Energy efficiency that doesn't hurt utilities
By: SGN Staff
Quick Take: Although utilities are often mandated to encourage energy efficiency, they rarely receive incentives. Now Portland, OR-based Energy Resource Management is pioneering a new financial structure that, if it doesn't reward utilities, at least doesn't penalize them.
Building energy efficiency has long been held back by a mismatch between costs and benefits. Building owners get the costs of efficiency upgrades. But it's often the tenants that get the benefits (in the form of lower electricity bills).
Under a complex arrangement called metered energy efficiency transaction structure or MEETS, investors put money into large efficiency projects just as they might put money into a wind farm. They pay the building owner "rent," just as they might rent land for their wind towers from a farmer. And they sign a long-term power purchase agreement with the utility for the power that is created, just as they would do for the power from the wind farm. The only difference is that the investors are selling nega-watts â€“ power that has not been used instead of power that has been generated.
The utility gets paid what it would originally have received, minus the nega-watts it buys. In theory, those nega-watts will be cheaper than power the utility could get by building a new plant or turning to the wholesale power market. The only losers are the tenants, who get a greener building but who don't see any reduction in their bills. But that seems reasonable since they didn't pay for the improvements.
There are several other nuances, some of which you can glean from the release below. Or you can read a lengthy explanation at Xconomy.com.- By Jesse Berst
Efficiency in Buildings
Program builds on 100 years of leadership at Seattle City Light
SEATTLE -- 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.
â€œThis is a great partnership between the City and the private sector to encourage energy efficiency,â€ said Seattle Mayor Mike McGinn. â€œI hope this project can serve as a model for others to save money, reduce energy usage, and cut our carbon emissions.â€
â€œThis is one of the most innovative solutions Iâ€™ve seen,â€ said Jorge Carrasco, Superintendent of Seattle City Light. â€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,â€ he added.
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.
â€œPartnering with Seattle City Light, NEEA and others on this project will create better integration of information between industry, utilities, building owners and investors,â€ 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 ownerâ€™s ability to secure a loan.
â€œIf adopted nationally, this could be a trillion dollar game changer,â€ said Denis Hayes, President of the Bullitt Foundation. â€œBy 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,â€ he added.
While the pilot program is testing this new model in one building â€“ the Bullitt Center â€“ it could be scaled to work for any utility.
Jesse Berst is the founder and Chief Analyst of SGN and Chairman of the Smart Cities Council, an industry coalition.
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