Revolving Loan Funds
A revolving loan fund (RLF) is an interest-bearing (or sometimes interest-free) loan used as capital for research campus projects expected to yield a certain amount of savings. RLF options are available from both internal and external sources. Read below for examples of how schools are using RLFs to support new energy efficiency and renewable energy projects on their campuses.
Revolving Loan Funds Overview
Sometimes called a green revolving fund, RLFs are increasingly being implemented at higher education research campuses and support sustainability, conservation and greenhouse gas reduction projects. The savings from one project are used to replenish the RLF, which then allows for other similar investments.
In addition to removing the burden of an upfront cost, the campus also benefits from cost-neutral efficiency improvements and operational cost savings over the term of the contract.
Revolving Loan Fund Options
- Internal Sources: An RLF can be established using internal research campus funds, either from administrative budgets, student fees, an existing savings account, and/or donations. Though the sizes range significantly depending on the organization, the average RLF currently in existence at universities is around $170,000.
- External/State Revolving Loan Funds: State revolving loan funds are another source of financing for renewable energy and energy efficiency projects on research campuses.
See examples of both these options below.
Revolving Loan Fund Program Examples
- Harvard University has a $12 million RLF that funds sustainability projects with a payback period of 5–10 years. Under this RLF, Harvard has implemented 154 projects, making over $11.5 million in loans. With $4 million in savings, the RLF has demonstrated a 27% return on investment. Read more about this project on the Sustainability at Harvard site.
- The Billion Dollar Green Challenge is an organization that offers resources to institutions who commit to establishing revolving loan funds for sustainability. Their goal is to reach a combined loan value of $1 billion through member institutions. Resources are offered to establish loan funds and to share experiences and best practices.
- Iowa State University's $3 million energy sustainability loan fund issues interest-free loans for campuses as long as they have quantifiable savings equivalent to the RLF's return on investment criteria. Funded projects typically reduce university-operating expenses, decrease green house gas emissions, and engage all campus stakeholders in environmental stewardship. Read more about this opportunity on Iowa State's Live Green site.
- Tufts University has a loan fund to finance energy upgrades with a payback schedule of five years or less. Savings from past projects, such as lighting upgrades; steam traps; boiler replacements; and heating, ventilation, and air conditioning (HVAC) upgrades fund future green projects on campus. Read more about this endeavor on the Tufts University Office of Sustainability site.
- Oregon State University's Student Sustainability Initiative (SSI) established the Sustainable Energy Revolving Loan Fund providing local, low-interest financing. In addition to being a financial resource, the initiative also engages students in learning opportunities in environmental stewardship and gives priority to projects that directly involve the students. The fund makes $100,000 available each year per 5-year period. Read more about this opportunity on the SSI site.
- Macalester College has a Clean Energy Revolving Fund (CERF) used to finance clean energy projects. In 2010, Macalester combined their CERF with a newly-created Technology, Equipment and Maintenance Sustainability Fund, allowing innovations in the CERF to become a regular part of their capital budget. Read more about this project on the CERF site.
- The University of Maine Foundation has a $300,000 Green Loan Fund providing interest-free loans to departments for sustainability projects. Within five years, a project repays its loan with operational cost savings. Though funds are also available to the student government, it must pay interest on the amount borrowed. Read more about this project on the College Sustainability Report Card site.
- University of Michigan's Energy Conservation Measures (ECM) Fund finances energy reducing initiatives on campus. One of the older revolving fund programs, the ECM fund was named the U.S. Department of Energy's Top Building Technology project in 1996. Learn more about this fund on the ECM website.
Externally Sourced Funds from the State or Other Government Entities:
- The Texas LoanSTAR Program is one of the best-documented building energy-efficiency programs in the United States. Using a revolving loan approach, the statewide funding program is the pre-eminent energy-efficiency demonstration program. There are over 191 LoanSTAR projects worth more than $240 million. With one of the best quality control mechanisms, the program has been responsible for over $212 million in energy savings, returning that money directly to taxpayers.
- The Home Upgrade, Carbon Downgrade (HU/CD) Community Revolving Loan Fund of Chula Vista provides low-interest financing to property-owners for energy efficiency retrofits and renewable energy installations at their homes or businesses. Funded by the American Recovery and Reinvestment Act of 2009, HU/CD helps to reduce utility costs and capitalizes on existing rebate opportunities. Priority is given to retrofits with at least a 10 million British thermal unit (Btu) savings per $1,000 spent and a payback period of five years or less. Read more in the HU/CD Program Plan.
- The Colorado Governor's Energy Office also utilizes its federal allocation from the Recovery Act as an RLF. The loan supports "eligible and extraordinary projects that promote energy efficiency or renewable energy." Priority is given to companies and projects that have a harder time securing private financing. In addition to retrofits and installations, monies can be used as direct support to renewable energy companies. For more information, please refer to the Database of State Incentives for Renewables & Efficiency.
- For more information about Revolving Loan Funds, please refer to Greening the Bottom Line: the Trend toward Greening Revolving Funds on Campus.