Posts Tagged ‘energy retrofits’

Georges DyerEarlier this week I had the pleasure of attending an excellent event co-hosted by Citi and EDF on Innovations in Energy Efficiency Finance.  As you can see from the agenda below, it was a fully-packed day with an all-star cast of panelists diving deep into the barriers and solutions to financing energy efficiency projects.

Upfront it was acknowledged that huge potential exist from energy efficiency.  As this EDF blog post recently noted: “Using data from a 2009 McKinsey study, EDF estimates that there are at least $40 billion of investment opportunities for EE projects in commercial buildings that will provide annual returns in excess of 20%.” 

Panelists said financing was the biggest barrier to energy efficiency.  This is the same message we hear consistently from colleges and universities, which has led us to create the ACUPCC Financing Committee, and financing webpage on the topic.

Key take-aways included that this challenge is not new, we’ve been working on it for 30+ years; and while significant progress has been made in improving energy efficiency, tough barriers remain.  Many of those challenges revolve around risk.  In this low interest rate environment, the returns on energy efficiency are strong and clear, but risk can still inhibit projects from getting done.  Financing groups like Citi are creating new mechanisms for reducing risk, and are working with rating agencies and partnering (e.g. with the Better Buildings Initiative) to make progress.


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By Wendell Brase, Vice Chancellor, University of California, Irvine and Chair, University of California Climate Solutions Steering Group
(This article appears in the January, 2011 issue of The ACUPCC Implementer)

The ACUPCCWendell Brase

Is your institution lagging compared to colleges and universities you read about when it comes to aggressive energy-saving or renewable energy projects?  (Such projects represent a major fraction of most climate action plans.)  If your energy mix derives primarily from coal or hydro, don’t blame your chief financial officer, who is probably under governing board pressure to maintain fiscal stability despite unprecedented economic conditions.  Suppose that your electricity costs 5 cents per kilowatt-hour (kWh) and the governing board expects all energy project investments to at least break even.  What can you do?

By contrast, if your electricity costs were nominally 10 cents/kWh and your state has an incentive program that subsidizes energy-retrofit projects, you would probably be installing daylight sensors, “smart lab” controls, constant-volume to variable-volume conversions, “smart” lighting controls and fixtures, and refrigerator and freezer replacements.  But what if your energy cost is 5 cents/kWh and you do not have an incentive rebate program to help underwrite energy projects?

There are energy-retrofit projects that can pay for themselves – that is, yield annual savings that cover borrowing costs – even with 5 cent/kWh electricity.  But first, make certain your assumed energy cost is the time-weighted, marginal cost – not your average cost per kWh.  That is, suppose your institution’s energy bill reflects a 12-month average cost of 5 cents/kWh, but energy-retrofit projects will accrue savings based on the last megawatt-hour purchased.  This latter figure may be closer to 6 or even 7 cents per kWh when time-of-use and demand changes are factored in for the marginal increment that will not be procured due to realized energy savings.

Here is a list of energy-retrofit projects that will usually be cost-effective, recovering their own cost, at an electric cost of 6-7 cents/kWh:

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