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Unlocking Potential

A single financial vehicle holds the ability to unlock the power of President Obama’s Better Buildings Challenge.

Recent high-profile bankruptcies in clean tech have caused many in Washington and around the country to regard the idea of federal investment in green jobs as

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Chris Curtis

too big a risk for taxpayers. Grouping all programs in this manner would deal a tremendous blow to much-needed U.S. job growth and stall our nation’s progress toward a sustainable future.

Following the announcement of President Obama’s Better Buildings Challenge and plans for implementing $4 billion in energy upgrades to federal and commercial buildings, there is an opportunity to create 50,000 U.S. jobs — using zero tax dollars. Additionally, during this year’s State of the Union address, President Obama recognized energy efficiency as a priority and promised energy savings of $100 billion over the next decade, with less pollution, more manufacturing and more jobs — if Congress can enact the right legislation.

The Better Buildings Challenge brings about an opportunity to address much needed updates to our nation’s buildings that will drive energy savings for years to come.

Given these circumstances, what’s the vehicle for bringing about such changes?

The solution lies in a financial vehicle known as energy savings performance contracts (ESPCs).   

ESPCs, which are a foundational element of the White House program, leverage the flexibility and resource of the private sector to pay for energy-saving capital upgrades using the future energy savings. The initial capital investment required to do the work is provided by the private financial community and the actual services are delivered by energy services companies (ESCOs). The financier is paid out of the accrued energy savings, with the ESCO guaranteeing a certain level of savings or performance. If the performance standards are not met, the ESCO is responsible for paying back the loan. ESPCs typically bundle a variety of capital upgrades into one project, creating a significant guaranteed annuity that is financed over a 10 to 20 year period.

Today, the commercial building sector is our nation’s biggest consumer of energy, but what’s sometimes overlooked is the nearly $40 billion opportunity for energy savings within these buildings. Energy retrofits can easily achieve up to 30 percent energy savings while creating thousands of local jobs in trades that have taken a hit in recent years. It’s estimated that a typical $10 million ESPC creates about 100 of these jobs.

For example, the U.S. Coast Guard recently implemented a landmark $50 million energy savings performance contract to upgrade 960,000 square feet of facilities in Puerto Rico. Using a combination of both renewable energy solutions and energy efficiency upgrades, it’s estimated the facility will reduce its energy usage by 40 percent.

While upgrading the more than three million square feet of federal facilities will be a good starting point, more widespread adoption is needed.

During a roundtable discussion with Presidents Obama and Clinton and other industry leaders, we discussed additional ways to accelerate energy efficiency in the U.S. We found that while the Better Buildings Challenge is the foundation that was needed to launch a focus on energy efficiency, an ongoing dialogue with our nation’s leaders is needed to establish myriad other standards and measurement methods. With strong engagement from the federal government we can not only mitigate some of the perceived risk involved with performance contracting but also achieve the maximum savings possible.

As a result of President Obama’s announced plan, we expect to see a spike in interest from current building owners and managers as well as from stakeholders in new construction projects to discuss energy efficiency goals and steps for driving results. We all need to rethink the energy composition of our buildings and role we play in driving efficiency — from the architect laying the ground work for a new construction project or retrofit to the facility manager overseeing daily operations.

 The time to act is now, and as building stakeholders, we each play a vital role in bringing about change. The model is there for us to follow, and with no cost to taxpayers, we have a huge opportunity to create jobs and save energy today and create a more sustainable future for tomorrow. 

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