In the fight to save energy and reduce pollution, everyone always says that energy efficiency is the “low-hanging fruit.” That’s because upgrading appliances and building performance typically saves enough energy and therefore money to pay for itself in just a few years.
So why aren’t commercial building owners in particular taking more advantage of the opportunities? And why aren’t lenders promoting these options — particularly when some estimates indicate that there could be $72 billion in market potential that’s being left on the table?
It’s the subject of much insider discussion, and a new report from Institute for Market Transformation (IMT) attempts to analyze the challenge through interviews with building owners and bankers. As Clean Energy Finance Forum reports:
“The key finding of our study was that lenders perceive a low level of demand for energy-efficiency finance,” said Leonard Kolstad, senior program associate at IMT. “That’s something we expected.”
What factors are at the root of this apathy? Building owners are highly skeptical energy retrofits will deliver reliable returns on investment, according to an article Clean Energy Finance Forum published in January 2015.
What would help? For starters, more outreach to building owners about how they can profit (i.e. raise rents) from retrofits. More building energy data would help, too, to show owners the current inefficiencies and also to prove the savings stream from certain retrofits.
It would also help to give banks a more formal role in energy efficiency incentive programs, so that banks were involved in utility outreach programs. And banks could likewise include efficiency finance as part of their environmental, social and governance (ESG) programs.
A move to pay-for-performance energy finance, as Berkeley and UCLA Law documented in a new report, could jumpstart this collaboration. As we detail in the report, measuring a predictable savings stream from specific retrofit improvements could give financial institutions something to bank on and finance, akin to rooftop solar.
Otherwise, business-as-usual is ignoring an unusual amount of business.
I hope you can join me this morning as UC Berkeley and UCLA Schools of Law present a webinar on how California and other states can unlock private capital market financing for energy retrofits. It begins at 10am and ends at 11am, and you can register here to join.
The webinar will feature findings from our new report, Powering the Savings. The webinar will also include the following expert speakers:
- Jeanne Clinton, Special Advisor to the Governor for Energy Efficiency, California Public Utilities Commission
- Cynthia Mitchell, energy economist and TURN consultant
- Dennis Quinn, Chief Operating Officer and Co-Founder, Joule Assets. Inc.
It comes on the heels of the Sacramento Bee running this op-ed recently on our report and the need to address this challenge of making the state more efficient with the energy we produce.
Hope to “see” you there. We’ll also post a link to the recording in a few weeks.
California’s energy efficiency efforts for existing buildings have been treading water — when we need much faster progress. The Sacramento Bee ran an op-ed from me today on ways to address the challenge:
A solution might be to emulate the success of rooftop solar. It has spread quickly in part because many companies offer no-money-down, long-term loans, backed by capital market investment. The same financing could work with energy-efficiency retrofits, since they also promise to reduce electricity bills at a steady rate.
So why is private capital sitting on the sidelines? Because, unlike with solar panels, we haven’t been able to reliably measure the energy we don’t use due to energy-efficiency measures in buildings – and provide the documented, standardized savings to attract large-scale financing.
Fortunately, technology is coming to the rescue. New software and methodologies can more accurately measure and verify the energy saved through efficiency improvements, and can account for a variety of factors, such as weather and building use.
But the state needs a uniform, state-sanctioned methodology and technology standard in order to encourage utilities to base incentives on the measured efficiency gains. Ultimately, we’d like to see utility procurement of energy savings the same way they procure generation resources, as San Diego Gas & Electric just did in procuring 18.5 megawatts of energy efficiency, working with Willdan Energy Solutions on specific retrofit methods for local buildings.
You can read more on this topic in our latest Berkeley/UCLA Law report, Powering the Savings. You can also register to attend our webinar on this topic on Monday, April 18th at 10am.
Much of our efforts to reduce carbon emissions involves fairly complicated and advanced technologies. Whether it’s solar panels, batteries, flywheels, or fuel cells, these technologies have typically required public support to bring them to scale at a reasonable price, along with significant regulatory or legal reforms to accommodate these new ways of doing old things, from generating power to driving a car.
Yet ironically, here in California we seem to be making the most progress on some of these more technologically advanced areas, and not enough progress in one of the simplest and most cost-effective means of reducing carbon emissions: using less energy in our existing buildings.
Being more energy efficient certainly can involve technological advances, like LED lights instead of incandescent bulbs, lights with sensors that turn off when people leave a room, or more efficient heating or air conditioning units. But it is fundamentally about doing the same with less, and it can often pretty quickly pay off, given the reduction in utility bills that result.
