Get Energy Smart! NOW!

Developing a lower total ownership cost (TOC) can often require paying a bit more money upfront. When it comes to energy efficiency and renewable energy (EE/RE), that upfront incremental cost is too frequently a barrier to achieving that more cost effective longer term solution. A bond program targeted specifically for EE/RE in government facilities can help local governments move past this problem. And, in tackling EE/RE investments in this way the local government can support achievement of many objectives from lowering the taxpayers’ financial burden to heat/cool/light buildings, to improving worker productivity and health, to reducing pollution, creating local jobs, and helping foster local capacity for and reducing barriers to EE/RE projects in the community (businesses, home owners, etc …).

Programs along these lines exist around the nation.

• California, for example, has a set of subsidized bonds of 1% interest rates using ARRA funding (which, sadly, means helping make community swimming pools more energy efficient is an excluded item along with gambling establishments) and a 3% interest rate loan program which enables funding that more efficient swimming pool.  Don’t worry about applying, this program is oversubscribed.

• New Mexico’s Energy Efficiency and Renewable Energy Bonding Act, passed in 2005, established a revolving $20 million bond authority “to finance energy efficiency and renewable energy improvements in state government and school district buildings.” The Act has a provision for “the New Mexico Energy, Minerals and Natural Resources Department [to] conduct an energy assessment of a building to determine specific efficiency measures which will result in energy and cost savings” on request from another state agency or school district.

And, there is Federal assistance for such programs with CREB and QECB programs: Qualified Energy Conservation Bonds (QECB) and Clean Renewable Energy Bonds (CREB). And, these programs are routinely oversubscribed.

What is sadly impressive, however, is that no special assistance should be necessary. While the financial assistance might help spark some municipalities to action (at 1 percent interest, that is pretty close to free money), to a certain extent the programs can help foster a belief that doing energy efficiency within public facilities simply doesn’t make sense for the local taxpayer unless someone is helping foot the bill.  Since programs like CREB and QECB are typically oversubscribed, this suggests that there might be a pool of governments and public utilities waiting until they can ‘get the deal’ before funding energy efficiency programs. There might be institutions delaying action in belief that it doesn’t make sense without that special Federal assistance. This couldn’t be further from the truth.

Let us take a moment to step through the logic.

The basic truth: local governments pay significant amounts for utilities for their buildings (schools, court houses, jails, administrative offices, etc) and other infrastructure (someone pays for the night pollution of street lighting).  Few communities have taken aggressive action to reduce these costs. Let us take a few examples:

• Skylights: School gyms and hallways, for example, are prime candidates for skylights. Wal-Mart, for example, calculates less than two-year payback just on electricity savings (potentially as fast as 14 month payback) for its skylighting. That payback period doesn’t count in the increased sales and improved employee morale due to increased natural light.  (And, when putting in those skylights, time to white roof those asphalt school roofs with a payback period that could be measured in months.)
• Public pools: Both improved equipment (better pumps) and even solar hot water have fast payback times. In fact, solar hot water for public pools is the fastest paying back renewable energy program for a public facility: dependent on currently used heating fuel (and, obviously, price), supplementing a natural gas or electric public pool heating system with solar could have a payback of under 18 months.

And, obviously, the list can go on.

We are talking quite real possible for significant investments at several year payback periods.  Most communities around the nation have real potential for substantially improving their energy efficiency and introducing (limited) renewable energy with a cumulative payback period of five years or better. At five years, that annual return on investment (ROI) is above 14 percent. A 20-year municipal bond, as of yesterday, yielded 4.07 percent.  True cost to the community (administration, financing fees, etc) might actually be 5 percent. Okay, to achieve 14% savings, being able to get a subsidized loan of 1, 2, or 3% would be great.  However, reducing the size of a program or delaying it (indefinitely) for a desire to have that 3% loan cost rather than paying 5% to be able to achieve a 14+% ROI seems — to be polite — to penny wise and pound foolish.

With a 4% loan, actual payback terms would require about 6% in payments each year for a 20-year payback. With 14% savings, that would mean the taxpayer would see an 8 percent savings each year, year-in, year-out.  That savings actual creates the potential for creating an indefinite funding of continuing investment in energy efficiency and ever-increasing savings.

