Can the Obama administration spur $4 billion in building energy efficiency retrofits without being able to get the money out of a deadlocked Congress? Looks like we’ll have the next two years or so to find out.
That’s the gist of a big 'Better Buildings Initiative' set to be announced by the White House late Thursday evening. After months of working with former president Bill Clinton and a lot of private-sector and government partners, the White House says that more than 60 organization have pledged to spend $2 billion to retrofit about 1.6 billion square feet of commercial and industrial property in the next 24 months.
The announcement also comes with a commitment to move forward with $2 billion in federal building “performance-based contracting” projects over the next 24 months. Because private investors and companies will pay for efficiency upgrades at government buildings, then pay themselves out of the energy savings, those projects can go forward without new federal spending, National Economic Council Director Gene Sperling said in a Thursday press pre-briefing call.
Together, that $4 billion in projected commitments could add up to “tens of thousands of jobs,” Sperling said. Consider it a major new market opportunity for the building energy efficiency sector -- and a major new challenge in making private-sector economics work in the absence of direct taxpayer support.
That’s because the Obama administration has been unable to get Congress to act on many of the proposals in its Better Buildings Initiative launched in February. The Department of Energy initiative laid out a laundry list of building energy efficiency initiatives, all aimed at making the nation’s commercial buildings 20 percent more energy efficient by 2020.
Part of that plan was the 'Better Buildings Challenge,' launched in late June at the Clinton Global Initiative. On June 30, Energy Secretary Steven Chu announced that 14 initial private sector and local government partners had pledged to spend $500 million to retrofit buildings totaling about 300 million square feet.
That included big public-private partnerships in Seattle, Los Angeles and Atlanta, as well as buy-in by USAA Real Estate Company, Best Buy and other corporate partners. As for financing the projects, partners including Citi, Hudson Clean Energy Partners, Metrus Energy, Transcend Equity and Renewable Funding agreed to provide at least $525 million in project funding in the next 18 months.
Presumably that figure is part of the $2 billion in new public-private sector financing announced this week, but there were some new funding promises as well. San Francisco-based startup Serious Energy, for example, on Thursday promised to execute $100 million in energy efficiency upgrades for customers as part of the initiative.
Indeed, the list of Better Buildings Challenge participants includes a who’s-who of startups seeking to revolutionize the way energy retrofits are financed, including Metrus Energy, Transcend Equity and Serious Energy (via its new Serious Capital model).
At the same time, energy services giants such as Siemens, Schneider Electric, Honeywell, Johnson Controls and the like are doubtless participating as well in serving the federal building upgrade portion of the work announced this week. Schneider, for its part, announced it would also join the "Challenge" portion of the project with a pledge to cut energy use at 40 U.S. manufacturing facilities by 25 percent.
The $4 billion challenge is the latest move the Obama administration has made as part of its “We Can't Wait” campaign to bypass a deadlocked Congress and spur job creation, even as the President pushes lawmakers to pass a $447 billion jobs bill.
Sperling wouldn’t put an exact figure on the number of jobs the White House hopes will come from the $4 billion initiative, though he noted that the U.S. Chamber of Commerce -- not known as a great friend of green initiatives -- has estimated the $2 billion in federal building retrofits alone could create about 35,000 jobs.
The Political Economy Research Institute projected in June that the entire Better Buildings Initiative could create up to 114,000 jobs if implemented in full. Of course, much of that would have to come via legislation, which seems increasingly unlikely, at least this year.
Sperling did make clear that one proposal contained in the Better Buildings Initiative -- legislation to authorize up to $2 billion in federal loan guarantees for retrofit projects -- was not part of the new $4 billion announcement. Given the heat the White House is taking over Solyndra and Beacon Power, two companies that won separate DOE loan guarantees only to later declare bankruptcy, it’s not surprising that more loan guarantees aren’t on the table.
The big question, of course, is whether the economics of building energy retrofits are developed to the point where they can support a $4 billion boost in business without loan guarantees or other federal supports. Kudos to the Obama administration for bootstrapping these projects via any means necessary -- but we’ll have to wait for a few years to see how many billions of dollars in projects actually get done.