In this week’s column, I expand upon a short blog post I made in late October, “Conservation Capitalism,” which highlighted the Energy Efficiency Partnership of Greater Washington. That partnership, spearheaded by Virginia Tech, has set the goal of reducing energy consumption by 20 percent to 50 percent in some 100 major office buildings in the Washington region over the next five years.
Virginia Tech will drum up awareness through conferences and other outreach programs, Pepco Energy Services will conduct the retrofits and investment banker Hannon Armstrong will arrange an estimated $100 million worth of project financing per year.
While the politicians are talking about climate change and energy conservation, the level of activity on the ground — people actually doing something to increase energy efficiency — is remarkably low compared to other countries, observes Laurel Colless, the cosmopolitan New Zealander, wife of the Finnish ambassador to the United States, and mother of three children, who got the ball rolling. But the Washington region appears to have reached a tipping point. The response to the initiative has been enthusiastic she says. At last count, 38 major property owners had contacted the Partnership about participating.
Pepco will conduct detailed energy audits for serious prospects, ranking a list of energy-saving improvements: from double-paning windows and installing automated lighting, heating and cooling controls to installing solar panels on the roof or building a cogeneration facility to supply electricity, steam and hot water.
Energy service companies like Pepco have been around a long time. The crucial difference now is the appearance of companies like Hannon Armstrong that can bundle the savings into a single project, bridging the gap between the property owner’s expectation of a short-term payback and the 8- to 10-year time horizon required to recoup some of the more expensive energy-saving investments. Hannon Armstrong employs mixtures of equity and debt, and devises arcane structures such as synthetic and leveraged leases.
The energy savings are shared between the property owner, Pepco, Hannon Armstrong and its investors. For the property owners, the value proposition is effortless, risk-free savings. The Partners are confident the idea will take off.
Colless guesstimates that the potential exists to reduce electricity consumption by $3.6 billion a year in the Washington region. That’s just from the commercial sector, not including federal government facilities, hospitals or universities. By deploying energy-efficiency strategies across Virginia, we can delay the need to build expensive and intrusive new power plants and transmission lines for years — potentially until renewable fuels such as solar, wind and biomass are practicable to build economically on a large scale. The result will be lower electric bills and less pollution.
Read the full article here.
