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Creating Climate Wealth Through Energy Efficient Buildings

Paul Nastu

Carbon War Room chartAlthough the global energy efficiency market could grow to $245 billion by 2020,  project uptake has been slow, but that’s going to change because of innovations in technology, financing and policy that are around the corner, says a report from the Carbon War Room.

The report, Raising the Roof: How to Create Climate Wealth through Efficient Buildings, says the key barriers preventing growth in this market are significant upfront capital costs, risk misconceptions, misaligned financial interests and the lack of information.

However, despite the fact that it’s an emerging market, the report says it will expand quickly over the next 18 months because —

  • a whole suite of big data products hitting the market, ranging from digital audits, retro commissioning and optimization, will enable asset owners to save up to 25 percent on their energy bill with little or no upfront capital expense.
  • significant progress in financial innovations, like Property Assessed Clean Energy (PACE), On-Bill Repayment, and Energy Savings Agreements are now maturing and expanding in scope. Also, new proposed structures like using master limited partnerships and real estate investment trusts for energy efficiency have the potential to vastly grow the capital available for retrofits.
  • market-enabling policy innovations, ranging from benchmarking ordinances like Australia’s NABERS program, Singapore’s Energy Conservation Act, the UK’s “Green Deal”, and utility de-coupling in the United States, are helping drive retrofits.

Carbon War Room, which spent three years studying market factors in 30 cities across the world for this report, says there is a huge opportunity to reduce carbon at a “gigaton-scale” using profitable, market-based energy efficiency solutions that don’t require government subsidy or changes in policy and regulation. It cites the analogy of the US, where it costs more than $400 billion each year to power homes and commercial buildings which are responsible for almost 40 percent of the nation’s CO2 emissions.

Commercial buildings could be made up to 80 percent more efficient with new and existing technologies, according to the Department of Energy. But despite the large-scale opportunity, stakeholders still face the challenge of determining the best approach and the best options available to them. In response to that, the report provides detailed guidance on how to differentiate between the various technologies and financial mechanisms.

Creative ways of connecting building owners and operators with financing have begun appearing in the market. In May, Noesis Energy launched a matchmaking service to connect building managers and owners wanting to invest in energy-efficiency projects with financing companies that specialize in loans for such projects. The lenders offer capital and operating leases, efficiency services agreements, managed energy services agreements and property-assessed clean energy (PACE) financing.

Chart courtesy: Carbon War Room



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