Making Energy Efficiency Easy to Finance

CalCEF and Metrus Energy show how to institute energy efficiency in buildings with zero upfront cost.

Before solar or renewable energy sources are installed on buildings, buildings need to be more energy efficient.  That means better weatherization and insulation, smarter lighting and controls, and more efficient heating and cooling.



But the chief obstacle that prevents solar from being installed -- high upfront costs -- is the same obstacle that prevents energy efficiency (EE) measures from being implemented.



CalCEF Innovations, the market strategy and public policy arm of the California Clean Energy Fund (CalCEF), released a white paper titled: "Energy Efficiency Paying the Way: New Financing Solutions Remove First Cost Hurdles."  The report uncovers EE financing options and explores six new models for EE financing.  The report also includes some illustrative case studies.



Here are the programs and case studies:



We reported on the PACE program as deployed by Renewable Funding here



The Energy Services Agreement as deployed by Metrus Energy is another method of making EE affordable.



Metrus Energy is funded by Go Green Capital with the goal of executing ESAs -- Efficiency Service Agreements.  ESAs bear some similarity to the PPA (Power Purchase Agreement) model, but they are energy efficiency programs instituted at large industrial or commercial facilities.  Metrus' ESA eliminates the obstacle of initial up-front cost for customers, making it easier for a business to institute efficiency measures.  ESAs typically have terms of less than ten years with a customer repayment obligation based on a set cost per unit of avoided energy use.  The bottom line -- customers use energy savings to pay for efficiency upgrades.

We spoke with Metrus Energy founder and CEO Bob Hinkle. 



There are several key points about Metrus' Energy Service Agreement according to Hinkle:



The ESA from Metrus Energy allows the customer to finance a large retrofit project (on average $2 million to $4 million) with no first cost.  The cost of the agreement is based on the avoided cost of energy.  Hinkle notes, "Lighting has the quickest payback, but more capital intensive items like boilers are tougher and carry a longer payback."



Metrus works with Energy Service Companies (ESCOs), but while ESCOs are focused on construction and implementation, Metrus provides the financing piece.  Metrus provides customers with a service agreeement structure, much like their traditional utility bill.



Metrus just closed a big initial project with a customer and an ESCO.  It's a large-scale energy efficiency retrofit project at BAE Systems' Merrimack, N.H. facility, installed by Siemens Industry, and financed under Metrus' ESA by Bank of America. The project is scheduled for completion in 2010 and Metrus claims it will result in energy savings equivalent to more than one million annual kilowatt hours (kWh).

BAE Systems is only paying for the value of actual and verified savings, with customer repayment based on a cost per avoided unit of realized energy savings.

The American Council for an Energy Efficient Economy expects there to be a $250 billion market for efficiency upgrades in the commercial and industrial sector over the next decade.



A founding father of EE policy in the U.S., Art Rosenfeld, is a CalCEF board member and retired Commissioner of the California Energy Commission. According to Rosenfeld, “Energy efficiency should be the foundation of our clean energy infrastructure."



And according to CEO Hinkle, "The goal is avoiding capital outlay and saving money right out of the gate."