But in California, despite billions spent on energy efficiency efforts, our energy efficiency efforts are barely keeping pace with the increasing demand for electricity. Current utility efficiency programs focus on voluntary, often self-financed measures, with rebates and fixed incentives meant to spur them on. Meanwhile, administrator costs are taking up half of the budgets for many efficiency programs.
Clearly, something needs to change if we are to have any hope of achieving our long-term climate and energy goals in the state. After all, it’s a waste to focus on expensive new renewables and energy storage if we’re not making better progress on the efficient use of the energy we already have.
Given this challenge, the state legislature recently acted to change the nature of our efficiency programs. SB 350 (De Leon, 2015) requires a doubling of efficiency in our buildings by 2030, while AB 802 (Williams, 2015) in part requires utilities to plan for efficiency programs that compensate building owners based on the measured energy saved. These steps will be necessary to change the paradigm and unlock more private investment in energy efficiency retrofits.
To recommend policies to boost this capital market financing for energy retrofits, UC Berkeley and UCLA Law are today releasing a new report “Powering the Savings: How California Can Tap the Energy Efficiency Potential in Existing Commercial Buildings.” The report is the 17th in the two law schools’ Climate Change and Business Research Initiative, generously supported by Bank of America since 2009.
The report describes ways that California could unlock more private investment in energy efficiency retrofits, particularly in commercial buildings. This financing will flow if there’s a predictable, long-term, measured and verified amount of savings that can be directly traced to energy efficiency measures. New software and methodologies can now more accurately perform this task. They establish a building’s energy performance baseline, calibrating for a variety of factors, such as weather, building use, and occupancy changes. That calibrated or “dynamic” baseline can then form the basis for calculating the energy savings that occur due specifically to efficiency improvements.
But the state currently lacks a uniform, state-sanctioned methodology and technology standard, so utilities are reluctant to base efficiency incentives or programs without regulatory approval to use these new methods. The report therefore recommends that energy regulators encourage utilities to develop aggressive projects based on these emerging metering technologies that can ultimately inform a standard measurement process and catalyze “pay-for-performance” energy efficiency financing, with utilities able to procure energy efficiency savings just like they were a traditional generation resource.
To learn more about the report and its recommendations, please join us for a webinar on Monday, April 18th from 10 to 11am. Speakers will include:
- Jeanne Clinton, Special Advisor to Governor Brown for Energy Efficiency, California Public Utilities Commission
- Cynthia Mitchell, energy economist and TURN consultant
- Dennis Quinn, Chief Operating Officer and Co-Founder, Joule Assets. Inc.
You can register via this site.
Hopefully, by tapping into the state’s spirit of innovation, California leaders can show the way to an energy efficiency revolution the way the state helped create a strong market for other clean technologies, like solar panels and energy storage. Because failure on the efficiency front could otherwise nullify so much of our progress in these other areas.
Even with more buildings, the United States is doing well on energy efficiency, as Greentech Media reports:
New data from the Energy Information Administration reinforces that shift. The agency reported this week that nationwide electricity sales dropped by 1.1 percent in 2015. That marks the fifth time in eight years that U.S. electricity sales have fallen. Meanwhile, yearly construction of new building space is growing by tens of millions of square feet.
“The flattening of total electricity sales reflects declining sales in the industrial sector and little or no growth in sales to the residential and commercial building sectors, despite growth in the number of households and growth in commercial building space,” wrote the agency.
It’s always tough to pinpoint the causes. Certainly the recession made a dent, and so did possibly warmer weather or more growth in warmer climates.
For my part, I would guess that efficiency is now pretty much standard with new building design, and the steep declines in efficient lighting with LEDs are probably having a big impact.
Either way, it’s good news and vital for achieving long-term climate goals.
The simple fix of switching out old light bulbs to LEDs is making a major dent in demand on the nation’s power grid:
The nation’s largest grid, serving more than 61 million customers from Washington to Chicago, is revising its demand forecasts after recognizing that better lighting has undercut its projections. Swapping all of Thomas Edison’s incandescent lightbulbs with lamps containing light emitting diodes, or LEDs, would save enough electricity to power 20 million American homes, according to the Energy Department. …
Lighting accounts for about 5 percent of a home’s energy budget and switching to more efficient bulbs is one of the fastest ways to cut those costs, according to the Energy Department. LEDs use 75 to 80 percent less energy than incandescents and last 25 times longer.
LEDs will account for 83 percent of the lighting market share by 2020 and almost all of it 10 years later, the Energy Department says. The cost of the bulbs has fallen by more than 85 percent in six years, according to ACEEE, a Washington-based non-profit that promotes conservation. Bulbs are now available for less than $5.
