Environmental and Energy Study Institute

The Rural Energy Savings Program is an innovative idea developed by electric cooperatives in South Carolina to address the special challenges and opportunities facing rural communities to save energy, cut household utility bills, and reduce greenhouse gas emissions. Creating stable, high-skilled jobs and keeping more dollars in the local economy are important added benefits. The program finances energy efficiency improvements for rural homes with low-cost loans that are repaid through customers’ electric bills (known as “on-bill financing”).

The Problem: Rising Energy Demand and High Energy Costs

The Drummond-Henking family celebrates their energy retrofit as part of the "Help My House" trial project in South Carolina. Image courtesy ECSC.The idea originated in South Carolina, where electric cooperatives were faced with the prospect of building new power plants due to a rapidly growing population and high peak energy use in both winter and summer. The co-ops first explored nuclear and natural gas options in anticipation of possible regulatory limits on greenhouse gas emissions — both of which would come with a multi-billion dollar price tag. South Carolina co-ops subsequently took a hard look at potential investments in energy efficiency. They launched a trial project called “Help My House” to demonstrate the energy and cost savings that could be achieved.

Rural communities in South Carolina have a relatively high percentage of older, less efficient homes and low-income residents, which for some households means spending more than 70 percent of their income on energy during peak heating and cooling months. Many rural homes still use electric resistance heating, which is notoriously inefficient and costly, in addition to having poor insulation and weatherization. These homes represent some of the simplest and most cost-effective opportunities to save energy in the state.

Rural residents, however, especially low-income residents, do not have ready access to financing that would allow them to individually capture large energy and cost savings and greatly increase the comfort of their homes. Many households would not qualify for conventional loans, and renters have had virtually no options other than to approach their landlords.

The Solution: On-Bill Financing for Energy Efficiency Improvements

The co-ops, using an emerging idea known as on-bill financing, devised a program to provide low-cost financing that would be attached to the electric service account—not the tenant or the property owner. The loan would be repaid gradually (within 10 years or less) through charges on each participant’s monthly electric bill — one third of the energy savings for each home would go to lower the monthly electric bill, while two thirds would go to repay the loan. If the home is sold or renters move, the loan is simply transferred to the next resident.

Energy efficiency retrofits create local jobs that can't be exported. Image courtesy ECSC.Another important feature of the program is that the most cost-effective energy-saving measures can be selected from a large pool of homes — rather than waiting for households to self-select for participation. Electric cooperatives will actively identify homes to receive energy audits at no expense to the participating households. Based on the energy audit, co-op staff will facilitate the selection and supervision of qualified contractors to perform efficiency improvements, and ensure that the desired results are achieved before paying the contractor.

The South Carolina program aims to ultimately retrofit more than 200,000 homes and save co-op members an estimated $280 million a year. The program will also help South Carolina reduce projected greenhouse gas emissions by 6.7 million metric tons over 10 years and avoid or delay $4 billion in new capital costs.

Developing and Replicating the Program

The program is an important innovation that could be applied by electric cooperatives and utilities in other states. Many other states are likely to face the same challenges and opportunities as South Carolina. Before the program is implemented, however, a pilot project is being developed and implemented in South Carolina that will be used as a model to scale up and replicate in other states and as a potential national program.

The Environmental and Energy Study Institute (EESI) is assisting with the design and implementation of the pilot project, working in cooperation with The Electric Cooperatives of South Carolina (ECSC), the state association of electric cooperatives, and Central Electric Power Cooperative, the state’s generation and transmission co-op. EESI's role in the project is being generously supported with a grant from the Doris Duke Charitable Foundation.

EESI will also help leverage the lessons learned from the pilot project in replicating the program in other states and help guide the development of a national program. The Rural Energy Savings Program Act (H.R.4785), federal legislation sponsored by Congressman James Clyburn (D-SC), passed the U.S. House of Representatives during the 111th Congress with broad bipartisan support. Comparable legislation has been introduced in the 112th Congress as part of the Energy Savings and Industrial Competitiveness Act (S. 1000), sponsored by Sens. Jeanne Shaheen (D-NH) and Rob Portman (R-OH). This legislation would authorize a national program that based on the pilot project being developed in South Carolina.

On February 13, 2012, Rep. Jim Clyburn (D-SC) and Nancy Sutley, chair of the White House Council on Environmental Quality, visited the home of Jordan Johnson, a participant in the pilot program. EESI Executive Director Carol Werner and the rest of the pilot leadership team were also present. This video features the group as they highlight the process, benefits and successes of the project.