While they may lack the sexiness of wind farms and solar panels, run of the mill energy efficiency upgrades such as upgrading an HVAC system or improving insulation can cut carbon emissions at a relatively low cost and are increasingly becoming big business, according to The Guardian.
The opening up of efficiency projects to investors with a small amount of money – so called “retail investors” has happened mainly in the US so far, the paper reports.
When Maryland-based energy efficiency finance company Hannon Armstrong Sustainable Infrastructure Capital went public on the New York Stock Exchange in April, it raised $167 million. Simultaneously, its shares became the main vehicle available to retail investors wanting to dip a toe into funding efficiency projects.
Hannon-Armstrong has invested some $3 billion in energy efficiency projects since 2000, and the company expects spending to increase with the injection of new capital from the public offering, the paper reports. CEO Jeffrey Eckel hopes to pay a dividend of 7 percent – culled from energy savings – at the year end. The company’s projects include financing an upgrade to the air conditioning systems of 120 buildings at Fort Bliss, Texas.
Real estate investment trusts, a tax-favored investment vehicle could also prove to be a huge source of funding for building upgrades, the paper reports.
Worldwide, REITs hold $430 billion. Just a tiny fraction of that would “completely dwarf” the amount of money already invested in energy efficiency projects, according to Jesse Morris, an electricity expert at thinktank the Rocky Mountain Institute.
In the UK, Sustainable Development Capital has launched an energy efficiency fund with £50 million ($80 million) from the green investment bank and £50 million from other sources. Project’s include financing the upgrade of an insulation factory in Wales aimed at making steep cuts in its energy use, the paper reports.
The main reason many energy efficiency upgrades don’t happen is, due to funding and in order to free up more financing, it’s going to require scale, according to another Guardian article released in August.
Although huge investment houses such as Deutsche Bank and Goldman Sachs have billions they’re looking to invest, they aren’t interested in smaller projects, even “small” multimillion-dollar projects. Because each deal requires bankers’ time, the big investors want bundled projects, says the paper.
The paper says Deutsche Bank and the Rockefeller Foundation estimate the US market for energy-efficiency retrofits to be $279 billion.
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