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Highlights from the 6th Annual Energy Efficiency Finance Forum

May 22, 2012 - 2:11pm

By Casey Bell, Senior Economic Analyst

This month, ACEEE hosted its 6^th Annual Energy Efficiency Finance Forum in Boston, Massachusetts. The event was attended by 250 representatives from utilities, banks, venture capital firms, energy efficiency program offices, real estate firms, nonprofit organizations, consulting firms, and state and local government offices. Participants enjoyed a rich program that featured presentations centered on this year’s theme of “Getting to Scale.”

Some overarching ideas from this year’s conference include:

Data, data, data: There are numerous models for energy efficiency financing available on the market today, but in order to tap into the full potential of private sector capital investment, we need to focus on not just collecting but meaningfully recording and reporting data on the financial performance of existing products. Perhaps more importantly, there is a need for standardization of existing data.

Kerry O’Neill, of the Clean Energy Finance Center, during a panel on developing a secondary market for energy efficiency finance, also suggested that the field may be missing a data aggregation platform. There appear to be many opportunities for leaders in the field to dialogue and coordinate efforts on this particular issue.

There is also some debate surrounding the role of energy savings data in attracting secondary market finance. While many in the utilities and efficiency professionals see great value in these data, we need to do a better job of describing and proving its value to the finance community and other new actors in this space.

Treatment of the multifamily market: Many conversations centered on unlocking the potential of the multifamily market. A recent CNT/ACEEE report highlights the potential of this market where cost effective upgrades could achieve energy savings of 15-30%. It also highlights challenges such as the split incentive barrier.

There appears to be some consensus that this market segment shares some commonalities with both the large commercial and residential markets. It is likely that tools such as on-bill financing can be specially tailored to address some of the issues specific to this challenging but high potential market. Programs such as the MPower Program, highlighted by John Warner of Blue Tree Strategies during a panel discussing financial innovation for underserved markets, leverage elements of on-bill programs with energy service charge models to provide an innovative delivery model to the multifamily sector.

Sadie McKeown, in that same session, touched on the idea that incorporating energy usage into the valuation of physical spaces could further drive financial innovation. It appears that there is potential to engage philanthropic interest in this sector to develop financing that values co-benefits from energy efficiency investment including preserved affordability, indoor air quality, and other health and safety improvements in addition to energy and cost savings.

Making the most of retail solutions: The field of energy efficiency finance still appears to be in a period of experimentation, with few one-size-fits-all solutions. As one panelist noted: “there are no silver bullets, only silver buckshot.” While large financial institutions can only commit to projects that have achieved a certain level of scale, it is still very important to continue to develop and evaluate versatile new program designs at the local level, which may become tomorrow’s best practices. In order for best practices to achieve the momentum to scale up, local lenders will play a critical role in financing smaller projects. In addition to providing capital, these institutions also possess the knowledge and experience to assist program administrators with risk management, and can play an important role in defining energy efficiency as an asset class.

Presentations from the event are available on ACEEE’s website. Many thanks to our co-chairs, sponsors, and speakers for making this year’s event a great success!

Categories: Economic Development, Efficiency Potential & Market Analysis, Energy Efficiency Finance Forum, Energy Efficiency Financing, Energy Efficiency Investment, Financial Incentives for Energy Efficiency

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Shaheen-Portman and INCAAA: An Important First Step

May 22, 2012 - 10:23am

By Kate Farley, Research Assistant

Although Congress has been unable to pass comprehensive energy and climate legislation so far, there is hope for energy efficiency legislation in the not-too-distant future. Energy efficiency is cost-effective and has the potential to give the economy a boost. And importantly, energy efficiency has bipartisan support.

This week, ACEEE released a white paper analyzing two pending energy efficiency bills: the Energy Savings and Industrial Competitiveness Act of 2011, which was introduced by Senators Jeanne Shaheen and Rob Portman, and the Implementation of National Consensus Appliance Agreement Act of 2011 (or INCAAA), which was introduced by Senator Jeff Bingaman.

The Shaheen-Portman bill contains a variety of provisions designed to increase energy efficiency in the residential, commercial, and industrial sectors of the economy, such as establishing centers to train building engineers and technicians in energy-efficient methods, and a loan program to support industrial energy efficiency. INCAAA establishes new and revised efficiency standards for a variety of common household and commercial appliances based on consensus agreements between product manufacturers and energy efficiency advocates, including ACEEE.

Together, these bills would result in important energy savings. If these bills are implemented, we estimate that by 2030 our primary energy consumption would be reduced by over 2 quads per year—approximately the annual energy consumption of the state of Tennessee—reducing our CO2 emissions and our reliance on foreign fossil fuels. These savings would also mean that American consumers would save about $70 billion (net present value) in reduced energy costs over the 2012-2030 period.

In the current economy, job creation is a major concern. We estimate that together these bills would support about 93,000 jobs in 2020 and over 178,000 jobs in 2030. Jobs will be created directly and indirectly from projects resulting from the provisions (for example in the construction sector and in the industries that support it). Furthermore, the resulting energy bill savings will free up the funds to support additional employment throughout the economy.

These benefits would come at minimum cost to the federal government since both provisions would be funded and implemented overwhelmingly by the private sector. We estimate total appropriations for these provisions to be about $600 million for the entire 2012-2030 period—a drop in the bucket, considering that the total federal budget for domestic discretionary spending for 2010 alone was over $600 billion.

These two bills represent an important first step toward implementing policies needed to maximize our use of available cost-effective energy efficiency resources to create jobs and save Americans money.

