Buildings use energy, and the bigger the building, the more energy it uses. Investing in energy efficiency creates benefits beyond just cutting pollution and keeping our air and water safe. Energy efficiency upgrades lower utility bills for residents, make buildings more comfortable, and outfit buildings with the latest and best technology to replace old systems that are not functioning as well as they should. Best of all, making these upgrades to our buildings puts people to work. And the bigger the building, the bigger the job opportunities.
Until now, many energy efficiency programs and financing strategies haven’t worked very well for the people that most need the savings – low-income tenants of multifamily buildings. MPower is a model that finally brings energy efficiency to affordable multifamily housing.
In 2011 Green For All partnered with the Network of Oregon Affordable Housing (NOAH), Enterprise Community Partners, the Energy Trust of Oregon, Craft 3, and Blue Tree Strategies to launch a demonstration pilot testing MPower in Portland. The U.S. Department of Housing and Urban Development awarded NOAH a $3 million Energy Innovation Fund grant on March 8, 2012 to continue the implementation of the pilot program and capitalize the MPower Fund. With the Portland Demonstration underway, we are working to replicate MPower across the U.S.
The MPower Model
The MPower Model combines a finance platform with energy services to address the two key barriers that keep building owners of affordable multifamily housing from investing in energy efficiency: the “split incentive” and the inability to service additional debt.
Oftentimes, it is next to impossible for owners of affordable housing to take on additional debt. Because of this, the MPower Fund capitalizes the upfront cost of the energy efficiency improvements itself. Once the upgrade is finished, the MPower Energy Services contract provides ongoing maintenance and educational materials for staff and residents to ensure the savings materialize. The owner and residents pay for the energy services, including the cost of installing the improvements over the term of the energy services contract.
The Split Incentive:
Bringing energy efficiency to multifamily properties has been paralyzed by the “split incentive.” Since residents usually pay their own utility bills, when a building owner pays for the energy efficiency upgrade they don’t benefit from all the savings that are produced. This makes it very difficult for them to repay the cost of the upgrade.
Since MPower spreads the cost for the energy services across all of the meters in the property, everyone contributes to paying for the energy efficiency improvements according to how much they save. The cost is spread out over time so that utility bills don’t increase. When the energy services contract is fulfilled, the surcharge is taken off all of the meters and the bill decreases to reflect the full benefit of the energy efficient improvements that were made.
MPower depends on three essential partners:
- The Fund Manager pools energy efficiency incentives and rebates with finance in order to fund the full energy efficiency upgrade for the cheapest cost. The Fund Manager pays for the upgrade and receives the repayment from the utility bill.
- The Energy Service Providers work with the building owner and coordinates all the work to upgrade their properties for efficiency. The Energy Service Provider also helps them maintain the improvements to achieve the full energy savings.
- Utilities enable the on-bill repayment mechanism that allows MPower to overcome the split incentive and bring energy efficiency to affordable housing. Utilities also provide incentives and rebates that lower the cost of installing efficiency measures.