For such a simple resource, energy efficiency has a lot of complicated factors working against it.

Financing constraints, cultural inertia, inconsistent and ineffective policies, and lack of trust are just a few things holding back greater project volume.

Underlying all of those obstacles is perhaps the biggest challenge for efficiency: risk.

According to the Massachusetts-based insurance company Energi, one-quarter of all projects in the U.S. are killed each year by lack of certainty about estimated savings. Customer skepticism about performance is a the first hurdle developers must overcome. But even if the developer can convince a building owner to invest in a project, getting the bank interested can be a challenge.

Small and medium-sized banks are particularly worried about poor performance for shared savings agreements, as loans for those projects are paid back by the energy savings accrued over time. But efficiency doesn't offer the same sort of tangible asset for a lender that, for example, housing does. If savings don't materialize and the developer can't repay the loan, the bank is limited in its ability to manage or flip an energy efficiency project in the same way it might with a piece of property. 

"We've seen a number of lenders reach out to us who are worried about these types of agreements," said Angela Ferrante, vice president of alternative energy solutions at Energi. "Banks are much more tentative about these structures."

As a result, only "a minority of banks" are interested in financing efficiency projects that require performance guarantees, said Ferrante. And when banks do back projects, they often treat them like construction loans or capital improvements, and do not factor in how energy savings would increase cash flow for the customer. 

"It's a huge missed opportunity," she said. "The project can improve cash flow, but the banks aren't recognizing the full value of savings when they make the loans."

Energi was formed in 2005 to provide risk mitigation products for the transportation industry. Over the last few years, it has moved deeper into the clean energy sector -- particularly efficiency and distributed generation projects -- where it offers energy savings warranties, electricity generation performance warranties and equipment warranties. It has homed in on younger companies that may not have a deep performance track record for their projects or technologies.

So far, Energi has backed sixteen energy efficiency projects, ranging from a $50,000 lighting replacement to deeper equipment retrofits worth $8 million. Although insurance products designed specifically for the industry can help unlock new money, Energi has also realized some limitations.

What happens if there's variation in the project performance due to external factors like extreme weather? Right now, there's no methodology in this nascent part of the insurance sector to account for that type of risk -- adding another layer of complication that can hold back projects.

Last month, Energi started working with the National Renewable Energy Laboratory to develop a way to account for "unknown or unacceptable risk" in the small building sector, which comprises 90 percent of all commercial buildings in the U.S. The pilot will focus on establishing a risk "buffer" for efficiency loans. NREL and Energi will also develop a methodology to securitize energy efficiency loans using better risk analysis, creating opportunities for institutional investors that want to create new financial tools by packaging efficiency projects, but lack the deal flow to do so.

Deutsche Bank Climate Advisors estimated in 2012 that the American building efficiency market could be worth $279 billion a year with more financial innovation like securitization. But creating those securities, which often requires pipelines worth $100 million or more, will necessitate more deal flow and greater assurance that projects will perform. That means better insurance products.

Remarkably, even though insurance is so critical to stimulating more deal flow in efficiency, there aren't many companies addressing the problem head-on. 

"We're currently one of [the only companies] doing this," said Ferrante.

There are other large insurance companies that offer products for energy performance, but the options are often limited.

"The insurance world is pretty cookie-cutter," said Kari Mueller, director of operations at the small startup risk modeling firm New Energy Risk. "There are some offerings, but they can be pretty high-deductible and they won't always cover all the debt."

New Energy Risk is approaching the risk problem from a different angle. The small, boutique firm is attempting to create more demand by modeling technology performance for banks and insurers. Like Energi, the founders of New Energy Risk started in a different sector -- in this case, risk modeling for natural disasters -- and moved over to clean energy technologies after seeing the market potential.

"We knew that if you could quantify or project future performance with good enough accuracy, the insurance industry could get in," said Mueller. "We new there was insurance money sitting there."

The firm uses techniques it developed modeling natural disaster risk, factoring in historical data, engineering reports, lab testing, and competitor performance to create a stochastic model of how a product will perform over a period of ten or fifteen years. New Energy Risk recently modeled the performance of Bloom's fuel cells, enabling 6.1 megawatts of installations in California. It has also modeled the technical performance of concentrating photovoltaic modules from SolFocus and various other solar PV projects.

"We're definitely seeing more interest in this from insurers," said Mueller. "We've found that the risks are pretty low if you can properly quantify them and create a good portfolio of projects."

Creating that portfolio is the real challenge -- and the insurance industry still hasn't found a way to standardize clean energy risk to open up higher volumes of projects. But if the insurance industry has developed models to value unpredictable factors like hurricanes and earthquakes, shouldn't it be able to do the same for energy efficiency and distributed energy? It appears that that is finally starting to happen.