Case Study: Energy Retrofits in New Mexico
Solar Panels Come with Home Improvements
Residents at three public housing authority properties for Santa Fe County in New Mexico are happy to see solar panels installed on the roofs of their projects, as the arrays also come with 16 additional upgrades for the tenants.
The International Center for Appropriate and Sustainable Technology (ICAST) partnered with the Santa Fe County Housing Authority and the Department of Housing and Urban Development on a HUD Energy Performance Contracting (EPC) deal, which also included high-efficiency furnaces, low-flow toilets, showerheads and aerators, LED lighting, air and duct sealing and ventilation upgrades. The retrofits were completed in 2021 and repayment for the HUD EPC financing is ongoing.
EPC, according to HUD, is a financing technique that uses cost savings from reduced energy consumption to repay the cost of installing energy conservation measures. Normally offered by Energy Service Companies (ESCOs), this technique allows building users to achieve energy savings without upfront capital expenses. There have been 315 of them done through 2020.
The New Mexico upgrades, for 200 public housing units, also tapped the Department of Energy’s (DOE) Weatherization Assistance Program (WAP) and local utility rebates. (See Accessing Federal and Utility Incentives for Green Projects.)
Ravi Malhotra, founder and president of the Denver-based nonprofit ICAST, described the complex “braiding” of the funding among a network of partners that teamed up to get these retrofits done.
It was comprised of “utility rebates (water, electricity and gas), weatherization money from the DOE, and then we used financing from a community development financial institution (CDFI) called Triple Bottom Line Foundation, TBL Fund for short, which made a loan to the housing authority.” TBL Fund is unique in that it’s the only CDFI in the country that is exclusively focused on financing green upgrades in multifamily affordable housing. And it does more than debt financing, specifically energy financing via power, purchase agreements, pace, energy, performance, contracts, etc.
TBL Fund is owned by ICAST, which touts its “triple bottom line” orientation of providing economic, environmental and social benefits to its customers.
Then, “the repayment of the loan is through HUD and their Energy Performance Contract, which they call an Energy Service Agreement. It’s a 15-year term financing. The CDFI itself received its money from banks, which wanted Community Reinvestment Act credit.
“Having the letter upfront from HUD, saying ‘we approve this Energy Service Agreement (ESA), and will repay the financing,’ is very, very bankable.”
The three public housing projects were Jacobo D. Martinez, 70 units in Santa Fe; Santa Cruz, 58 units in Espanola; and Valle Vista, 69 units, in Santa Fe. The retrofits for the three came to $1.2 million.
First of a Kind
This kind of retrofit is the first for the Santa Fe County Housing Authority. Though HUD has been running the ESA program for some time, Malhotra says it is somewhat unusual to do them on projects as small as these three. Often, they are done at big city Public Housing Agencies with thousands of units, involving tens of millions of dollars.
Why would PHAs do this for small numbers of units?
“I think they are tired of waiting for capital to show up from HUD to make those upgrades,” he says. “And they’re never going to get the capital from HUD to install solar.
HUD has started Rental Assistance Demonstration deals to inject new capital for renovations, but they involve transitioning the projects from public housing to Section 8. Santa Fe did not want to do that, Malhotra says.
The retrofits started in late 2019 and were interrupted by COVID, which shut the program down in March 2020.
“It should have taken five or six months. Unfortunately for us, due to COVID, it got shut down for almost a year. HUD wouldn’t let us in, the housing authority wouldn’t let us in. And so, it ended up taking 18 months.”
But the result pleased the residents. “If I remember correctly,” Malhotra says, “their savings ended up being between 40 and 50 percent.”
He says space and water heating are the two biggest utility loads for residents. “And so, we got major efficiencies with new furnaces and the hot water system. Those efficiencies helped with that, and then the solar helped with the electric.”
Malhotra says his nonprofit regularly does these kinds of projects, with Housing Authorities and other affordable housing customers.
Tax Credit Advisor profiled ICAST in its June 2022 issue for its work with the Troy Housing Authority and others on the general theme of decarbonization.
At Troy, ICAST did a design for a net-zero energy rehab that included highly efficient heat pump systems and solar.
More Money for WAP
Malhotra also wrote a piece on weatherization for Tax Credit Advisor in the August 2022 issue. He wrote that the Bipartisan Infrastructure Law (BIL) provided $3.2 billion to the WAP (on top of the original ~$1.6 billion allocation), tripling the dollars available each year for the next five years.
But, he said, not much WAP work is being done on the multifamily side.
“The vast majority of WAP agencies are unfamiliar with the multifamily affordable housing sector and do not understand the regulatory and logistical requirements,” he wrote.
“They are not familiar with central HVAC and hot water equipment. And most importantly, the DOE requires cost share from rental properties, versus 100 percent free for owner-occupied, single-family homes. Consequently, current WAP agencies don’t have the expertise or capacity to serve the multifamily affordable housing sector.”
In addition to the PHAs, Malhotra does some work with Indian Housing Authorities (there are 21 tribes in New Mexico).
“Most of them have propane as their fuel source, which is extremely expensive. Our focus there is getting rid of propane and converting them to high-efficiency heat pump systems.”
ICAST is working with the Pueblo of Jemez on new construction, “helping them design it so they don’t have propane.”
It is using its CDFI, TBL Fund, in an interesting way, to get carbon credits that it then can sell on the open market, using a third party to verify the amount of carbon and give an independent assessment. So far, it has done 40,000 tons in total. Malhotra hopes it will be able to account for 30 to 40,000 tons a year.
“We’re probably the only CDFI in the country I’m aware of that has a mechanism to register our work and get carbon credits. It took us three years and a lot of effort because these projects are small and needed to be aggregated.”
Creating energy efficiency and reduction of carbon emissions allows companies to accumulate carbon credits. There is also a secondary market where they can sell the credits to companies that want to show they are serious about climate change.
ICAST started in 2002, tallies more than 105,000 multifamily residents it has assisted, with a total of $151 million invested in local communities, $248 million in lifetime utility savings achieved, 1,825 sustainable jobs created, 7,862 high-efficiency heat pumps installed and ~4.1 billion pounds of carbon emissions reduced over the lifetime of the installed solutions.