One of the deciding factors in achieving energy efficiency derives from the ability to afford it, which is why the city of Holland, Michigan, is working with Michigan Saves to develop an on-bill system that will increase access to energy efficiency.

“If somebody wants to do work on their home, replace a furnace or buy more advanced equipment for energy efficiency, they need to pay for it. If they don’t have the funds, they may choose not to do it because the cash isn’t available,” says Mary Templeton, executive director of Michigan Saves. “Good financing options serve as the solution to that barrier.”

Michigan Saves’ traditional loan program has served more than 5,300 homeowners. But in order to participate in that program, individuals need to have a credit score of at least 640 which is a barrier for some. On-bill financing is an opportunity to serve families that may not qualify for traditional financing.

“Our traditional program is great in that it’s specific to energy efficiency and renewable energy and allows us to work with credit unions to back the loans to provide longer terms and lower rates to serve a good portion of the marketplace,” says Templeton. “But because it’s based on credit, there are people we can’t serve—about 35 percent of the people who apply.”

That’s where on-bill financing comes into play. On-bill programs offer consumers the ability to pay for improvements in energy efficiency or renewable energy through utility bill payments.

For individuals in Holland, Michigan, the ease of participating in on-bill financing is in the works.

“Holland has a long-range community energy plan, which is a 40-year strategy to ensure prosperity for the city. It is a vision of being a thriving, world-class, energy-efficient city and a leader in energy security, affordability and sustainability,” says Anne Saliers, community energy services manager at Holland Board of Public Works.

Many states already have on-bill programs, but not Michigan. In response, Holland advocated to pass legislation explicitly allowing utilities to offer on-bill financing.

Once the City of Holland had the ability to move forward with its initiative, the next step was to learn as much as possible about the successes and failures of programs in other states.

“It’s all over the board in terms of what energy-efficiency measures are included, how the fund gets capitalized, what the qualification process is for people applying for the loans, and how long the loans can last. It really inspired us to think about what our goals were and what we wanted out of the program,” says Saliers.

After the review of other states, Holland needed experts to determine specifics of its program—turning to Public Sector Consultants and the Environmental and Energy Study Institute. In addition, the C.S. Mott Foundation supported this program with a grant to Michigan Saves because the program aligns with its clean energy initiatives and could serve as a pilot for the rest of the state.

“We were fortunate enough to be able to work with Holland as they started to form their stakeholder engagement process. They did a great job of pulling a range of energy-efficiency contractors, neighborhood programs, energy providers, mortgage lenders, title companies and anybody who would be affected by on-bill financing,” says Templeton.

One of the outcomes of the stakeholder engagement process was to detail how the program would be set up. Unlike determining loan eligibility by a credit score or debt-to-income ratio, it’s easier to participate in on-bill programs because there is a broader spectrum of qualifications. The loan amount is up to $30,000, and terms are up to 15 years. Paying via a utility bill is simple too, Saliers says, making the overall process less complicated for consumers.

After determining the source of capital and the steps of getting the plan approved, there will be about six more months of work to get the program up and running—with a goal of accepting applications on July 1, 2016. This effort, along with many others, is designed to support Holland’s multifaceted 40-year plan to slash per-capita greenhouse gas emission in half by 2050.

Templeton believes in on-bill financing for Holland not only because it will support their goals in reducing greenhouse gas emissions, but also because it is a natural extension of Michigan Saves’ work in breaking down barriers to energy efficiency.

“I’m excited that another financing tool is being added to the toolbox to help more people be eligible to make energy efficient changes. The results of Holland’s program can be used to inform the creation of a statewide infrastructure for other municipalities, bringing this highly accessible option to scale for Michigan’s residents.”