Opinion Dynamics led an innovative and strategic market study to characterize California’s residential energy efficiency finance market. Our research, done to provide a “snapshot” of the market before the CA Residential Energy Efficiency Loan (REEL) Pilot launched, characterized the financing products available to customers, how contractors are currently supporting energy efficiency financing products, the awareness and uptake of energy efficiency financing amongst homeowners, and the motivations and barriers in the marketplace.

Our leading-edge study was designed to characterize both the supply and demand sides of the market, marrying consumer and contractor demand with the financial products available to them. This interdisciplinary analysis combined findings from financial, behavioral, energy, and market research to measure 26 different market characteristics. This market characterization serves as a critical baseline against which the State can measure market transformation in the long-term, due to REEL or other efforts.

Gathering information from lenders such as lending volume, underwriting, eligibility criteria and energy efficiency requirements, is extremely challenging given that lenders treat this as sensitive and confidential information.

To meet this challenge, we shifted to an innovative strategy by designing a mystery borrower method. Our consultants (or the “mystery borrowers”) acted as homeowners wishing to complete home improvement projects, including some energy-efficient upgrades. The mystery borrowers spoke with lenders throughout the state and asked for general loan offerings (such as home equity loans or lines of credit, unsecured loans, and credit cards), as well as any energy efficiency-specific loan offerings that were market-based or supported by taxpayer or ratepayer dollars. To capture the range of loan offerings available in the market, the mystery borrowers asked about different cost scenarios with different credit scores during the call. Our sampling approach was based on the active lenders in California and included a range of lender types from banks (national, regional, and local) to credit unions.

Opinion Dynamics’ creative solution to the central and significant challenge of this study embodies our nimble and dynamic approach to research and evaluation. Through the mystery borrower interviews, we successfully identified the typical interest rates that homeowners are offered in the marketplace, depending on the size of the project to be financed and the borrower’s creditworthiness. The information gathered and presented through this research helped to identify how the REEL pilot could fill a gap in the marketplace by identifying the market segments currently underserved by existing financing products. Additionally, this information is critical for measuring longer-term market changes that may occur due to REEL, or other efforts. In the near-term, this study provides comprehensive market information to inform finance-related policy decisions and program design.