Energy Exchange

EDF Energy Innovation Series Feature #10: Social Networking From Honest Buildings

By Jim Marston / Published: August 22, 2012

Throughout 2012, EDF’s Energy Innovation Series will highlight more than 20 innovations across a broad range of energy categories, including smart grid and renewable energy technologies, energy efficiency financing, and progressive utilities, to name a few. This series will demonstrate that cost-effective, clean energy solutions are available now and imperative to lowering our dependence on fossil fuels.

Find more information on this featured innovation here.
 
Is your office building on LinkedIn?  Can you find user reviews of your high-rise on Yelp?  Probably not, but the chances are good that you’ll be able to do both on HonestBuildings.com.

Since launching in beta on March 20, 2012, the fast growing real estate network has already aggregated detailed information on over 700,000 buildings across the U.S. From architects to brokers, thousands of real estate, construction and service companies have joined the platform, posting their portfolio of work and connecting with building owners and managers to find new business opportunities.

Honest Building’s co-founder and CEO Riggs Kubiak says that the real estate market is primed for the convergence of data and community, which will lead to more transparency for all stakeholders and accelerate the adoption of high performance buildings.

“Greater transparency about building performance increases the demand for energy efficiency as tenants can make better, informed decisions about where they lease,” said Kubiak. “This accelerates the adoption of all sorts of best practices by building owners and managers in order to command the best leasing rates. From energy efficiency to leasing to design to management, buildings will have to get better, faster. This also gives the best building service providers and vendors the opportunity to scale faster, as the services and technologies with the best track record can leverage a network effect to capture more and more business.”

And when it comes to important energy innovations, tackling the building sector is vitally important.  Cars and trucks carry a lot of the blame for climate change.  But in the U.S., the building sector is responsible for nearly half of CO2 emissions, compared to a third for the transportation sector. Three-quarters of the electricity produced in the U.S. is used just to operate buildings, and that percentage is even higher globally.

There’s a massive amount of factual, verifiable data about how homes and buildings operate.  This data includes square footage, energy costs, walkability – all things that people care about now more than ever.  But all this information is very hard for consumers to find and for building professionals to promote.  And there is no venue for people — designers, buyers or sellers — to interact.

“The purpose of Honest Buildings is to merge the hard facts with human interaction,” Riggs said. “You can see the data on a building and weigh it against what the community is saying about it.”

In San Francisco, the Honest Buildings platform is using energy benchmarking compliance data to bring together building owners, service providers and local government to create new business opportunities and more efficient buildings.  Working with the city’s department of the environment, they’ve created a custom map of all the buildings that have and have not complied with the city’s energy benchmarking ordinance, and helped building owners connect with energy efficiency companies and consultants that can help these building go above and beyond compliance.

“The introduction of real-time energy data for buildings will provide an incredible insight into how they perform,” Riggs said.  “Our expectation is that developers and property managers will want to highlight their best performers and create an element of competition that will increase efficiency and sustainability.  And the better the technology, the faster that will happen.”

But according to Riggs, data alone isn’t enough.  “As with all great services, there has to be a human element,” he said.  “People need to be able to weigh in with their voice, and the social network aspect of our service will be just as important as detailed, trustworthy data.  Information may help us make better buildings, but people make the decisions.”

Also posted in Energy Innovation / Read 3 Responses

The Housing Market And Green Labels: Location! Location! Efficiency!

By / Published: August 21, 2012

From produce to t-shirts, we know certain people are willing to pay more for organic, and that these people often seek out restaurants, vendors and brands that have earned certifications for their commitments to sustainable practices. Labels help consumers, who increasingly face a multitude of product and service offerings, make informed decisions. But what about a sustainably-labeled house? Will people pay more for a certifiably more efficient, or “green,” home?

A recent study, “The Value of Green Labels in the California Housing Market,” suggests that the market places significant value on certified green homes in California. Such green-labeled homes fetched a 9% premium versus non-labeled homes, based on statewide sales data for 1.6 million homes from 2007 to 2012. This translates to a $34,800 price premium for a home labeled by at least one of three standards: ENERGY STAR, LEED for Homes or California’s own GreenPoint label, on the $400,000 sales price of a non-labeled home. The research was conducted by Matthew E. Kahn, an economics professor at UCLA, and Nils Kok of Maastricht University in the Netherlands, a visiting scholar at the University of California at Berkeley. Their analysis controls for variables known to affect real estate prices including location, size, vintage and the presence of amenities.

