To make any lasting progress on climate change, we’re going to need to be a whole lot more efficient with the energy we produce. That means retrofitting existing inefficient buildings as much as possible to reduce waste.
The dream would be to make a home or commercial building energy retrofit as easy and scalable as rooftop solar has become. But so far nobody seems to have figured out how to do it. There are some promising options, which we explored in a recent policy report called Powering the Savings.
But maybe the missing ingredient has been the insurance market. The idea is that if insurers are willing to back a home or business retrofit project, then financiers should be much more willing to bring Wall Street-type money to the effort on a mass scale. As PR Newswire reported:
Sealed, an energy software company that empowers homeowners to pay for home upgrades like insulation, air sealing, and smart thermostats with their energy savings, announced today the implementation of a residential energy efficiency insurance policy from The Hartford Steam Boiler Inspection and Insurance Company (HSB), part of Munich Re.
This innovative program insures the performance of Sealed’s proprietary energy analytics, which both removes energy savings performance risk from homes that finance energy efficiency improvements and increases the confidence of third party capital providers.
The key here is trusted and verifiable software that can measure actual energy saved via specific efficiency measures. With software improving to do just that, these kinds of financing arrangements will be just around the corner.
Energy efficiency probably doesn’t sound too exciting to most people, but saving hundreds of dollars without having to do anything about it probably does. Not to mention reducing pollution and fiscal waste. And that is the legacy of Art Rosenfeld, who passed away last week at the age of 90.
Most people have probably never heard of him, but back in the 1970s Mr. Rosenfeld pioneered the idea of energy efficiency standards for new homes and appliances. These standards became law in California and have spread nationwide. As the San Francisco Chronicle obituary reads:
His quest for energy efficiencies led to breakthroughs in a host of areas that affect every person in California: buildings with low-energy electric lights, like compact fluorescent lamps or CFLs; kitchens with low-energy refrigerators; and glass windows that trap heat.
Economists have estimated that those efficiencies have saved Americans countless billions of dollars.
As he pursued his technical efforts, Mr. Rosenfeld also maintained a powerful public focus on persuading utilities and government policymakers that requiring energy-efficient power plants could not only save dollars but would also curb the greenhouse gas emissions that are warming the planet.
I never overlapped with him when he was based at UC Berkeley, but I had colleagues who worked with him and spoke reverently of him and his work. It’s rare to have one person so embody a major field like Rosenfeld did of energy efficiency. His contributions to the environment and all of our pocketbooks are enormous, and we would do well to continue carrying on his legacy and life’s work.
Climate policies are under political attack, both in California and nationally. The common argument is that these policies hurt the economy and destroy jobs, particularly in disadvantaged communities.
To assess those claims, the Center for Law, Energy and the Environment (CLEE) at UC Berkeley Law and UC Berkeley’s Donald Vial Center on Employment in the Green Economy, working with the nonpartisan nonprofit Next 10, released today the first comprehensive cost/benefit study of climate policies in the San Joaquin Valley, one of California and the nation’s most economically and environmentally vulnerable regions.
The Economic Impacts of California’s Major Climate Programs On The San Joaquin Valley specifically looked at the impact of cap-and-trade, renewable energy, and energy efficiency programs in the eight-county region.
Why the Valley? Simply put, if climate policies can work in this region, they can work anywhere. In addition, the region’s elected leaders have asked questions about the impact of climate policies on their constituents, raising their concerns both in the state legislature and now nationally in the congress.
After examining the data and using advanced modeling software, we found that these three programs (among the most important in California’s suite of climate policies) brought over $13 billion in economic benefits to the Valley, mostly in renewable energy, and created over 31,000 jobs just in the renewable energy sector alone.
With the relatively new cap-and-trade program, we found that despite the compliance costs in the heavily industrial Valley, the benefits from state spending of the allowance auction proceeds outweighed those costs, particularly due to construction of high speed rail, which is funded in part with these funds. Furthermore, once the state disburses proceeds already collected from the auction, those benefits will increase greatly.
The overall benefits to the Valley are likely to continue and grow through 2030, as the state strives to meet its newly legislated climate goals for that year, via last year’s SB 32 (Pavley) and SB 350 (De Leon, 2015). Those efforts will require at least 50% renewables by 2030, a doubling of energy efficiency in existing buildings, and a more robust cap-and-trade program.
However, the benefits of cap-and-trade may cease if litigation over the auction mechanism (described by Ann Carlson at UCLA Law) is successful, as that mechanism allows the state to spend the proceeds that provide the benefits. Furthermore, federal action to undercut renewables and energy efficiency could also slow the gains.
Ultimately though, California is committed to its path and these programs through bipartisan legislation and regulations. Given the economic data we see in this study, its a path that the state should continue — and it can hopefully now inform federal debates about environmental policy and the need for job-producing programs.
In the effort to reduce greenhouse gas emissions, glitzy technology like solar panels and electric vehicles get a lot of attention. But often times there are some simple and relatively cheap technologies that can make just as much difference, particularly when looking at the costs.
Energy efficiency measures are a great example. Conserving energy is just as powerful, if not more so, than buying emissions-free energy like solar power. But it’s much cheaper. Case in point: updating your cable box to take advantage of new efficiency features can save you a lot on your utility bill.
Now David Roberts at Vox.com flags another promising technology: the heat pump.
A heat pump is a “mechanical-compression cycle refrigeration system” that can serve as both a furnace and an air conditioner (indeed, many air conditioners are just one-way heat pumps). From manufacturer Trane:
Even in air that seems too cold, heat energy is present. When it’s cold outside a heat pump extracts this outside heat and transfers it inside. When it’s warm outside, it reverses directions and acts like an air conditioner, removing heat from your home.
Because it merely moves, rather than generates, heat, it is far more efficient than combustion furnaces.
They key feature for our purposes is that heat pumps run on electricity. When Siemens modeled shifting 80 percent of citywide heat consumption over from natural gas to electric heat pumps, emissions declined another 14 percent…
Switching natural gas appliances to electric will be critical in the long term to reducing emissions from buildings. Right now, most furnaces and ranges are natural gas powered, but heap pumps can make the transition to electric heating much easier. Then when you combine it with emissions-free electricity such as from solar power, you’ve suddenly got a major climate win.
My guess is that with the right policy-based incentives (rebates and cheap financing), we could greatly spur consumer adoption of these technologies and ultimately bring the price down as economies of scale kick in. It would be a big win for the climate and potentially a cost-effective use of our resources.
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.
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.