This NASEO Program in a Box provides guidance on how State and Territory Energy Offices (State Energy Offices) can leverage federal, state, and private funding to develop State Energy Revolving Loan Fund (RLF) programs to finance energy projects for state and local government buildings, commercial and industrial buildings, and Municipal, University, Schools, and Hospitals (MUSH) buildings and facilities.

State energy efficiency and renewable energy RLFs enable State Energy Offices and their partners to offer long-term, low-interest financing for energy and water efficiency improvements, energy systems modernization, and energy resilience upgrades. RLFs are ideal for targeting areas of the market where public capital can supplement private sector solutions to fill gaps and reduce costs for government agencies, nonprofits, and building owners.

Because borrowers' principal and interest repayments are used to reseed and revolve the funds, and because energy efficiency loans typically outperform conventional financing with minimal default rates, many RLFs around the U.S. have successfully supported designated energy efficiency, renewable energy, and other clean energy activities for decades - maximizing the economic impacts of their initial funds and funding sources.

Benefits for States that Implement Revolving Loan Fund Programs

State Energy Offices that operate or oversee State Energy Revolving Loan Fund programs can:

• Offer long-term, low-interest financing to public and private building owners for a variety of uses;
• Supplement and leverage private capital investments to enable projects that might not otherwise occur;
• Target specific economic sectors (public/private commercial); and
• Direct capital to address public policy objectives without the need for continual legislative appropriations.

Benefits for Building Owners that Use Revolving Loan Fund Capital

Building and facility owners can benefit from leveraging State Energy Revolving Loan Fund capital in the following ways:

• Reduce borrowing costs for building retrofits by taking advantage of lower interest rates;
• Access affordable and secure financing for complex energy improvements to buildings;
• Use post-retrofit utility and maintenance savings to pay loan principal and interest; and
• Improve indoor environments for building occupants in schools, hospitals, universities, and commercial businesses.

How this Program in a Box was Developed

Thank you to staff from the Minnesota Department of Commerce Energy Resources Division and the Texas State Energy Conservation Office (SECO), who generously shared their experiences. This Program in a Box is based on their actual programs.

See the Minnesota Trillion BTU Program here.

See the Texas LoanSTAR Revolving Loan Program here.

See the U.S. Department of Energy’s (DOE) Revolving Loan Fund Resource library with additional case studies, tools, and guides here

Staff at SECO provided information on their LoanSTAR Revolving Loan Program:
With an original capital allocation of $79.1 million from federal government petroleum violation escrow funds, SECO performs all Texas LoanSTAR Revolving Loan Program loan issuance and servicing activities in-house. The program provides financing for eligible energy efficient upgrades for public and MUSH market entities, including school districts, colleges and universities, hospitals, and local government agencies. Over the years, SECO has added to the fund’s capitalization with U.S. State Energy Program (SEP) annual appropriations, and the fund is now capitalized at approximately $255 million.

Staff at the Minnesota Department of Commerce provided information on their Trillion BTU program:
The Minnesota Department of Commerce used American Recovery and Reinvestment Act (ARRA) State Energy Program funds to capitalize the Saint Paul Port Authority for $5 million to administer the Trillion BTU Program. The program provides financing for eligible energy efficient upgrades for commercial and industrial building owners and nonprofit organizations for buildings located within Xcel service territory. The program was eventually further capitalized by the Minnesota legislature with an additional $10 million to extend its coverage area statewide.