EDF's Investor Confidence Project: A Brief Overview
The Golden Opportunity: Energy Efficiency Retrofitting
If your local auto shop offered to increase the miles per gallon of your gas guzzling Expedition so it performed like a Prius, it would be a no brainer to accept. A. You don’t need to buy a new car, B. You would be making about a thousand dollars a year in saved gas money, and C. You can brag to all your friends about how your monster of a car gets 50mpg. Or, you can just buy a Tesla if you have 70k lying around (they are pretty cool). How does this relate to building efficiency? Since less than 1% of all buildings in the U.S. are newly constructed each year, and since buildings last a whole lot longer than cars, the potential for improvement is tremendous. As the Investor Confidence Project clears a hypothetical path between energy efficiency projects and financers, a similar scenario is now becoming more and more viable for building owners.
More often than not, big investors have shrunk from giving out loans for retrofits because of the risk that comes with a lack of standardized performance assurance. The ICP is out to demolish this train of thought, without demolishing any buildings along the way.
The Environmental Defense Fund (EDF) created the Investor Confidence Project (ICP) to encourage more funding of building energy efficiency projects by taking the variability out of the process. Experts working for the ICP have come up with standardized protocols for a five-step evaluation for energy efficiency retrofits. The goal of standardization is to reduce transaction costs, enable clear evaluation of investment opportunities, and create a more transparent and efficient market.
The Problem: Buildings Need Upgrades But Investor Confidence is Low
The business of building energy efficiency has been slow to take off largely due to a lack of information. This leads to a lack of investor confidence, hence the name of the project. Engineers across the country are using new ideas and technology to save building owners a lot of expensive fossil fuel energy. The potential is certainly there. The right building upgrades reduce operating costs, raise tenant retention rates, improve productivity with an enhanced environment, and lower a building’s carbon footprint.
The underlying problem is that there is no systematic method to measure the accuracy of the initial predicted energy and financial savings. Nor is there a fundamental way to make sure the upgrades are performing after they have been completed. The Investor Confidence Project is an initiative to remove these barriers, and to catalyze growth in building energy efficiency upgrades by creating protocols that can be a basis for investment-quality analysis.
The Solution: An Efficiency Project Framework
The ICP has devised an Efficiency Project Framework that consists of five categories that together represent the lifecycle of a “well-conceived and well-executed energy efficiency project”:
2. Savings Projections
3. Design, Construction, and CommissioningOperations,
4. Maintenance, and Monitoring
5. Measurement and Verification (M&V)
Details are given within the Efficiency Project Framework through Energy Efficiency Performance Protocols (EEPP) that standardize project performance underwriting for a specific type of building, such as large commercial. Commercial buildings are particularly important because even though there are fewer of them by number, they are the particularly energy intensive. The EEPPs incorporate best practices and existing technical standards to create core requirements for the 5 steps outlined above. One example of a baselining core requirement in the large commercial EEPP is having documentation of weather data for the defined 12-month baseline period from the nearest weather station in order to correlate energy used for heating and cooling with outdoor temperature.
The overall goal of the ICP is to raise investor confidence with a more detailed, consistent, and comprehensive road map. There are three things that must be quality assured and readily accessible for big investment companies to be more likely to get involved in the energy efficiency market. They are:
- The ability to see the likelihood of projected savings beforehand
- Certainty that mechanisms are in place to ensure that those savings continue afterwards
- A clear way to perform M&V post investment.
WegoWise is a project ally of the Investor Confidence Project and provides baselining and measurement and verification services. If you are interested in finding out more, check out the ICP website.