Revolving Energy Loan Funds Pay It Forward in Michigan Cities, and Could Go Regional in Detroit

Ka-ching! Ann Arbor's fund proved a sure bet. (City of Ann Arbor)

As Jordan Eizenga’s data mining showed us, energy efficiency upgrades can save cities big money. The initial investment required can be an obstacle, though. Those lighting upgrades in Hazel Park and Madison Heights were paid for by federal grants, but how can cash-strapped cities sustain their energy efficiency campaigns after outside funds run out? Energy policy intern Jordan Garfinkle’s research has turned up an answer.

Revolving loan funds are a simple financial device for recapturing the savings recouped by energy efficiency projects. For a certain period of time, the money saved gets shoveled back into an account that will fund additional energy conservation or renewable energy initiatives, helping cities overcome the up-front costs. The money saved in the next round gets put back into the fund, too, where it can be used for more projects, so the sustainability action never stops – at least not until atmospheric levels of carbon dioxide are back to normal and our cities are net generators of electricity.

How UM fund recycles the green. (University of Michigan)

Some places in metro Detroit are already climbing on board the revolving loan fund bandwagon, according to Jordan’s research. Ann Arbor started its Municipal Energy Fund with a $100,000 allocation in 1998. 80% of the subsequent energy savings went back to the Fund, and in five years it was self-sustaining. The City of Farmington Hills just made the first deposit in its Energy and Sustainability Account. And the University of Michigan’s Energy Conservation Measures Fund has been around for almost a quarter-century.

Since many of Detroit’s older suburbs are relatively small, they could see the greatest gains by joining forces to create a shared revolving loan fund. “In general,” Jordan writes, “the larger, regional funds with numerous member communities offer many of the benefits of smaller funds without the administrative burden associated with managing a revolving loan fund,” while also offering “augmented purchasing power.” Could the Michigan Suburbs Alliance’s Regional Energy Office get such a regional fund started before long? It’s too early for us to say now, but stay tuned.

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