By: Matt Golden, Senior Energy Finance Consultant, Environmental Defense Fund
Environmental Defense Fund’s (EDF) Investor Confidence Project (ICP) aims to bring transparency and accountability to the energy efficiency market by introducing a system of standardization. Traditionally, most energy efficiency analyses are done by the companies selling retrofit services to commercial building owners and investors, resulting in biased results that do not always ensure return on investment (ROI). Additionally, inconsistencies in the methodology for arriving at these ROI metrics have created barriers to standardizing a measure of success for energy retrofits.
For the first time, ICP’s Energy Performance Protocols were used to leverage financing for a $2 million office building retrofit in Bridgeport, Connecticut. This new model could accelerate the vast potential of energy efficiency retrofits in commercial buildings.
ICP’s protocols have been developed with broad stakeholder participation including engineers, industry allies, financial market participants, insurers, regulators and utilities. The protocols aim to significantly increase stakeholder confidence in the resulting savings by:
- Standardizing how projects are baselined, engineered, installed, operated and measured by specifying the use of existing industry standards and best practices.
- Providing developers with a clear roadmap to design projects that will save energy and money when utilized to develop energy efficiency projects.
- Reducing performance risk and enhance investors’ and building owners’ confidence in the projected financial returns on energy efficiency projects.
- Standardizing the project origination process, thereby reducing engineering overhead and lowering transaction costs.
Widespread market adoption of the protocols will help to lower capital costs and increase the availability of funding, allowing large-scale investment to flow into commercial energy efficiency projects.
The use of ICP protocols in the Connecticut building upgrade demonstrates that their initial market adoption is underway. The project received support from a number of influential ICP allies, including Sustainable Real Estate Solutions, Inc. (SRS), EMCOR Services New England Mechanical (EMCOR) and Connecticut’s Clean Energy Finance and Investment Authority (CEFIA) the administrator of Connecticut’s Commercial Pace Program (C-PACE).
SRS, a member of ICP’s Ally Network, has embedded ICP protocols within its energy retrofit underwriting software platform. The use of this platform enabled the Connecticut building developer, EMCOR, to design the retrofit to be consistent with both Connecticut’s C-PACE standards and the recently-released ICP protocols. As a result, both the investor, CEFIA, and the building owner had the data they needed to meet their investment underwriting requirements, thus green lighting the project.
The ultimate goal for the Investor Confidence Project is to transform the current energy efficiency marketplace, making it more robust and dynamic. As this project helps demonstrate, the ICP protocols are already increasing the confidence of building owners and lenders in real-world projects.