Case Studies
Switch It Up!
Orcas Power and Light Cooperative
Heat pump maintenance on Orcas Island, WA. Photo Credit: OPALCO
Orcas Power and Light Cooperative (OPALCO), an electric cooperative (co-op) serving the San Juan Islands in northwest Washington, launched the “Switch It Up!” on-bill program in April 2019. The program provides debt-free financing to the co-op’s members for the replacement of fossil-fueled residential and commercial equipment with electric equipment. The program also finances electric vehicle (EV) charging stations for both residential and small businesses. Program participants repay OPALCO for these measures as a line item on their monthly bill. Since its inception, Switch It Up! has financed 210 projects for $2 million in energy upgrades. The program’s goal is to finance 100 projects per year for the next 10 years. This program is part of OPALCO’s “This Electric Life” initiative to reduce the San Juan Islands’ reliance on fossil fuels by transitioning to all-electric buildings and vehicles (including island ferries).
OPALCO provides nearly carbon-free electricity to its members across the island chain, thanks to abundant access to hydropower. However, approximately one-third of OPALCO-served buildings are heated by burning fossil fuels (e.g., propane and fuel oil). With no bridges connecting the islands to each other or to the mainland, delivered fuels need to be ferried in at great costs. This adds to already high heating costs for those members with propane-powered end-use devices. This increases energy burdens, particularly in the winter season, which presents challenges to low- and moderate-income (LMI) households served by OPALCO.
To help its members reduce their energy burden and move away from fossil fuels, OPALCO’s “Switch It Up!” program focuses on beneficial electrification. This allows OPALCO to increase revenue by moving additional energy uses onto its power grid, but in a way that provides member value. And by decreasing propane and fuel oil use, co-op members improve their quality of life, have more predictable home heating costs, and reduce their carbon footprint.
“Switch It Up!” encourages members to lower their total energy bill by replacing their old propane-powered furnace with a new and more efficient air-source heat pump.
“Members are so grateful for the opportunity to install these beneficial measures—for efficiency and cost savings—and the on-bill financing program removes the barrier to entry for most. It levels the playing field—the co-op way,” said Suzanne Olson, OPALCO’s public relations manager. “The on-bill financing program—Switch It Up—gives members access to efficiency, cost savings, and improves our rural housing stock. The benefits will continue for generations.”
Program Details
The program is capitalized by a $5.8 million zero-interest loan from the U.S. Dept. of Agriculture (USDA) through the Rural Energy Savings Program (RESP). This initial capital was recently supplemented with two additional RESP loans totaling $42 million. The new capital will enable OPALCO to finance a wider range of clean energy measures, including rooftop solar panels, dispatchable in-home electric battery storage devices, community solar subscriptions for LMI households, and energy efficiency retrofits. RESP is a relatively new federal resource that allows rural electric utilities to finance a wide variety of behind-the-meter energy efficiency and clean energy projects, including beneficial electrification projects.
“Switch It Up!” finances the cost and installation of mini-split heat pumps, heat pump water heaters, and electric vehicle charging stations. Through the program, OPALCO members can also finance the cost of wiring their home or business for fiber optic internet as long as it supports a smart energy device that will improve overall building efficiency. This “fiber to the premises (FTTP)” financing must be paired with the purchase of a smart thermostat or other energy efficiency device (including any “Switch It Up!” measure). OPALCO members can borrow up to $36,000 for all these four projects (including the fiber to the home), with no upfront costs.
Repayments are made over time—up to 10 years—depending on the cost-effectiveness of measures installed. Longer repayment periods allow for more affordable monthly repayments as project costs are aligned with savings generated by the upgrades. To qualify, co-op members need to have one year of on-time bill payment history, but credit scores are not checked. On-bill repayment obligations are tied to the meter (not the person), allowing for the charges to transfer to the next owner or renter. Participants sign an energy conservation agreement, and there are no loan documents involved. The zero-interest RESP loan allows OPALCO to charge a low-interest rate (2%) to participants, which is used to pay for program administration costs and to fund a $115,000 loan loss reserve. These design elements promote affordability and accessibility for participants, while still giving OPALCO high confidence that it will recover its investments.
| Eligible measures | Amount financed | Repayment period |
|---|---|---|
| Ductless air-source heat pumps | $15,000 | 10 years |
| Fiber-To-The-Home (FTTH) | $15,000 | 10 years |
| Heat pump water heaters | $3,500 | 5 years |
| Electric vehicle charging stations | $2,500 | 3 years |
For EV charging stations, the program finances both the Level 2 charging station and the electrical rewiring needed to run the station. Financing EV charging stations for businesses (e.g., restaurants, and local shops) can drive economic development while reducing carbon emissions. OPALCO is looking into using Volkswagen settlement funds to finance 12 electric bus charging stations for the local school district. “Switch It Up!” can also fund Level 3 charging stations, which carry an approximate price tag of $35,000.
Program Implementation
For its first project, “Switch It Up!” financed a partial conversion of the propane-powered heating system of Outlook Inn, an independent hotel in Orcas Island. For a $105,000 investment, the old system was removed and replaced with electric ductless air-source heat pumps for about half of the hotel’s forty rooms. The project reduced the hotel’s overall energy costs, slashed its carbon emissions, and gave hotel guests more control over their room temperature, including the option for air conditioning in the summer. The hotel’s total energy costs are lower even while factoring in the program repayment charge on its OPALCO bill. The hotel reinvested these savings on additional air-source heat pumps, energy efficiency retrofits, and solar panels on their roof.
Two years into the program, OPALCO has completed 210 projects, representing over $2 million in energy upgrades. Another 29 projects totaling $300,000 are currently in development. Most of the projects have been air-source heat pumps, with five heat pump water heaters financed.
In a survey of first-year program participants, OPALCO found very high satisfaction with the program (~95%) and that there is still a good appetite for additional measures. The greatest measures of satisfaction were “improved comfort in my home” (90%) and “energy savings on my bill” (70%).
Looking Ahead
The early program success spurred OPALCO to successfully secure $41 million in additional RESP loans. These additional funds will allow the Switch It Up! Program to do additional beneficial electrification projects, as well as expand into weatherization, community solar, and behind-the-meter energy battery storage projects.
For the expansion into community solar, OPALCO is exploring the development of several mid-sized projects that would total five megawatts. The “Switch It Up!” program would help LMI co-op members own a portion of these systems by financing the $725 per panel cost. Participating members will repay OPALCO via a line item on their bill over a 10-year period.
Along with six other co-ops, OPALCO is participating in a Department of Energy-funded community solar project, Achieving Cooperative Community Energy Equitable Solar Sources (ACCESS). ACCESS is led by the National Rural Electric Cooperative Association (NRECA) and aims to develop models and best practices for co-ops to make solar more accessible and affordable for rural communities and for low-and moderate-income households.