The study estimates that the typical single-family California household spends $200/month on utilities, and thus stands to benefit from $720 in annual savings from energy efficiency measures that would reduce energy use by 30%. The authors point out that the $34,800 price premium of a green-labeled home is 48x the annual estimated utility bill savings of $720, suggesting that consumers value efficient homes for more than the direct financial benefits they produce.

All else equal, it is well understood that a resource efficient home uses less energy than an inefficient one, and will therefore have lower operating costs. But Kahn and Kok point out that ‘the added value of a green-labeled home far exceeds both the estimated cost of adding energy efficiency features to a home and the utility-bill savings generated by those improvements.’  

Since the non-financial benefits of a green-labeled home are a seemingly large part of their perceived value, effectively promoting energy efficiency requires a targeted marketing approach that taps into the consumer’s values –  perhaps some combination of increased comfort, improved indoor air quality and the signal of ‘conspicuous conservation’ that lets your neighbors know your own particular “shade of green.”  In fact, the study found that the value of a green-labeled home was positively correlated with the level of environmental ideology of a neighborhood, as measured by the percent of hybrid vehicle registrations. 

We tend to focus on cash-flows when doing a cost-benefit analysis of energy efficiency financing programs, weighing the upfront installation costs versus the resulting monthly utility bill savings. This makes sense given that non-financial benefits, to date, have been hard to value. However, this study is an indication that these benefits are indeed monetized at sale – and a 9% price premium sends a strong message that it pays to invest in energy efficiency!

Also posted in California / Read 1 Response

Making It Real – Energy Efficiency Upgrade Project Performance In The Real World

By Elizabeth B. Stein / Published: August 2, 2012

While codes, standards, and an increasingly energy-savvy marketplace push new buildings toward higher energy standards, existing building stock presents a conundrum.  Upgrading a building to meet higher energy standards than those for which it was originally designed is a tricky business.

McKinsey and others have identified energy efficiency in buildings, particularly large buildings, as one of the most powerful, and potentially cost-effective, opportunities for greenhouse gas (GHG) reductions needed to avoid catastrophic climate change.  However, even energy conservation measures that are “expected” to “pay for themselves” fairly quickly are not implemented universally.   Why?

There are myriad barriers to scaling energy efficiency, but one that gets little attention is the question of how reasonable and achievable upfront energy saving projections actually are.  This is remarkable, because knowing the savings will actually happen is incredibly important for ensuring that energy cost savings streams actually flow to the parties who pay for them – thus making billions of dollars available to pay for them as well ensuring that load reductions resulting from energy efficiency projects can be relied upon by electric system planners and that the GHG reductions we are counting on actually happen.

In a complex world, of course, it would be unreasonable to expect outcomes to match predictions perfectly. And, if the variability consisted of most outcomes coming pretty close to matching predictions, with overperforming and underperforming projects distributed evenly along a familiar-looking bell curve, the unpredictability of individual projects could be managed to some extent by combining them into portfolios.  Unfortunately, this does not appear to be the case.  Although data about energy efficiency project performance is scarce, the little that is publicly available suggests that outcomes do not conform to a neat bell curve, and, worse, systematic underperformance may be the norm. 

I’ve explored some of the reasons for this variability and underperformance – and described EDF’s efforts to foster the conditions for a better track record – by convening parties engaged in various aspects of the upgrade process (our Investor Confidence Project)  in a Snapshot column published yesterday in the newsletter of the Sallan Foundation, The Torchlight.

Also posted in Investor Confidence Project / Tagged , | Read 1 Response

Energy Efficiency: A Resource For The Masses

By / Published: August 1, 2012

By: Jessica Feingold, EDF Financial Policy Fellow

EDF believes that On-Bill Repayment (OBR) can do for efficiency what the third-party finance model has done for solar.

A recent post on efficiency.org, entitled ‘Solar is for the wealthy? Not anymore!’ highlights the growth of residential solar projects in middle-income markets (areas with median incomes of $50k-$100k) at the same time that financing became widely available from the private sector.  While wealthier people have always been more likely to be able to afford the upfront costs of a solar installation, the introduction of solar leases and Power Purchase Agreements (PPAs) has extended the opportunity to a much wider range of consumers.  This increase was described in detail in the 2012 California Solar Initiative Assessment.  The success of solar among middle income households – achieved by eliminating upfront costs and allowing for monthly repayment through a solar lease or PPA structure – lends support to the notion that low-cost financing will be critical to making similar advancements in energy efficiency.

