Critical need for energy savings and loan performance data remains unmet

KatherineBy Kat Friedrich
Guest Blogger, Energy Efficiency Markets
May 2, 2012

 

A vast gap exists between the detailed information financial institutions need to support energy efficiency financing and the limited data they currently have. Several examples suggest these loan programs can succeed, but there are no large datasets supporting investment in energy efficiency.

Providing energy efficiency loans could give financial institutions new market opportunities. Unfortunately, their underwriters don’t have enough loan performance information to finance large volumes of energy efficiency projects yet. This lack of information inhibits the scaling up of energy efficiency retrofits in the residential and commercial sectors.

 

The small size of the market for energy efficiency loans inhibits market growth, said John Joshi, Managing Director and Business Strategist at Capital Fusion Partners. Investors seek liquidity; they want to be able to move their assets within a market. As the energy efficiency loan market grows, this lack of liquidity will no longer be an issue. Right now, “it’s a Catch-22,” Joshi said.

 

“We need strong political and regulatory support to make the market more viable,” Joshi said. “If it’s left to capital markets’ intervention, it will be a much slower process.” He said government financial support for renewable energy programs is key to opening this market.

 

“Investors want to compare apples to apples within transactions,” Joshi said. “They also want analytics so they can do scenario modeling.” Investors also ask third parties to participate in the analysis, so data needs to be accessible to a range of stakeholders.

 

When approving loans, underwriters need reliable data on the expected energy savings from energy improvements so they can factor this into their credit risk analysis. To consider an energy efficiency loan a safe investment, investors and rating agencies need reliable data on expected energy savings from efficiency installations in similar buildings in similar locations. They also need statistics on loan repayment. Much of this information is currently missing.

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May 2, 2012 | | Tags: , , | 1 Comment »

Obama’s budget good for energy efficiency

Elisa WoodBy Elisa Wood
February 16, 2012

 

President Obama’s 2013 budget caused a lot of smiles this week among energy efficiency advocates – even if it is more of a wish list than anything else. Obama calls for about $1.2 billion in spending for energy efficiency.

 

What’s this mean to the energy efficiency industry?

 

Kateri Callahan, president of the Alliance to Save Energy, says that Obama’s budget represents a dramatic increase from current efficiency spending. And while the sector won’t receive that kind of money in the final budget, it still should do well, given that the starting point is so high in a time when many budget items begin with cuts.

 

“The administration’s vigorous support for energy efficiency at this stage of the game should help ensure that we get funding almost as robust as we have currently,” she said.

 

It’s not easy figuring exactly how much the federal government spends on efficiency now, since funding is spread out over several programs and sometimes infused into budgets for defense, science, agriculture, environment and commerce.

 

By ASE’s count Congress appropriated $811 million in 2012 for energy efficiency programs in DOE’s Office of Energy Efficiency and Renewable Energy (EERE), and $50 million for Energy Star at the Environmental Protection Agency.

 

In all, Obama increases the Department of Energy budget by 3.2%,  bringing it to $27.2 billion for 2013. He allots $2.3 billion for both the efficiency and renewable energy programs in EERE, and maintains Energy Star spending at the same level. Funding for  high-risk research increases 27% and for manufacturing advancement 150%. Obama offers an 80% increase in programs that cut energy use in buildings and factories. He also continues to press Congress to pass the HomeStar bill to reduce household energy use.

 

Raising spending might sound alarms, given the US deficit. However, spending on efficiency actually decreases society’s energy expenses. Energy efficiency cost about 1.6 to 3.3 cents/kWh for utilities in 14 states studied by the American Council for an Energy Efficient Economy. Had those utilities built power plants rather than conserved energy, they would have paid 6 to 14 cents/kWh.

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February 16, 2012 | | Tags: , , , , , | 2 Comments »

How did we grow an energy conscience?

Elisa WoodBy Elisa Wood
June 15, 2011

The US has grown an energy conscience.  Just look around in stores that sell appliances, computers, televisions, light bulbs or any kind of electric equipment. You’ll see the words ‘energy saving’ or ‘energy efficient’ on a lot of the packaging.

This trend didn’t just happen, but is the result of some careful nurturing by government, most of it relatively invisible to the average consumer and certainly painless and free of sacrifice.

Of these policies, one of the most ingenious is the state energy efficiency resource standard, or EERS. Okay, it’s mouthful to say, but the concept is actually pretty simple. A state sets a requirement to reduce the amount of electricity (and sometimes natural gas) used within its borders by a certain date. Some states come up with a catchy goal, like New York’s 15-by-15, meaning New York wants to reduce energy use 15% by 2015.

