For the first time, an electric utility is testing a 20-year model to purchase metered energy efficiency savings. The agreement between Seattle City Light and the Bullitt Foundation is designed to make deep energy efficiency in new and existing commercial buildings economically feasible.
The pilot program builds on 100 years of leadership and innovation at Seattle City Light, which has long led the fields of renewable energy and energy efficiency.
“This is a great partnership between the City and the private sector to encourage energy efficiency,” said Seattle Mayor Mike McGinn. “I hope this project can serve as a model for others to save money, reduce energy usage, and cut our carbon emissions.”
“This is one of the most innovative solutions I’ve seen,” said Seattle City Light General manager and CEO Jorge Carrasco. ”We want to try it because we think the approach could help harvest deep energy efficiency in buildings and do it in a way in which everyone wins. Ratepayers get more comfortable buildings, investors see a positive return, and the utility delays new power plants and reduces its carbon emissions,” he added.
Very few building owners now make the large, long-term investments needed to achieve “deep” savings of 35 to 50 percent. Yet the rates of return on such investments would be attractive to utilities and other investors that have access to cheap, long-term capital. The new pilot program aims to overcome this obstacle.
“We often hear that building owners want to make their buildings more efficient, but getting the right return on investment, in the right timeframe, can be difficult. This innovative new approach to financing energy efficiency could help spur the type of investments in deep green buildings that we need to meet the carbon reduction goals outlined in our Climate Action Plan,” said City Councilmember Mike O’Brien, Chair of the Energy & Environment Committee. “With a utility only paying for efficiencies that actually materialize and investors getting a reliable return, we are excited by the possibilities that this financing model creates,” he added.
The Bullitt Center was chosen to test this new model based on its participation in the City of Seattle’s Living Building Pilot Program, which was designed in part to encourage ultra-efficient green buildings.
There are two keys to the model: An energy efficiency meter to objectively measure real-time energy savings and a 20-year contract between a utility and energy efficiency investors.
The energy efficiency meter measures the energy savings and allows it to be sold as it occurs. This meter was developed by EnergyRM, with support from OR BEST and the Northwest Energy Efficiency Alliance (NEEA), a non-profit that works with regional utilities to prove out new, energy-efficient technologies.
“Partnering with Seattle City Light, NEEA and others on this project will create better integration of information between industry, utilities, building owners and investors,” stated Rob Harmon, CEO of EnergyRM.
A 20-year contract with a utility allows an investor to profitably invest in energy efficiency upgrades with longer payback times, squeezing more efficiency out of the building. And because the contract is with a utility, the opportunity is appealing to long-term investors who are not necessarily the owners of the building. This means outside capital can be profitably invested in efficiency without relying on a building owner’s ability to secure a loan.
“If adopted nationally, this could be a trillion dollar game changer,” said Denis Hayes, CEO of the Bullitt Foundation. “By separating the efficiency investor from the building owner, just as we separate the wind farm developer from the rancher whose property the turbines are on, we can reduce the energy use in most existing buildings by more than 40 percent. I know lots of investors who would be delighted to get a safe, consistent return for 20 years while reducing greenhouse gas emissions,” he added.
While the pilot program is testing this new model in one building – the Bullitt Center – it could be scaled to work for any utility.
Read the full press release for more information.