Wow. Sounds great. No? Well, the benefits extend well beyond the straight reduction in energy costs.

• Job creation: At this time of economic travails, saving money while creating employment in the community would seem to be a no-brainer.
• Economic activity with the workers spending money on lunches, paying their rents, etc …
• Reduced tax burden for businesses and citizens due to lowered local government energy costs
• Improve county employee productivity and student performance (“greening structures” leads to higher productivity such as, for example, due to daylighting vs artificial light)
• Reduce pollution burden and Greenhouse Gas (GHG) emissions (Cool Counties)
• Reputational value
• Improve capacity for EE/RE projects due to increased
  • Private sector capacity (skilled workers, qualified contractors, suppliers)
  • Awareness (businesses, citizens) of opportunities and payoffs
  • Improved government oversight (for example, increased inspector exposure to and knowledge of renewable energy projects)

Hmmm … lets get in line for a subsidized loan to save 1 or 2 percent on interest, delay activity, because those direct and indirect benefits clearly don’t make sense for action without action.

Sigh …

The case is quite clear that investing in energy efficiency makes sense (CENTS) for homeowners, businesses, government. The challenge is getting individuals, business owners, and governments to see clearly.

The Energize American Energy Smart Communities Act

Objective
To enable communities to create neighborhood-based energy solutions suited to their unique needs and available resources by combining low-interest private financing with federal technical and financial assistance.

Description
The Energy Smart Communities Act of 2007 (‘ESCA’) will provide funding for energy-efficiency and renewable energy projects at the local level across the United States. ESCA will enable the creation of community bonds that will be repaid using savings from increased energy efficiency and profits from renewable power generation, which will also lower overall community energy costs and reduce energy-related pollution. Such dual efficiency / generation programs can provide annual returns in excess of ten percent (10%), providing a self-sustaining path for continuing investments. The federal government’s primary role will be to seed initial project financing and provide technical assistance.

The ESCA will establish the “Community Energy Bond Office” (CEBO) within the Department of Housing and Urban Development (HUD), composed of experts on bond financing structuring and energy efficiency economic analysis. CEBO will assist local and state governments in performing technical surveys, balancing the efficiency and production elements of projects, and offering bond model options.

CEBO’s charter will include the structuring of programs so that the value of the project’s energy savings and renewable power generation will be greater than the funds required to pay back the loans. ESCA project financing will come from:

• Local and state government bonds
• Local funding
• Federal funds of up to ten percent (10%) of total program funds, matching local funding amounts

A Proven Model
ESCA builds on successful precedents around the country where communities have financed energy efficiency and renewable energy programs through bonds structured so that the combination of energy savings and renewable energy production exceeds the value of the bond. San Francisco’s ‘Vote Solar’ program is an example of this model (www.votesolar.org).

Benefits
ESCA will:
1.Create energy-independent communities across the United States.
2.Allow communities to launch energy projects suited to local needs and resources (including weather, availability of commercial resources, residential energy needs, the presence of specialized local competences or industries, etc.).
3.Reduce pollution in local communities and throughout the United States.
4.Enable community ‘resiliency’ in the face of either man-made or natural disasters by providing limited energy availability during emergencies.
5.Stimulate $10B per year investments in local and state energy efficiency and renewable energy production through the allocation of $1B in federal seed financing.
6.Create over 50,000 new energy-related jobs.
7.Increase tax revenues at the federal, state, and local levels.
8.Spur nationwide development of energy efficiency and renewable energy capabilities to meet both public and private requirements.
9.Create a knowledge pool of renewable energy specialists for design, construction, installation, and maintenance.
10.Build strong awareness and market demand for new technologies and approaches for energy efficiency and renewable energy in all regions of the United States.

Investment
The Federal Government will invest $1.1B per year through the ESCA, allocated as follows:

• $1B in matching funds to local and state governments to seed energy projects
• $100M for program administration and management of the expertise required to assist local and state governments

Key Messages
1.Creates energy-resilient communities.
2.Reduces community-level energy costs.
3.Builds grassroots support for energy efficiency and renewable energy.
4.Creates over 50,000 new energy-related jobs.
5.Reduces greenhouse gas emissions locally and nationally.