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On-Bill Financing

On-Bill Financing (OBF) refers to a type of loan that can be used to invest in enhancing the energy efficiency of a building. The utility provides a loan to the municipality, and the loan is repaid through monthly energy bills based on the saving tendencies thus saving administrative costs. The loan is, however, reflected on the municipality’s balance sheet. OBF is considered to be very easy to set up for small and medium enterprises and simple to implement. Nevertheless, loans should be estimated to be adequate to repay using savings.

Advantages: On-bill financing exposes the municipality and utility to a considerably low risk, thereby giving the municipality chance of repaying its energy bills. The implementation arrangements are also relatively simple. 

Disadvantages: To pursue on-bill financing implies that the municpality needs to be able to handle the financial burden associated with the investment in its balance sheet.

Projects that can be financed with this model: The model is suitable for small- to medium- size projects, such as to improve energy efficiency in buildings.

Further reading:

Novikova, A., Stelmakh, K., Hessling, M., Emmrich, J., and Stamo, I. 2017. Guideline on finding a suitable financing model for public lighting investment: Deliverable D.T2.3.3 Best practice guide. Report of the EU-funded project “INTERREG Central Europe CE452 Dynamic Light”, October 2017.

 

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