It’s been a long time coming, but it looks like the value of energy efficiency is finally being realized. In the past year, we’ve seen a handful of funds form that allow investors to finance energy upgrades in buildings, while they make strong returns.
The latest is the Efficiency Resource Fund, which expects to raise $10 million this year from investors to finance upgrades in small and mid-sized buildings of all kinds across the US – manufacturing, schools, churches and clinics.
It’s being launched by the non-profit California Clean Energy Fund (CalCEF) and Metrus Energy, which provides financing and implements retrofits.
As with other similar funds we’ve written about, the goal is to make it easy to get efficiency upgrades with no upfront cost, eliminating the need of having to search for hard-to-find traditional financing, usually through banks.
"This innovative approach bridges the funding gap that has stymied small- and mid-sized retrofit projects – some 4 million buildings nationwide," they say.
This is a "massive, underserved market opportunity," says Paul Frankel, Managing Director of CalCEF. "We’re enabling a whole class of projects that would otherwise not be completed, while at the same time delivering not just savings for customers but also attractive returns for impact investors and generating capacity for utilities."
Here’s how it works: The Fund signs an Efficiency Services Agreement for up to 10 years with a building owner, and then hires contractors to design, install, measure, and maintain energy-saving improvements.
The customer gets a smaller utility bill and a more comfortable building and the fund recoups its investment by billing customers for their realized efficiency gains.
Since the useful life of the energy efficiency equipment continues well beyond 10 years, customers continue to save for years to come.
Institutional investors such as foundations, pension funds, and other community-based financial institutions can get tax-exempt returns. For pension funds that represent construction trades, besides generating a substantial return on investment, they will be directly contributing to new, local jobs.
"There’s a huge amount of money to be saved – and, for investors, earned – by improving energy efficiency throughout our economy and putting professional contractors and skilled tradesmen to work," says Jim Willson, Executive Director of the Los Angeles County Chapter of the National Electrical Contractors Association.
"We’ve supported the development of this novel financing mechanism because we see its potential for advancing green buildings, green jobs, emissions reductions, and cost savings for small and medium businesses," says Cathy Halstead, trustee of the Sidney E. Frank Foundation, a long-time grantor to CalCEF.
They plan to work with trade groups, such as Greater Cleveland Partnership’s Council of Smaller Enterprises, to identify suitable projects and to match them with vetted local contractors. Local chambers of congress are also interested through Chambers for Innovation and Clean Energy.
Founded in 2004, CalCEF is a family of non-profit organizations that’s working to accelerate the use of clean energy technologies through finance, public policy and technological innovation.
In San Francisco, CalCEF joined with key city departments to create "CleantechSF," to support cleantech jobs and businesses there.
CalCEF operates at the local, state and national levels through three affiliated entities: CalCEF Ventures, which invests in companies; CalCEF Innovations, involved in analysis and product development; and CalCEF Catalyst, a trade association.
Along these lines, Clean Energy Sacramento launched last month, forming a district energy financing model for the city’s commercial and residential buildings. 84 universities have revolving loans that fund sustainability projects, mostly focused on energy efficiency upgrades.
And in California, a group of 14 counties and 126 cities announced the nation’s largest initiative to leverage financing for commercial properties.
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