This news comes on the heels of Ikea announcing its only stocking LEDs going forward in its stores.
While switching bulbs is a relatively simple, cost-saving upgrade, other retrofit methods, such as efficient appliances and better insulation will also help decrease demand. It’s certainly easy to focus on shiny new clean technologies, like solar and batteries, but ultimately we’ll need major improvements in efficiency to meet our long-term climate goals. The rapid uptake of these new bulbs makes for a great start.
So says a new study by UC Berkeley economists Severin Borenstein and Lucas Davis. After looking at IRS data on tax credit programs like for electric vehicles, renewable energy, and energy efficiency improvements, they found that most of the benefits are going to top-income earners. In part it’s because lower-income renters don’t have access to property-based credit programs.
But they also found that the programs are inefficient at encouraging better energy usage:
What about efficiency? Although tax credits may initially seem like a good idea, they are actually quite a poor substitute for first-best policies like a carbon tax or cap-and-trade program. Probably the single biggest limitation of a tax credit is that it cannot achieve the efficient level of usage. Take energy-efficient windows as an example. A tax credit can encourage households to install better windows, but it cannot get households to use less heating and air-conditioning. A carbon tax, in contrast, would encourage households both to install better windows and to use less heating and air-conditioning.
One could argue in response that the inequities may even out over time — as high-income residents buy electric vehicles and renewables like solar, the costs are coming down and bringing the technologies within range of lower-income residents. And these programs are certainly better than nothing.
But in the long term, they should be replaced by the programs that Davis and Borenstein advocate: a carbon tax or rigorous cap-and-trade system.
Big news in the climate world yesterday as California Governor Jerry Brown announced ambitious 2030 targets for greenhouse gas emissions for the state:
The target, contained in an executive order and expected to be folded into pending legislation, seeks to reduce emissions in California 40 percent below 1990 levels by 2030.
The goal is in line with one adopted by the European Union last year, and proponents characterized it as the most aggressive in North America.
“With this order, California sets a very high bar for itself and other states and nations, but it’s one that must be reached – for this generation and generations to come,” Brown said in a prepared statement.
California is well on pace to meet our 2020 goals set forth by AB 32. But admittedly, we’ve had some winds at our back. The recession significantly cut energy demand and also seems to have reduced driving miles, although there could be multiple factors there. Cheap natural gas has also helped.
But make no mistake, California has encouraged significant progress on renewables and electric vehicle deployment, and is starting to make strides on energy storage as well. These will be critical technologies to meeting the governor’s 2030 goals. But the other big challenge will be the less sexy energy efficiency efforts, which so far the state has made only moderate progress on.
Still, with these goals, the path is now laid out for businesses, regulators and the public to follow. And California will provide a strong example for other states and countries by showing how to decarbonize the economy without hurting economic growth.
I’m always on a quest to reduce my home energy consumption, so I was intrigued over the winter holidays when Markos Moulitsas of the political blog Dailykos.com described his intense efforts to save money and eliminate waste at his house. In particular, he noted the huge energy consumption of DVR cable boxes:
My TV service is provided by DirecTV. My satellite box was drawing 45 watts, continuously. While it had a “sleep” function, it merely dropped consumption by a single watt. You see, devices with DVRs are continously recording, so even if you’re not recording a specific show, it’s recording the last hour of whatever channel you are on. Why? Who the hell knows.
If you have cable, you may be wasting even more on vampire draw. An NRDC study found that set-top boxes drew roughly 50 watts whether they were on or off, or about 446 kWh per year. At my rates, that would be about $85, for something that is on just a fraction of the day.
Then, earlier this year, DirecTV introduced a new settop box mid-last year that consumed 20 watts, less than half the draw of the previous model. I harassed the company until I had my replacement, for free—the most cost-effective upgrade of all. So if you’re sitting on a cable box that you’ve had for a while, see if there’s a newer more efficient model available. The cable companies are under a lot of pressure to improve their energy efficiency, so this could be a great way to save money for little effort.
Since I love local sports, I haven’t been able to “cut the cord” and go all-internet/no cable. So I made it a mission to swap out my box from 2010 and get a new one this past weekend. If anyone is interested in saving energy without sacrifice, this is an easy call to make.
To learn more about efficiency upgrades, I recommend reading Markos’s diary entries on the subject. And for a relatively painless way to find out how to save energy, sign up for Home Energy Analytics on-line. It’s a free web-based software program that can remotely read your Smart Meter and then identify the appliances and features that are using — and wasting, as the case may be — electricity in your house.
