Energy efficiency is one of the fastest and most affordable ways to reduce harmful pollution. Why, then, aren’t we financing more energy efficiency upgrades?
Well, simply put, there are quite a few barriers that must be addressed and broken down before energy efficiency skyrockets. Yes, there are already many buildings that have set the bar high for others to follow, but some investor and lender hesitancies still exist that we need to overcome.
Furthermore, the efficiency market cannot create itself. And it is currently stifled, despite investors’ eagerness to take part.
The problem, as the investment community sees it, is that there is no secondary market for energy efficiency loans. In other words, the pool of loans is currently not large enough to make these investments worthwhile for institutional investors. Furthermore, there is a lack of uniform standards for energy efficiency loans, limited data on loan and project performance and an insufficient pipeline of projects. There are also challenges to bringing efficiency to scale, namely:
- the split incentive—disconnect between the building owner and the residents, who actually pay the utility bill;
- utility disincentives—utilities generally make money by selling more energy, not by reducing wasted energy; and
- limited information available to consumers on their energy use.