In the quest for more widespread adoption of energy-efficiency measures, cost is one of the biggest challenges, as it is for so many of the new technologies considered integral to green building. However, in one state, officials may have found a solution.

This summer, state lawmakers in New York approved legislation that will allow home- and business-owners who make efficiency upgrades to finance the improvements through a unique arrangement that will have no practical effect on their pocketbooks.

Called “on-bill financing,” the program will enable home- and business-owners to pay off loans for their improvements through their utility bills. More importantly, the legislation requires that the monthly payments for the loans must be equal to or less than the savings the property owner will see on their monthly bill because of the upgrades they install. So the net result for the property owner will be a utility bill that goes down even with the loan payments factored in. Even in the worst-case scenario, when a customer installs high-cost improvements, their bill will remain the same.

According to Dayle Zatlin, a spokesperson for the New York State Energy Research and Development Agency, which will administer the program, this creative financing solution overcomes “the two biggest obstacles to efficiency upgrades” by eliminating the impact of the upfront capital costs and by simplifying what is typically a complicated payoff process. Furthermore, she said that the loans are “transferable” with the property, so if a customer moves, the loan stays with the property, not the customer.

The on-bill financing mechanism is part of a much larger program, “Green Jobs New York,” which encourages energy efficiency in the state. Another component of this program will provide the financing, and unlike other government-supported incentives, the funds will be recyclable, creating less risk that they will go dry. The $51 million revolving loan fund will be replenished by payments on the first round of loans, making more funds available for future loans and extending the life of the program.

Major upgrades that are eligible for the program include central air conditioners, electric water heaters, lighting fixtures, ventilation fans and other energy-efficient upgrades. A property must first undergo a free, whole-house energy audit to be eligible for the loans.