In a $4-billion push for energy efficiency improvements to federal and private sector buildings, President Obama's Better Building Challenge promises long-term energy savings with no up-front costs to building owners.
Through a Presidential Memorandum, Obama has committed $2 billion to energy upgrades of federal buildings, as well as announced $2 billion of private capital commitments for energy efficiency projects of existing building stock.
The building performance upgrades hope to make American buildings 20 percent more efficient by 2020 and will account for efficiency improvements in more than 1.6 billion square feet of office, industrial, municipal, and school buildings.
Launched in February, the Better Buildings Challenge is sponsored by the President’s Council on Jobs and Competitiveness and is designed to reduce energy bills for American businesses by $40 billion a year. The initiative brings together a select group of partners including cities and commercial building owners with financial service providers to help privately fund energy efficiency projects.
The initiative is targeting property owners who are reluctant to make efficiency upgrades due to potentially high capital costs. Today's memorandum calls for Energy Savings Performance Contracts which allow energy efficient equipment to be installed at no up-front cost to building owners, who pay for the improvements over time through savings on utility bills.
More than 60 partners were included the announcement, among them 3M, Best Buy, GE, Walgreens, and Alcoa, which is making a commitment to improving energy efficiency by 25 percent across 30 million square feet of industrial plant space by the year 2020. Schneider Electric, a giant in energy management services, announced it would join the challenge portion of the project with a pledge to cut energy use at 40 U.S. manufacturing facilities by 25 percent.
As a way to improve energy efficiency without taking on the risk of new investments, the Better Building Challenge seeks to streamline the way energy retrofits are financed. While big-name energy service providers such as Siemens, Honeywell, Johnson Controls are taking part in the initiative, a number of smaller, more nimble financing companies are participating including Ygrene Energy, Serious Energy, and Metrus Energy.
Among the inaugural financial partners, Metrus Energy bumped its commitment to funding $75 million in energy efficiency projects over the next two years. Previously, Metrus Energy has worked with Building Technologies division of Siemens to enable defense contractor BAE Systems to retrofit a New Hampshire facility for energy efficiency.
"We've built our business around the fundamental idea that energy efficiency is a resource, more than a new lighting, heating, cooling system," said Bob Hinkle, CEO of Metrus Energy. "Support through the Better Building Challenge allows financing to play a critical role in removing barriers to get energy efficiency projects done."
Metrus Energy named a new partner in Energi, an insurance provider that guarantees the energy savings performance on retrofit projects. Hinkle said the assurance of performance guarantees reduces the risk for small-to-medium sized building owners to deploy energy efficiency projects and expands the number of service companies Metrus Energy can target.
For its part, Serious Energy, which recently launched an energy-efficiency-as-a-service offering, has committed to executing $100 million worth of energy efficiency upgrades on behalf of its customers through the initiative.
"The Better Buildings Challenge will play a crucial role in connecting property owners and managers with companies like Serious Energy that will reduce their energy consumption and lower their bills," said Claire Broido-Johnson, General Manager of SeriousCapital in a statement.
In June, a study by the Political Economy Research Institute (PERI) estimated significant job creation would come from the Better Business Challenge in addition to reforming a tax incentive to make commercial buildings more efficient.
But while the tax incentive measure has stalled in Congress, President Obama was pressed to move forward with an executive action. "We can’t wait for Congress to act," said Obama. "Upgrading the energy efficiency of America’s buildings is one of the fastest, easiest, and cheapest ways to save money, cut down on harmful pollution, and create good jobs right now."
Buildings photo by Shutterstock