Building energy efficiency retrofits - $1 trillion market opportunity

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Source: GLOBE Foundation

DB Climate Change Advisors (DBCCA) and The Rockefeller Foundation have released a research study which examines the potential size and investment opportunity of upgrading and replacing energy-consuming equipment in US real estate.

The paper, entitled, 'United States Building Energy Efficiency Retrofits: Market Sizing and Financing Models,' highlights this investment opportunity, with the potential for significant economic, climate, and employment impact. DBCCA is the climate change investment and research business of Deutsche Bank's Asset Management business.

In the United States alone, more than $279 billion could be invested across the residential, commercial, and institutional market segments. This investment could yield more than $1 trillion of energy savings over 10 years, equivalent to savings of approximately 30% of the annual electricity spend in the United States.

If all of these retrofits were undertaken, more than 3.3 million cumulative job years of employment could be created. These jobs would include a range of skill qualifications, and would be geographically diverse across the United States. Additionally, if all of these retrofits were successfully undertaken, it would reduce U.S. emissions by nearly 10 percent.

Judith Rodin, President, The Rockefeller Foundation, noted 'buildings consume approximately 40% of the world's energy and are responsible for 40% of global carbon emissions. However, proven technologies to retrofit buildings can both conserve energy and - even more importantly in these difficult economic times - have the potential to create a large number of jobs. With the release of this new report, outlining both the investment and job opportunities, I am increasingly hopeful that this market can achieve its full potential.'

Mark Fulton, Global Head of Climate Change Investment Research for DBCCA, stated 'We believe that the emerging Energy Service Agreement financing structure offers significant near term potential to scale quickly and meet the needs of both real estate owners and capital providers in the commercial and institutional market, without the requirement for external enablers such as regulation or subsidy.'

In this report, DBCCA and The Rockefeller highlight that mature and proven technologies, designed and manufactured by established multi-national firms, can save energy and yield significant returns when replacing older, less efficient systems.

However, the apparently simple act of upgrading and replacing equipment in buildings - from upgrading lights to replacing heating and cooling systems, or replacing building controls - has never achieved its full potential.

In order to provide a clear understanding of this opportunity, the report seeks to establish the potential size of the retrofit market in the United States and examines the emergence of new financing models that offer the promise of overcoming historical barriers and unlocking the true potential of this market and to overcome both the supply and demand side barriers.

Highlights:

  • ~$279 billion could be invested in retrofitting the residential, commercial, and institutional market segments in the US.
  • This investment could yield more than $1 trillion of energy savings over 10 years, equivalent to savings of approximately 30% of the annual electricity spend in the United States.
  • If all of these retrofits were undertaken, more than 3.3 million job years could be created.
  • These jobs would include a range of skill qualifications, and would be geographically diverse across the United States.
  • Additionally, if all of these retrofits were successfully undertaken, it would reduce U.S. emissions by nearly 10%.

With respect to an enabling policy environment for overall market development, the study suggests that policymakers consider the following:

Mandates (targets) that set comprehensive energy efficiency standards.
Disclosure and benchmarking laws, such as those implemented in New York City or voluntary systems such as proposed by Greenprint.
Leadership by example. Government can lead by example by using its existing assets (e.g. GSA properties) to test emerging financing models and prove out different approaches, as it did with the LEED standards.
Subsidies, incentives and guarantees to 'de-risk' energy efficiency investments.

Utilizing the work done by the World Economic Forum as a reference point, the report profiles these models, including the Energy Services Agreement (ESAs), Property Assessed Clean Energy (PACE) and On-Bill Finance (OBF), in addition to examining the largest historical provider of energy efficiency upgrades, the Energy Services Companies (ESCOs).

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