C40 Good Practice Guides: New York City - New York City Energy Efficiency Corporation

Summary

Established and endowed by New York City (NYC) in 2011 with USD 37.5 million of federal grant funding, the New York City Energy Efficiency Corporation (NYCEEC) has financed nearly USD 100 million of clean energy projects to date across 7.2 million square feet of NYC buildings—eliminating over 629,000 metric tonnes of greenhouse gases and resulting in the creation of over 1,000 jobs. NYCEEC’s design as a highly flexible, mission-focused specialty lender has attracted additional funding from the public sector (federal, city and state), commercial lending institutions, and philanthropy. 

NYCEEC provides loans and credit enhancement solutions for energy efficiency and clean energy projects that save energy and reduce greenhouse gases. NYCEEC’s mission is to innovate and deliver clean energy financing solutions for buildings, and its vision is that clean energy financing markets for buildings will develop and align with the city’s long-term environmental goals. As such, NYCEEC works closely with the City of New York to support their environmental policies¹⁹. 

Value: NYCEEC was established with an initial capitalisation of USD 37.5 million provided to NYC through the federal American Recovery and Reinvestment Act (ARRA). NYCEEC has attracted additional capital from the public, private, and philanthropic sectors.

Structure: NYCEEC is a 501(c)3 non-profit specialty finance company. NYCEEC was originally created as a component unit of NYC government, and subsequently “spun off” as a fully independent non-profit with continuing contractual ties to NYC. 

NYCEEC’s core capital is structured as a revolving loan fund whereby NYCEEC offers a variety of debt products to building owners and project developers to finance building-scale energy efficiency and clean energy projects. NYCEEC also provides credit enhancement to encourage private lenders to offer efficiency loan products. 

Because NYCEEC is a revolving loan fund, the fund can recycle capital as loans are repaid. NYCEEC also levers its balance sheet to multiply impact. NYCEEC lends at market equivalent rates while offering enhanced features to property owners to facilitate efficiency investments, namely flexibility, technical guidance and terms designed to meet project investment needs. Loans and credit enhancements generate income to support NYCEEC operations. NYCEEC supplements earned revenue with philanthropic funds to bolster financial strength and support field advancing activities, such as publishing project performance results and lending best practices. 

NYCEEC is staffed with both financial experts and engineers specialising in building energy systems. This novel combination of professional capabilities allows NYCEEC to innovate and advance the use of creative financing tools while producing strong environmental results. NYCEEC’s strategy includes three priorities: financing projects, building partnerships, and advancing the field. 

Financing Projects: Buildings in all sectors are eligible for NYCEEC financing products, provided that the measures financed result in reduced energy usage and avoided greenhouse gas emissions. NYCEEC finances: 

• Energy efficiency 
• Passive house 
• Clean fuel conversions 
• Renewables 
• Cogeneration 
• Demand management 

As an unregulated, specialty finance company, NYCEEC operates in a highly flexible manner and has the capacity to innovate and produce creative financial solutions to meet the needs of a developing energy efficiency market. To date, NYCEEC’s financial products include pre-development loans, equipment loans (secured and unsecured), energy services agreements, power purchase agreements and green mortgages. 

Partnerships: NYCEEC seeks to multiply its impact through strategic partnerships, typically with private-sector lenders and with public financing institutions (often focused on affordable housing). Credit enhancement is one tool NYCEEC uses to support lending programs developed by partner organizations. Ultimately, NYCEEC seeks to advance the integration of efficiency-friendly financing into mainstream real estate finance markets, such as the mortgage lending market. 

Advancing the Field: NYCEEC seeks to advance the broader markets for efficiency investment. The goal is to remove existing barriers to energy efficiency investment and empower building owners and tenants to make investments that will save money and produce significant environmental benefits, as well as co-benefits in health, economic development, and energy reliability. 

NYCEEC has several initiatives designed to provide information and transparency to the market, to remove barriers, and to develop innovative tools. Monitoring and reporting financial and environmental results at the project level is a high priority, as is removing barriers to investment such as obstacles to lender consent, high transactions costs, and current low levels of standardisation.

Results

To date, NYCEEC’s initial USD 37.5 million capitalisation has resulted in debt financing of over USD 96 million of energy efficiency and clean energy project costs in predominantly multifamily and commercial buildings. This portfolio of projects is projected to eliminate over 629,000 metric tonnes of GHGs (over the useful life of the equipment). NYCEEC has established several lender partnerships, resulting in greater capital access for efficiency. 

NYCEEC focuses on building sectors in NYC with the greatest contribution to GHG emissions and the toughest challenges in mobilising energy efficiency investment – namely privately-held, larger commercial and multifamily buildings (including the affordable multifamily housing sector). NYCEEC’s approach is to finance a wide range of technologies that save money and reduce GHG emissions, ranging from simple, proven approaches to deep multi-measure retrofits. NYCEEC has been active in supporting the development of “passive house” approaches in NYC buildings by providing attractive financing to this emerging sector.

Reasons for success 

• NYCEEC’s organisational structure and governance offer an attractive vehicle that combines public, private, and philanthropic investment. NYCEEC levers public sector dollars with private capital, and recycles public capital for maximum impact. 
• NYCEEC is staffed with both financial and engineering professionals, as well as marketing, legal, and communications experts. 
• NYCEEC has focused on the sectors with the greatest opportunity and barriers, and has built a significant portfolio of clean energy projects in multi-tenanted multifamily and commercial properties within a competitive real estate market. 
• NYCEEC uses a combination of true financial product innovation and specific modifications to business-as-usual lending approaches. This includes energy services agreements, lender waiver and acknowledgement templates, credit enhancement structures and ‘underwriting-to-savings’. 
• To demonstrate the commercial viability of energy efficiency and clean energy financing, NYCEEC finances projects at commercially equivalent market rates. NYCEEC is attracting lenders to this sector, improving overall capital access. 
• NYCEEC maintains close working relationships with city and state sustainability policy staff and incentive providers, ensuring the vertical alignment of goals.

When/Why a city might apply an approach like this 

Creating an independent but closely affiliated non-profit financing organisation like NYCEEC is a tool that cities can use to attract both philanthropic and private capital investment to an under-invested sector. Attracting private capital resources is critical, as there is clearly insufficient public capital to create a truly sustainable built environment. NYCEEC’s structure promotes innovation to advance investment and remove barriers. 

Offering financing through funds like NYCEEC provides cities a vehicle to do the “R&D” work and iteration needed to develop and test innovative approaches. NYCEEC maintains a very close working relationship with city and state policymakers, sharing lessons learned in order to shape effective policies that drive greater clean energy investment.

C40 Good Practice Guides

C40's Good Practice Guides offer mayors and urban policymakers roadmaps for tackling climate change, reducing climate risk and encouraging sustainable urban development. With 100 case studies taken from cities of every size, geography and stage of development around the world, the Good Practice Guides provide tangible examples of climate solutions that other cities can learn from. 

The City Climate Funds Good Practice Guide is available for download here.  The full collection of C40 Good Practice Guides is available for download here.  

All references can be found in the full guide.