New York startup Sealed just received a $5 million credit facility from the New York Green Bank. It's not the biggest winner in terms of financing dollars from the New York Green Bank, but the financing will be used for one of the more novel applications in the Green Bank’s portfolio, rather than as a boost to the maturing solar loan and power purchase market.

Sealed offers no- and low-cost efficiency retrofits that are paid back through a Sealed bill instead of through the utility bill -- similar to a residentialsolarlease. Homeowners are guaranteed a lower bill than they would have paid through their utility.

“Customers have a real aversion to taking out loans to pay for these projects,” said Andy Frank, president and founder of Sealed. “They just see it as another stressor.”

The New York City-based startup is working with National Grid on a REV demonstration pilot that is still awaiting final approval and is in talks with two other New York utilities.

Sealed has done about 150 projects so far, mostly through word of mouth and direct sales efforts. Frank said that volume is growing at about 40 percent per month. The company has mostly signed customers on Long Island but will use the $5 million from the Green Bank to continue to scale up in other counties in New York.

Most of the upgrades are for renovations such as air sealing and HVAC work. The average project is about $10,000 to $15,000 after rebates and has a seven- to eight-year payback.

The key to customer adoption is not the math. It’s fixing a comfort problem inside of the house. If a customer wants a more extensive renovation that does not make the payback more compelling, the customer has to pay for those additional upgrades.

The NY Green Bank expects its $5 million credit facility will allow for about $7.5 million in Sealed projects. The bank has only done a few energy efficiency deals, although unlocking the market for energy efficiency is one area that interests the bank.

In early 2015, the NY Green Bank put up $100 million along with Citi for Renew Financial’s Warehouse for Energy-Efficiency Loans program. The goal is to expand the availability of loans to homeowners and promote the creation of a marketplace for the securitization of residential energy-efficiency loans. 

As with Sealed, the homeowners are often looking for financing because they have a renovation or upgrade they want to complete, whether that’s a new HVAC system or an extensive retrofit of an old house. Unlike Sealed, the project is not paid back through energy bill savings; rather, the loan product can be offered by contractors that are already in the home closing deals. The average loan size is about $10,000 in New York.

No green bank has been able to crack the code on unlocking and securitizing an energy efficiency market yet. New York’s Green Bank, for instance, has given far more to solar loans and PPAs, which are easier to securitize.

In the most recent round that included Sealed, for instance, the Green Bank put in $25 million as part of a broader $340 million credit facility to Sunrun to aggregate solar power-purchase agreements. The Green Bank also announced $10 million as part of a revolving credit facility for residential solar loan company Solar Mosaic as part of $200 million financing deal.  

Alfred Griffin, president of NY Green Bank, said more efficiency dollars would flow in 2016, including for institutional energy-efficiency projects that are focused on the commercial and industrial sector.

It will take a portfolio of market-based solutions to energize the efficiency market across the U.S., and that portfolio is just beginning to emerge. It won’t just come from on-bill financing and cheaper loans, but also performance-based utility efficiency programs and property-assessed clean energy financing, which has ballooned to more than $2 billion in just a few years. For New York to hit its target of slashing building energy consumption by nearly a quarter by 2030, it will likely need all of the above -- and maybe more.