Categories: Economic Analysis & Jobs, Financial Incentives for Energy Efficiency, Industrial Energy Efficiency Programs, National Policy, Policy Analysis

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New Methodology for Ranking States on CHP to be Implemented This Year

May 10, 2012 - 12:39pm

By Anna Chittum, Senior Policy Analyst

ACEEE is improving the methodology it uses to evaluate a state’s policies toward combined heat and power (CHP) for this year’s annual State Energy Efficiency Scorecard. The new analysis will incorporate lessons learned from prior years as well as feedback provided by the CHP community.

CHP is a suite of technologies that simultaneously generate electricity and thermal energy. These systems can provide reliable, cost-effective power to a wide range of types of buildings, from single-family homes and small commercial buildings to large institutions and energy-intensive manufacturing facilities. CHP systems run on a variety of fuels, including natural gas, biomass, and biogas, and are much more efficient than traditional centralized generation. For all these reasons ACEEE considers CHP a smart policy choice and worthy of preferential treatment by state governments and public utility commissions.

For almost a decade, we have tracked and analyzed how different states encourage the deployment of CHP. While the market for CHP varies dramatically with the local price of electricity and other factors, state policies also make a difference. States can offer financial incentives, financing assistance, preferential emissions permitting, and game-changing regulatory treatments that may make CHP much more attractive to facility owners and managers. States that see robust CHP deployment typically have higher electricity prices as well as strong policies in place that encourage the local CHP market.

We rank states on their CHP policies in our annual State Energy Efficiency Scorecard. This analysis has always looked at several policies and regulations and ranked states based on their in-place policies for CHP. In recent years, CHP developers and advocates have indicated that the CHP rankings were not always reflective of their experience on the ground. To address this, we issued a report reflecting some of these anecdotal thoughts on local CHP markets and began to consider the methodology we would use in future analyses.

Today we issued a white paper outlining a new methodology for ranking states on their CHP policies. While many of the categories remain the same, the new methodology offers substantial clarity in the ranking process and incorporates additional considerations of a state’s CHP market and attendant policies. One notable change is the inclusion of additional policies and revenue streams for CHP, such as feed-in-tariffs, standard offer, and inclusion of CHP in utilities’ energy efficiency programming.

One common concern with prior Scorecard rankings was the fact that highly-ranked states were also home to utilities that tended to discourage CHP projects. ACEEE recognizes the importance of this concern. However, the Scorecard is primarily a tool to reflect state-level policies, and as such is not the proper venue in which to rank individual utility treatment of CHP, as we have attempted to do in the past. While such activity does impact local CHP markets, it is not reflected in the updated methodology. Our future work may again address utility treatment of CHP.

We hope this revised methodology will yield easier-to-understand rankings and a clearer picture of the policy and regulatory framework for CHP in each state. As regulators and policymakers at states around the country increasingly view CHP investments as a smart long-term energy strategy, we expect more and more states will adopt new policies and regulations that enhance the market for CHP around the country.

Categories: Combined Heat and Power (CHP), State Policy, Industrial

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Of Gold and Goldilocks: Funding the Next Chapter in the Local Energy Efficiency Journey

May 2, 2012 - 11:40am

By Eric Mackres, Senior Researcher and Local Policy Lead

This post is the third of three on sustaining local energy efficiency efforts. The first post described trends in local implementation of energy efficiency. The second was about the challenges and successes of local energy planning around the United States.

The last three years have been a productive period of trial and error for communities and initiatives around the country. During that time, federal funds from the American Recovery and Reinvestment Act (ARRA) were distributed to thousands of local governments to be used for energy efficiency. Most local governments were new to implementing energy efficiency for their citizens or local businesses, or in their own operations. Projects have varied widely from public building energy benchmarking and equipment replacement to community-wide programs incorporating engagement, workforce development, and financing. Communities have determined which energy efficiency strategies best meet their needs and they are already seeing the benefits through lower energy bills and economic development. Depending on community priorities and resources, like the three bears’ porridge in the Goldilocks fairy tale, some strategies may be “too hot” or “too cold.” But most communities have now settled on what, for them, is “just right.”

Regardless of their chosen strategies, communities have now had a taste of the energy efficiency porridge and want more. But things aren’t looking great for turning these visions into reality now that federal funding is largely drying up and local governments across the country are facing extremely tight budgets. Even among deeply committed and comparatively well-resourced communities, finding the means to continue funding energy efficiency activities is a challenge.

But during this gloomy national outlook there are many bright spots around the country. Communities such as Ann Arbor, Michigan, Arlington County, Virginia, Chula Vista, California, and Saint Louis County, Missouri have developed sustainable funding mechanisms to allow them to continue energy efficiency activities in the face of dwindling grant funds. As these communities have shown, there are many energy efficiency funding options available to local governments. ACEEE’s new report, Keeping It in the Community: Sustainable Funding for Local Energy Efficiency Initiatives, discusses various sustainable funding opportunities and includes case studies of these communities and others.

After reaping the benefits of the growing momentum on energy efficiency over the past few years, local governments can’t afford to abandon their efforts now. Alternative funding strategies are feasible and there are options appropriate for all kinds of local governments and community priorities. With dedication from local stakeholders and decision-makers toward continuing efficiency efforts, the energy narrative of the next few years will include efficiency becoming a permanent part of how communities around the country do business to improve their economy and environment. Luckily, communities are already taking these important steps forward on the journey from “Goldilocks” to “gold” (sustainable funding and reduced energy costs) and “glory” (economic development and the bragging rights of leadership).

Categories: American Recovery and Reinvestment Act of 2009, Energy Efficiency Financing, Energy Efficiency Investment, Energy Efficiency Program Funding, Energy Efficiency Programs, Energy Management, Government Lead by Example Initiatives, Local & Community Initiatives, Market Transformation, Public Buildings, Local Policy

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