for lenders.
Tucker says the program is looking for another capital infusion to hit the $1 billion milestone by 2023, which could also come from nonprofit or public sources. Every dollar that’s in a loan loss reserve has resulted in $20 in private investment until now, he added. The goal is to raise $20 million for the reserve.
“We think there’s a really great opportunity for the state as it’s talking about blue and green infrastructure,” Tucker said. “Our banks and lenders have capital, that’s not the issue. The issue is making sure they have a construct that allows them to lend.”
Tucker said the program plans on a 5 percent default rate, but that figure currently stands at just more than 1.5 percent.
Monhart says it’s likely Michigan Saves will hit increasing targets after generating more capital and attracting more lenders.
“That will be a big boost for their program,” he said.
The program also intends to focus increasingly on projects for low-income customers who may not qualify for energy efficiency assistance through their utility, Tucker said. DTE Energy sponsors a revolving loan fund through Michigan Saves that offers low-interest rates and rebates for qualified residents.
“We know there’s a gap and we want to serve those people,” Tucker said.
Michigan Saves’ growth also comes as more Michigan communities adopt PACE financing, a similar type of program for commercial properties. However, PACE is structured differently and is tied to a property instead of an owner. Municipalities also have to opt in to PACE, which Monhart said included a learning curve in some areas skeptical of the program, including Kent County. Detroit-based Lean & Green Michigan LLC, which administers PACE programs in Michigan and was started by Congressman Andy Levin, reports 24 counties and 14 cities and townships have adopted the program.
Monhart says PACE and Michigan Saves fill a different niche of the market, with PACE geared toward larger projects with longer lending terms. But that’s beginning to change as Michigan Saves grows and attracts more lenders.
“They’re competing a little bit more now because Michigan Saves has gone up to longer-term loans,” Monhart said. “You’re seeing that overlapping a bit with the PACE business.”
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