Program

The details of the Michigan Saves program presented below are still being refined in preparation for a statewide rollout beginning in mid 2010. The program framework is the result of research, stakeholder outreach, and one-on-one meetings with energy efficiency and financing experts conducted by the Michigan Saves team. 

Michigan Saves Program Overview

The following three program offerings will be available as part of Michigan Saves:

• Residential energy efficiency installations (click here for additional details)
• Nonresidential energy efficiency installations
• Custom energy efficiency or renewable energy installations

For both the residential and nonresidential programs, the primary marketing vehicle and initial point of contact for the customer will be a network of contractors and other energy professionals qualified by Michigan Saves. The residential and nonresidential programs will be limited, at least initially, to energy efficiency upgrades and will not finance renewable energy systems. Customers can choose from one of the following options to identify energy-saving measures:

• À la carte eligible measures: Customer selects measures from a list of qualifying energy-saving measures developed by Michigan Saves (an energy efficiency checklist is completed by contractor but no full audit is required).
• Audit-based full response: Comprehensive energy audit is performed by a certified auditor or contractor, who conducts a thorough assessment and explains recommended measures and financing options to meet the customer’s needs. For homes, typical recommendations include air and duct sealing, insulation, heating, ventilation, air conditioning (HVAC) improvements, appliances, and lighting upgrades. Following installation, the building is evaluated again to ensure that measures were properly installed. Recommended improvements for businesses may include lighting, insulation, HVAC, refrigeration, high-efficiency motors, and process changes. As a general rule, Michigan Saves will use the applicable audit, quality assurance, modeling software, and evaluation standards of external parties, such as Home Performance with Energy Star or other utility programs approved by the Michigan Public Service Commission. 

The custom program will be available to serve particular market segments, areas, or technology types (for example, solar photovoltaic for homes or small businesses). Because of the complexities involved, any renewable energy systems financed through Michigan Saves would be part of the custom program. Custom projects can be initiated by Michigan Saves, investors, contractors, or customers. The process is generally consistent with the process for the standard residential and nonresidential programs, but involves additional screening and evaluation to determine whether projects are eligible for financing. In addition, financing terms and the standards for project development, installation, and evaluation will be tailored to the particular technology, building type, and other factors.

Michigan Saves is currently developing financing options for the different program offerings, but they will likely include personal and commercial secured and unsecured loans. Capital for the loans will be provided by public and private lenders and investors. Michigan Saves will offer credit enhancements (loan loss reserve, interest rate buy down, etc.) so that lenders and investors can invest their capital in the financing program with confidence; this will also make loans more affordable for customers. Loan sizes and terms will vary across the three different program offerings and types of loans. It is anticipated that the largest loan volume will be unsecured personal loans of less than $12,500 with terms between 4 and 7 years. Interest rates will also vary; nationally rates range from 0% to 8.99% for unsecured loans.

The goal of the program is to have a fast loan approval process and to put in place a streamlined lending process while providing adequate security to the lender. Loan origination would be performed by the lender but the application process could be facilitated by contractors that have received training from Michigan Saves on the financial product and are performing the work, using a toll-free phone number or a website. In order to participate with Michigan Saves and to have access to the loan loss reserve, lenders would agree to adhere to minimum underwriting standards established by Michigan Saves. Lenders could set stricter standards at their discretion.

Michigan Saves will offer a hybrid billing model, with loan servicing performed by the borrower’s utility company or by the lender. If the borrower’s utility company services the loan, payments would be collected through its billing service. Upon payment, the utility company would remit the principal and interest payment to the lender. Both the utility and participating lender would have to agree to this arrangement.