Source: Shutterstock
In an era of fiscal austerity, government’s options to create change are frequently limited. The Obama administration did not let this roadblock slow them down today when they announced $4 billion of private sector investment in energy efficiency projects as part of their Better Buildings Challenge. This builds on a $500 million financing commitment made in June by Abundant Power, Citi, Green Campus Partners, Metrus Energy, Renewable Funding and Transcend Equity. The Clinton Global Initiative also played a key role in corralling these commitments.
Half of the $4 billion of investment will be in federal buildings using performance contracts. Under the standard terms of a performance contract, an energy services company (“ESCO”) designs and executes an energy efficiency upgrade for a building. The ESCO then provides a guarantee that this upgrade will reduce energy consumption by a certain amount per year and the building owner signs a long-term lease for the project where the annual lease payments are less than or equal to the guaranteed savings. At the end of the lease, the building owner gets all of the future savings. This is a win-win-win solution for taxpayers, our economy and the environment.
The remaining $2 billion commitment is divided between the six financial firms from the June announcement as well as several new participants. These firms are using a wide variety of innovative financial techniques to infuse capital into attractive projects (I highly recommend reading the full White House press release). EDF is working closely with many of these firms to develop new innovations and we’ve been very impressed with the talent, energy and financial commitment currently focused on this issue.