Utilities and others that supply electricity are responsible for meeting the goal. To help them do this, inventors, entrepreneurs and other enterprises offer a variety of energy efficient products, systems and services.

These states, of course, also are simultaneously trying to build industry and add jobs, so the electricity reductions are not about scaling back on commerce. Quite the opposite, they are about getting more economic bang out of each electron buck. To the consumer, the new television, the clothes washer and the computer works the same as the old one; it just uses less electricity.

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June 16, 2011 | | Tags: , , , | 1 Comment »

Breaking light bulb myths

Elisa Wood
By Elisa Wood
March 16, 2011

I have to agree with the Tea Party; the US government should not choose the light bulbs I use in my home.  And fortunately, it does not.

Yet that’s the spin being pushed by those who want to roll back federal lighting performance standards. An odd mythology is developing around the standards.

Opponents claim that the standards amount to government picking and choosing winners and forcing them upon us. More specifically, they say that the feds have banned the incandescent light bulb, which has been around since Thomas Edison’s time.

This is not true; the incandescent light bulb is not being banned; the standards are agnostic about technology type as long as they perform as required. The 2007 law is meant to act as a market mechanism that encourages innovation. With a benchmark to work towards, scientists, engineers and product designers are working to displace older, inefficient devices.  Already several different kind of light bulbs have made their way into the marketplace, including a new and better incandescent.

We have efficiency standards not only for light bulbs, but also for refrigerators, water heaters, air conditioners, microwaves and other appliances. They are nothing new.  Those who see them as government intrusion may be surprised to find that the first US appliance standards were set under Ronald Reagan.

Still one might ask, do we really need appliance standards? Are they worth the bother? That’s a $300 billion question – the amount the American Council for an Energy Efficient Economy estimates the US will save on electricity costs by 2030 through existing appliance and lighting standards.

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March 17, 2011 | | Tags: , , , , , , , | 13 Comments »

Energy efficiency: Cure for mortgage meltdown?

By Elisa Wood

October 7, 2010

My first reaction was that the Alliance to Save Energy was stretching a bit by titling its October 6 talk: “Is energy efficiency the key to recovery from the recession?”

But after hearing David Goldstein’s presentation, I must admit I’m thinking about energy efficiency in a whole different way. Goldstein, author of the book, “Invisible Energy: Strategies to Rescue the Economy and Save the Planet” crunched the numbers to show the enormous economic relief efficiency could bring to both the average homeowner and the US government.

He went as far as to suggest we may have averted the mortgage meltdown had we instituted more efficiency over the last few decades. Sound extreme? Consider this.

The average suburban home now costs $175,000. When banks evaluate a homeowner’s ability to pay a mortgage, they look only at that figure. They do not consider the cost to pay utilities, which adds another $75,000 over the life of the mortgage. Nor do they consider the cost to drive back and forth from work to the house, another $300,000.

These energy costs have gone up over the years, while worker income has stagnated since 1973. When energy costs are added to mortgage costs, suddenly homeowners are paying as much as 62% of their gross income to live in their homes. It is not surprising that the lending system went wrong, he said, given that banks looked only at the $175,000 commitment and not the accompanying $375,000.

“Would you invest in a mortgage like that? That is what we are doing every day,” Goldstein added.

How much of a difference can energy efficiency make? Goldstein calculated that green building and transportation costs could chop that $375,000 by half.

Because efficiency reduces utility and transportation costs, it frees up consumer spending power. As a result it could ease several of the nation’s other financial woes, among them our low savings rate, weak consumer spending, trade deficit, inflation risk and joblessness. Efficiency also could take a big chunk out of the federal deficit, given that government is the largest energy user in the nation, he said.

“This recession did not just occur randomly. It is largely a predicted result of fundamental problems,” he said. “Weak energy efficiency policy is at the heart of many of them and is related to all of them.”

How much energy can we save through efficiency measures? More than we think, Goldstein said.  Conventional studies indicate the US economy can wring out about 30% savings, but these are cautious estimates, biased toward the low end since no one ever loses their job for underestimating energy efficiency potential. But they might if they over-estimate and as a result the lights go out somewhere because we built too few power plants, he said.

Goldstein suggested that instead of relying on forecasts of energy efficiency potential, we set goals: “We best discover the size of the resource by going out and acquiring it.”

Elisa Wood is co-author of “Energy Efficiency Incentives for Businesses 2010: Eastern States,” www.realenergywriters.com

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October 7, 2010 | | Tags: , , , , , | 1 Comment »
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