EDF has been working to create an OBR program in California that would provide financing for energy efficiency and renewable energy upgrades.  OBR uses private capital to finance these clean energy upgrades at no upfront cost to consumers.   However, OBR differs from the existing clean energy financing models in that it allows for repayment of a clean energy investment on the customer’s monthly utility bill.  This reduces the administrative burden of an additional bill, while at the same time strengthening the credit of the loan by leveraging historically strong utility payment history. Thus, OBR would provide low-cost capital to consumers for clean energy upgrades.

Middle-income earners, in particular, stand to benefit from OBR, since they otherwise do not have access to low-cost, unsecured financing.  Middle-income households are highly price-sensitive and likely do not have sufficient savings or home equity available to make clean energy investments that would reduce their utility bills, resource use and reliance on grid power.  That is precisely why private sector financing was critical to promoting solar among middle-income households.  Energy efficiency projects, on the other hand, have not yet attracted the low-cost private capital needed to achieve such widespread success.

OBR is an innovative financing solution that would allow middle-income households to realize the long-term benefits of energy efficiency, and provide more affordable financing for renewable energy projects as well.

Also posted in California, On-bill repayment / Tagged | Read 2 Responses

Electric Utilities – An Industry In Transition

By Greg Andeck / Published: July 11, 2012

The recent merger of Duke Energy and Progress Energy represents yet another turning point for the electric utility sector, with significant implications for public health and the environment.  Duke’s six-state footprint – Florida, Indiana, Kentucky, Ohio, North Carolina and South Carolina – offers it an opportunity to lead the way on clean energy deployment.  The question is: Will the new Duke Energy – now the largest utility in the country – harness its size and scale to accelerate investments in energy efficiency and renewable energy, or stay anchored to the past?  EDF’s partnerships with Wal-Mart, FedEx and McDonalds have shown that when large companies are motivated, they are a powerful force for change.  But change doesn’t come easily.  It requires vision, leadership and a constant willingness to innovate.

This is true not just for Duke Energy, but for electric utilities around the country.  Over the past two years, four of the five largest investor-owned utilities have experienced a merger or change in the CEO role – AEP, Duke, Exelon and Southern Co.  The steps taken by these companies and their leadership will have a profound impact on our antiquated electric utility grid, human health and the environment.  The most visionary utility companies will do three things exceedingly well: 

1.       Get out ahead of environmental regulation

In 2002, Duke Energy supported efforts to tackle power plant pollution in North Carolina by supporting the “Clean Smokestacks Act.”  Xcel Energy followed a similar model in Colorado and endorsed the “Clean Air Clean Jobs Act.”  These landmark laws significantly accelerated clean-up of the dirtiest power plants in those two states and made it possible for the utilities to recover the costs of their investments.  It also enabled Duke and Excel to take early steps to modernize their fleets and prepare for future federal clean air requirements.  As a result of early actions, both companies are well-positioned for EPA’s recent Clean Air Rules – unlike the utility giant AEP, which continues to delay critical human health protections.  The world’s most successful companies skate to where the puck is headed, not to where it is, and are more competitive as a result.

2.       Treat efficiency and smart grid investments as new revenue centers, not side projects

The fact is that most electric utilities still see energy efficiency investments as side projects separate from their core business – generating power.  Without state building codes or energy efficiency standards in place, utility investment in energy efficiency remains low.  The reason is simple.  Even in states with decoupled rate structures in place, building nuclear plants is more profitable than energy efficiency projects.  Large generating plants require a large investment with a guaranteed rate of return over a long project lifetime.  In comparison, energy efficiency projects are generally small, often have an uncertain return and a short project life.  EDF is working with leading energy companies and regulators to craft new incentive models that make efficiency investments attractive, but utility companies must be willing to fundamentally alter their business models.      

