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State Energy Efficiency Lead by Example Programs

By matthew.brown | August 12, 2008

As part of work that I am conducting for a national energy efficiency client, I have been examining state energy efficient lead by example programs — programs through which state governments commit to reduce their energy usage or increase their energy efficiency by some percentage. These programs typically apply to high performance new buildings, existing buildings, purchasing guidelines or goals to increase the efficiency of state fleets.

Forty states operate some kind of program. Twenty three of these have quantified goals or requirements to reduce energy usage and the others have broader, sometimes unquantified, goals. Only twelve states both set goals, track and then report progress toward meeting these goals. As an example, Arizona requires that its state agencies reduce their energy usage by 10% by July 1, 2008 and 15% by July 1, 2011 using the fiscal year 2001-2002 as a baseline. California requires that state agencies reduce their grid-based electricity usage by 20% by 2015 as compared to a 2003 baseline. New York State has the most ambitious goal in the country of reducing energy use by 35% by 2010 using a 1990 baseline year.

I failed to identify a single state that had met its own, self-imposed energy efficiency goals. Only California may be able to meet its goals — or may be on track to do so– however we will not know if it meets its goal until 2015. In general, however, states failed to meet overall energy consumption reduction goals. Despite the fact that the state generally fall short of their own goals, there are some useful observations:

Programs to build new buildings with energy efficient designs appear to be more successful than programs to change the energy consumption of existing buildings.

Leased buildings present special challenges – state governments do not own or control these buildings although if they are new tenants occupying a significant proportion of the building they may have leverage to influence choices. Some states have given up trying to influence leased buildings. Others, like California, have focused on requiring that newly leased facilities meet high ENERGY STAR criteria.

Many states that try to track their progress have only limited success in doing so. Most of these requirements come in the form of executive orders, and although they may be a high priority for a while, they are often distant from the overall mission of many agencies that are charged with tracking their energy consumption and reducing energy consumption. As a result, many state reports lack data on their own progress.

Hiring staff who are dedicated to increasing energy efficiency and can provide technical and other assistance can be a significant help to those agencies whose core missions are not related to energy or energy efficiency.

State facilities can increase (or decrease) their energy usage as their mission changes or as they grow. Universities add laboratory space that is highly energy intensive, for instance, or a port facility in Hawaii might see an increase in cruise traffic. State goals that focus on energy intensity (energy use per square foot, for instance) can be more useful and accommodate these changes.
My view is that these state lead by example programs are well worth pursuing. Even though states have not met their own, self-imposed goals the programs have served to focus attention on energy efficiency. The states that are likely to be most successful are those that: hire people to focus specifically on energy efficiency including helping to design and evaluate financing tools; set goals that take into account the possibility of growth (perhaps a reduction in energy consumption, adjusted for this growth); incorporate specific requirements for new energy efficient buildings.

I will shortly have a full report on this topic available.

Matthew H. Brown

InterEnergy Solutions

Topics: Energy Efficiency | No Comments »

Energy Efficient Mortgages

By matthew.brown | March 24, 2008

As part of work that I am doing with the Energy Programs Consortium (www.energyprograms.org) I am focused heavily on development of a new energy efficient mortgage product.

The idea behind an energy efficient mortgage is simple — make an investment in energy efficiency and energy bills decline as a result. Lower bills free up money that can be put towards slightly higher mortgage payments — which means that borrowers should be able to qualify for a bigger mortgage. Incorporate energy efficiency investments into that mortgage and you’re now paying for those improvements over the life of the mortgage. If borrowers hold on to their mortgage for a long time, this could be a good thing.

Unfortunately, the energy efficient mortgage concept never really took off. It required energy audits, which were often cumbersome. It required lenders to fill out new forms. It required that money be put into escrow while energy efficiency work was completed. And energy efficiency mortgage interest rates were the same as those for a traditional mortgage — so there was little incentive for borrowers to go through the hassle.

The product that I am working on would look to use a variety of outside sources of credit supports and interest rate buydowns in order to bring the interest rate down. We are looking at state funds that could be applied to this purpose, and also looking at federal sources of loan guarantees to further increase the creditworthiness of these loan portfolios. We are also focusing on the audit protocols — trying to find a way to reduce the amount of time required to conduct an energy audit that will be acceptable to the lending institutions and to the investors that buy energy efficient mortgages.

The goal of this effort is not small — it is to try to transform a large industry that’s also in a lot of trouble right now. Energy efficient mortgages are, in theory at least, a way to finance measures to improve the quality of houses — they should be a better quality investment than many other kinds of mortgages for that reason. We don’t yet have the data to prove that, but the ultimate goal is to bring these mortgages into the mainstream as a high quality, potentially lower risk product that could inherently deserve a lower interest rate than would be given to a typical mortgage.

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State Energy Efficiency Lead by Example Programs

Energy Efficient Mortgages