The awarding of a federal, multi-million grant to help jump-start an ambitious, energy-efficiency program for island homes and businesses may lead to Puget Sound Energy postponing adding infrastructure because islanders have exceeded facility capacities during peak-load periods.

Bainbridge will receive the lion’s share of a $4.88 million U.S. Department of Energy conservation grant, which includes a small piece of the pie going to Bremerton.

The community’s project is one of the DOE’s 20 Energy Efficiency and Conservation Block Grants (EECBH) awarded late last week, and the third largest in size – ranging between $1.5 million and $5 million.

City Council member Hilary Franz considers the grant and the program it will help create a potential “game changer” because it could allow PSE to delay building a new substation (and transmission line).

The project, known as the Bainbridge Island Energy Challenge, will be managed by Conservation Services Group (CSG), a nonprofit located in Westborough, Mass., which helps put together a renewable energy plan and program that will ultimately transform a community’s use of energy.

A large number of islanders have worked on the project during the last year, many of whom were members of two energy organizations: the Community Energy Task Force (now known as Positive Energy) and Community Energy Solutions (CES), a nonprofit dedicated to renewable energy and efficiency. Positive partnered with PSE last year to embark on a “smart-grid rapid response” program in which about 600 homeowners participated.

The grant will enable home and small-business owners to sign up for either a one-hour inspection and/or a more extensive three-to-four-hour assessment. The initial walk-through inspection will be free of charge and available to 4,000 Bainbridge and 1,000 Bremerton homes.

The “deep energy” audit will feature extensive diagnostic testing and will include a charge for the testing and evaluation of all major components of a home. It will be available to 1,000 and 100 residents in Bainbridge and Bremerton, respectively.

The work will be done primarily by local and regional contractors and energy auditors. Franz, who is also a member of Positive Energy, said it will create some 65 living-wage green jobs and another 252 jobs indirectly through additional economic activity.

“It will enable us to create a cleaner energy future for our community,” she said.

“Our biggest challenge is to make our pre-1980 homes (built before more- stringent building codes were adopted) more energy-efficient. With an aggressive community-wide energy program we think we’re capable now of doing that, thanks to the grant.”

Grant Ringel, director of planning and marketing for PSE’s Energy Efficiency Division, said much effort will be needed to increase the island’s energy efficiency development to the level that PSE’s power capacity is no longer being exceeded during cold-weather periods. But he sees the grant and the effort that led to it as a giant step forward.

“It really opens the door to the community being able to drive its own future by taking incremental steps toward energy efficiency,” Ringel said. “Obviously, the drive of the group and a tremendous influx of resources could fundamentally change the outcome. The data will drive that decision. If it (a new substation) is not needed, it won’t be built.”

Ringel said he and PSE, which has been involved with the Positive Energy group by providing data to assist the grant proposal, are excited about the outcome and what it could mean to island residents.

“The community involvement and organization that’s taken place during the last year and half is being recognized through the grant,” he said. “The dedication of the team members – with countless sleepless nights from what I understand – is bearing fruit. And in the process of applying for various grants, team members were learning along the way and putting together an application that was spot on. That’s why they were successful.”

CES’ Tammy Deets, who was involved with the grant process from the beginning, said such energy programs have been slow to emerge in the West Sound area. But once it gets under way, it should be successful because the audit-based program will ultimately provide proof that it’s cost-effective in the long run to make homes more energy efficient.

“The grant is a fuel-neutral proposition designed to help all of those who want to save energy, save money, and make their homes more comfortable,” Deets said. “The ultimate purpose is to create a sustainable, energy-efficient industry here and in Kitsap County.”

The county, the City of Bainbridge Island and Kitsap Credit Union are also involved through a revolving loan fund that was created by two EECBG awards totaling $350,000 – $250,000 given to the county and $100,000 to the city.

The “pay as you save” program eliminates up-front capital for homeowners who decide their homes need to be retrofitted. In effect, the principal and interest on the loan – from the credit union, in this program – are closely matched to the dollar value of the energy savings from each project, Deets said.

“The money in reserve can only be used for defaults,” Franz said. “KCU thinks that will only be 1 percent. So, as the loans are paid off, the reserve has the potential to generate up to $5-to-10 million in funding for the program.”

The financing component of the retrofitting is critical “because then you won’t have too much out-of-pocket cash during the first five years or so,” Deets said. “You want to have a long-term financial plan because some of the measures may take a long time – seven to eight years to pay for the insulation, for example, or maybe 15 to 20 years for windows.”

Why Bainbridge Island? A confluence of conditions has created a demand on the island for a comprehensive residential energy-efficiency program, according to the project’s application summary:

“These conditions include a 20 percent unemployment rate among construction workers; a proposal by PSE to build a new transmission substation that has attracted substantial controversy…; and the subsequent emergence of the community becoming committed to show energy efficiency as the cleanest energy source.”

The program “will also increase the knowledge and skills of home performance contractors and retrofit workers by expanding technical and business skills training,” according to the Energy Challenge’s statement.

The goal is to get the project under way sometime during the fall, Deets said.

Information regarding it will be provided during the next few months by CSG’s website reports and workshops.