Efficiency Financing Tools for Cities and Local Governments

efficiency financing

So Many Tools Cities Can Use To Help Finance Energy Efficiency Projects

Zayed Future Energy Prize Blog, January 2, 2015

There are tremendous financial benefits to building owners and tenants who implement energy efficiency projects. In fact, energy efficiency improvements are generally much cheaper than any type of electricity generation project on a “levelized cost of energy” (LCOE) basis. (If you don’t know what LCOE is, the point is just that energy efficiency is the cheapest option out there.) However, many can’t do so due to lack of good financing options. A good friend from graduate school who is now working at the Institute for Market Transformation, John Miller, recently worked with Brendan McEwen of the MIT Community Innovators Lab to put together a report on the financing tools that cities and other local governments can use to bring financing to more homes and businesses. It’s an excellent resource that includes financing tools I’ve written about many times as well as ones I had never run across.

Before diving into the heart of the report a little bit, it’s important to understand why this is important. “Numerous studies have noted the tremendous potential for energy efficiency in existing US commercial buildings, and the broader US economy. Estimates by Deutsche Bank Climate Change Advisors and the Rockefeller Group suggest that roughly $72 billion will need to be deployed to achieve all profitable efficiency in existing buildings,” the report notes in the first chapter. But $72 billion doesn’t mean much without some context. Here’s the context: “This investment requirement dwarfs current spending on energy efficiency—Rockefeller and Deutsche Bank estimate that in 2012, roughly $1.5 billion was spent in dedicated project financing for commercial building energy retrofits with turnkey project management by a service provider (RF & DBCCA, 2012).” In other words, we have a long way to go in order to capitalize on the tremendous potential of energy efficiency retrofits. The story is similar in countries around the world.

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