3.       See competition as opportunity

Even in highly regulated markets, new market entrants and competitors are beginning to change the face of utilities with strong monopoly power.  The costs of solar panels have dropped by over a third in the past few years, making solar energy cost competitive with retail electricity prices in many parts of the country.  Companies like SolarCity are even financing and then leasing solar systems to home owners, enabling cash-strapped customers to reduce their dependence on the grid.  Hundreds of companies now exist to help all kinds of customers reduce their energy bills and dependence on electric utilities.  (I should know – I just insulated my attic and crawl space – and am already benefitting from lower electric bills.) 

Utility companies that help bring energy efficiency and renewable energy to market can retain ownership of environmental attributes (like renewable energy credits) and earn new revenue streams.  Otherwise, those benefits are likely to go to third parties or customers.  Smart utilities recognize the threat that this small, yet growing base of companies provides to their business model, and aim to bring technologies and services to market faster than new competitors.  Rather than trying to delay the inevitable, savvy utility leaders make their companies part of the solution – and profit from doing so.  Companies like San Antonio’s CPS Energy are making this idea a reality through partnerships with a wide range of service providers.

The next generation of electric utilities and their leaders must run their businesses differently than their predecessors or risk being left behind.  Just like the once monopoly-oriented telecom industry, those companies that are willing to adapt and transition to this new energy paradigm will prosper and be well rewarded.

Also posted in Climate, Grid Modernization, North Carolina, Utility Business Models / Read 1 Response

A Dynamic Approach To California Energy Use

By Jamie Fine / Published: July 5, 2012

This commentary was originally posted on the EDF California Dream 2.0 Blog.

Californians are poised for a more functional, data-driven model for setting the prices people pay for electricity.  The new model will make the massive differences in costs of providing electricity during the course of a typical day more evident to us as energy users, thereby inspiring more efficient use of electricity resources.

The California Public Utilities Commission (CPUC) started a rulemaking to examine if the current rate structure for residential energy users is fair and equitable across customer classes and if it:

  • supports statewide-energy goals;
  • facilitating technologies that enable customers to better manage their usage and bills;
  • enables conservation and efficiency on the customer side of the meter; and
  • increases the reliance on non-fossil based generation to reduce overall greenhouse gas emissions.

We know already that the short answer is “no”, so CPUC is eyeing a transition to time variant (“dynamic”) rates.  According to Pacific Gas & Electric (PG&E), with time variant, or what is often referred to as “time-of-use”, pricing – rates “will be higher during summer weekday afternoons when electric demand is higher, typically noon to 6 p.m., May through October. In return you’ll pay lower rates at all other times. This means that when you use energy is just as important as how much you use.” 

EDF’s Energy team has been, and will continue to be, closely involved in the CPUC’s rulemaking, which will examine several facets of the current system.  EDF has also been involved in the related smart grid proceedings, such as the deployment of smart grid infrastructure – which provides the ability to both measure energy use in real time and inform customers about the costs (and environmental impacts) of their choices to use electricity at different times of the day.  This Advanced Metering Infrastructure (AMI) enables a smoother transition to dynamic rates for residential consumers.

EDF is very encouraged that the CPUC is considering  time variant pricing because it will help consumers to be more thoughtful about their energy usage, particularly at times when demand is peaking and pushing electricity supply sources to their limits.  This type of rate structure can encourage conservation and reduce peak demand while providing customers with more choices that can ultimately lower their monthly bills.  For example, allowing consumers to see how much they can save on their electric bills by reducing their energy use during peak hours will encourage a shift of energy-intensive activities, such as washing and drying clothing and dishes, to off-peak (and less expensive) times of the day. 

Because a dynamic pricing system will alleviate pressure on the electric grid during peak demand, it will also lead to a more stable, less expensive energy system that is increasingly resilient to extreme weather events.  The economic motivation should also help to create an easy way for consumers to make decisions more efficiently, thereby lowering their electric bills and shrinking their environmental footprints.   

Futhermore, dynamic pricing can help integrate renewables and electric vehicles into the electric grid by allowing utilities to respond to price signals more effectively.  For example, time-of-use rates support electric vehicle charging at times when grid resources aren’t strained, such as late at night or early in the morning when most people are sleeping. 

This new approach will facilitate conservation and energy efficiency, as well as an increase in the use of clean energy sources that avoid harmful greenhouse gas and urban air pollution.   If adopted, the dynamic pricing model can be a common sense approach to saving energy and money, while promoting energy efficiency and a smarter, “greener,” electric grid country-wide.

Also posted in California, Grid Modernization, Time of Use / Read 3 Responses