Navigant Research Blog

Buildings Battle Moves into Finance

Noah Goldstein — June 2, 2014

As mentioned in an earlier blog, the U.S. Department of Energy (DOE) is holding a competition to see how much energy commercial buildings can save using different energy efficiency techniques.  The DOE’s Better Buildings Challenge is aimed at large portfolio owners who committed to reduce their energy use by more than 20% over 10 years.  So far, the program claims over $100 million in energy has been saved by participating partners, associated with a 2.5% reduction in energy use.  The program is organized into three sets of partners addressing different sectors.  The first is focused on the majority of the building sector, including large corporate tenants, multifamily residential (public and private), government, and educational buildings.  The second extends to the industrial sector with the Better Buildings, Better Plants Challenge.  This part of the Challenge also aims to reduce energy use by data centers, which is growing at 9.5% a year.

The third phase of the Challenge is focused on utilities (though only California utilities have signed on to date) and financial institutions that have been developing financial packages that promote energy efficiency.  To date, 21 “Financial Allies” have committed to extend $1.77 billion in financing for energy-savings programs.  These companies have agreed to publicize their involvement in the Challenge, attribute and measure the energy savings from their program, and report quarterly to the DOE.  For many of these companies, this is hardly a stretch.  For companies like SCIenergy and Green Campus Partners, energy efficiency financing is the core of their business model.  General Electric (GE) Capital is using the program to highlight its lighting retrofit program.  Still others are using the program as way of advertising their products to government agencies.

 

(Source: U.S. Department of Energy)

Energy/Carbon/Water

As evident from the chart, the “reinvestment of equity” pathway is the most popular.  This service is aimed at the identification of energy savings at the institution’s customers, and using different programs to tag those savings for reinvestment.  It’s interesting that more financial institutions haven’t joined the bandwagon, as the Better Building Challenge gives them free publicity for their active business models.

The DOE has also included water in the Challenge.  The Water Savings pilot will enable concerted tracking of water savings investments.  Some of these will focus on IT-based solutions, like smart water meters and information management.  The utility approach to these topics was the focus of a recent Navigant Research report, Smart Water Networks.  Incorporating water will align with many companies’ sustainability goals, which include water and carbon in addition to energy.  However, the extension of water in the Better Buildings Challenge could further confuse the average consumer as to which U.S. government entity aims to reduce which resource.  The Environmental Protection Agency (EPA) is typically responsible for maintaining clean water regulation, yet it also runs the Energy Star Portfolio Manager Program, which tracks building energy.   The history of these departments is rich, and sure to be the subject of many political science dissertations.  We’ll just stick to the challenge of understanding these entities for now.

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