Energy Efficiency Retrofit Market Set to Boom: Report

Taking steps to optimize energy efficiency is among the easiest ways for demand-side consumers to reduce their energy costs and consumption. But for some reason, consumers haven’t taken advantage of that opportunity – yet. However, a key energy efficiency bill that garnered support from President Barack Obama this week has pushed the market to the brink of growing exponentially, experts say.

On Sept. 12, the White House made a statement pledging support for an energy bill that includes key provisions related to energy efficiency. The White House support could boost the bill’s chances of passing because the provisions fall in line with Obama’s energy agenda. According to the White House statement, the bill would fund efficiency education and efforts to include efficiency measures in new construction and financing for retrofits.

“We really haven’t scratched the surface of retrofit potential,” said Silda Wall Spitzer, a principal with New World Capital during the Advanced Energy conference in New York earlier this year. “The markets for retrofits are anticipated to grow tremendously.”

According to a report published jointly by the Rockefeller Foundation and Deutsche Bank’s DB Climate Change Advisors and cited by Spitzer, energy efficiency retrofits offer an investment opportunity to the tune of $279 billion, which would result in total energy savings of $1 trillion over 10 years. Commercial real estate offers $72 billion in investment potential while institutional real estate offers $25 billion of investment potential. But even though energy efficiency is considered the low-hanging fruit of the cleantech world, the Rockefeller report notes, it has yet to catch on to its maximum potential.

The biggest hurdles to investment in energy efficiency are the lack of available data, insufficient credit and split incentives, said Spitzer. And these hurdles have restrained the potential of energy efficiency, she added. Currently, financing for energy efficiency is only worth about $20 billion, which is less than one-fifth of its cost-effective potential, said Spitzer.

The Rockefeller report points to Energy Service Agreements (ESAs) as one of several emerging financing models, but the report singles out ESAs as the model with the most potential. In an ESA, the lender pays for the cost of improvements and takes on the responsibility for paying the energy bill. The lender then captures the energy savings and charges the property owner based on historic consumption, the report explains.

“We believe that the Energy Service Agreement structure offers significant near-term potential to scale quickly and meet the needs of both real estate owners and capital providers in the commercial and institutional market, without the requirement for external enablers such as regulation or subsidy,” the report states.

In addition to ESAs, there has been growing success in financing from governments, private-sector companies and non-profit organizations, said Spitzer. Plus, investment in public sector buildings has been steadily on the rise.

For example, the New York Governor’s office announced last year that it would issue debt in order to finance energy efficiency investments in government buildings. The $800 million investment made by New York over four years is to be dedicated to updating the largest and most inefficient buildings among school districts, public hospital buildings and local and state government buildings. The projects are expected to lower peak electricity use by more than 10 megawatts. And on Sept. 3, Connecticut’s Department of Energy and Environmental Protection proposed doubling the state’s funding for energy efficiency programs, including retrofits in government buildings, from $122 million to $231 million annually for three years.

In addition, New York City’s Energy Efficiency Corporation, launched in 2011 as a partnership between the city’s Office of Long Term Planning and Sustainability and Deutsche Bank, provides public and private funds for commercial building energy efficient retrofits in NYC.

Yet despite the success stories, barriers remain. People are inert, and don’t want to change their habits. Plus, most consumers are unaware of how simple it is to make changes and that savings begin immediately.

Pat Sapinsley, president of Build Efficiently and CEO of Watt Not, said during the Advanced Energy presentation that retrofits should shift from being “low cost” to “no cost” as a way to address the barriers.

“Find a way [for users] not to have to pay upfront for this,” said Sapinsley.

Three Innovative Retrofits for Commercial Buildings

During a separate conference session, three companies presented their innovative retrofits for commercial buildings. One of those companies was Denver-based Coolerado, a manufacturer of highly efficient air conditioners for light commercial and residential use and one of Wall Spitzer’s investments. Coolerado was founded in 2004 and received $7.2 million in a series-B venture funding in 2010 that was led by New World Capital Group and included Spring Mountain Capital. The company claims its innovative A/C system reduces energy demand, cuts cooling costs by 90% and saves 30% on their customers’ electric bills, says Coolerado’s principal engineer, Steve Slayzak.

Another presenting company was 7-year-old NuClimate, based in Syracuse, New York. Its new technology, called a “chill beam,” ventilates and oxygenates rooms by way of a specialized nozzle, thereby improving air quality. The system reduces maintenance costs by eliminating the use of fans and reduces energy bills by 40%, says NuClimate ‎vice president William Shultes.  The company has completed 150 projects so far, including buildings in the New York City and Boston school systems and the U.S. Army Ranger barracks in Fort Lewis, Washington.

The third company, Atmos Air solutions, cleans the air inside commercial buildings. Its air purification process uses bipolar ion technology, which enriches air with positive and negative air ions, to breakdown dangerous VOCs and eliminate mold and bacteria. The EPA states that 30% of people suffer from sick building syndrome leading to $60 billion cost in U.S. on lost productivity due to poor indoor air quality, says Tony Abate VP of Operations.

 

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