In my latest Green State column on Grist, I explore new strategies to pay for commercial energy efficiency retrofits:
On the heels of San Francisco’s announcement last week that it plans to spend $150 million greening up homes, comes a new report that studies a slew of other innovative ways to finance energy efficiency improvements for all types of buildings.
It’s no big surprise that the key to ramping up the energy efficiency industry and fostering technological advances is no-money-down financing so building owners can avoid the capital costs of retrofits. And that’s exactly what the California Clean Energy Fund (CalCEF) is working toward.
Energy efficiency “immediately saves money for end-users, improves the bottom line for companies, reduces local exposure to electricity grid outages and offsets the need for new power plants,” wrote the authors of the report from the CalCEF, a non-profit venture capital outfit based in San Francisco. “Yet, efficiency upgrades and their respective financing options are often out of reach for most end-users, as the initial capital cost exceeds near-term savings.”
Yes, you read that right—CalCEF is a non-profit VC, a product of the California energy crisis of 2000-2001—remember Enron?—that resulted in the bankruptcy of Pacific Gas and Electric, Northern California’s dominant utility. As part of the bankruptcy settlement, CalCEF was created to accelerate energy innovation and was seeded with $30 million from PG&E.
The best known such program is Property Assessed Clean Energy, or PACE, in which cities float bonds to finance retrofits and homeowners pay back the cost through a surcharge on their property tax bills over 20 years.
While that can work well for middle and upper-middle class homeowners in environmentally conscious communities, PACE is not as useful for commercial buildings, office towers, and industrial sites, whose owners may be solely motivated by the bottom line, according to the CalCEF report.
“High upfront costs are preventing large entities from addressing energy inefficiencies,” says Paul Frankel, the managing director of CalCEF Innovations, the organization’s initiative that focuses on developing green energy financing and policy.
That led CalCEF to investigate possible solutions to the dollar dilemma, some of which are currently being implemented.
One workaround is something called on-bill financing. For instance, San Diego Gas & Electric will finance up to $100,000 in energy efficiency retrofits for commercial customers (and up to $250,000 for school and government buildings). Recipients then pay back the loans through a surcharge on their monthly utility bill.
Best of all, the loans carry zero percent interest, though business customers have to repay them in five years. In the first two years of the program, San Diego Gas & Electric financed 180 retrofits and has another 100 in the queue. Over the next two years, the utility will make $41.5 million available for on-bill retrofits.
You can read the rest of the column here.
Green Wombat 