Major Players Work to Boost Investor Confidence in Energy Efficiency

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investor confidence in energy efficiency

Increasing Investor Confidence in Efficiency

Several leading companies have signed on to boost investor confidence in energy efficiency through the Investor Confidence Project. Their participation is expected to ultimately increase investments in efficiency.

The Environmental Defense Fund’s Investor Confidence Project assembles existing standards and practices into a consistent process. The project trains developers to meet these standards and become credentialed project developers. The project aims to create a recognized “logo in the lobby” for efficiency projects that will show investors they can trust in the promised efficiency savings.

The first round of credentialed companies includes HVAC, energy services and building companies, among them Johnson Controls, Trane, Pepco Energy Services, Swinerton Builders, SCI Energy, Association for Energy Affordability, HT Lyons, Environmental Building Strategies, TRC, L & S Energy Services and Performance Systems Development.

“This is a really big deal. These companies are trendsetters in energy services,” said Matt Golden, director of the Investor Confidence Project. “These companies represent all types — HVAC, energy efficiency, and builders. We didn’t plan it this way but it’s interesting that the first class of credentialed companies touches on all types of businesses working in this space.” He noted that the turnout exceeded his expectations.

Michael Eckhart, managing director and global head of finance and sustainability at Citigroup, recently laid out the challenge  in the Clean Energy Finance Forum, saying, “Energy efficiency is in a category by itself. With the exception of one company packaging energy efficiency, energy efficiency projects do not yet meet the requirements of capital markets. The industry is just too disaggregated. No two projects or contracts are alike. Securitization is not practical or possible under these circumstances. Say you have 1,000 energy efficiency projects. Standard & Poor’s would have to read 1,000 documents to assess the risk. Fees won’t pay for that level of review.”

That’s exactly the problem the Investor Confidence Project seeks to address, said Golden.

“Everyone agrees that in order for energy efficiency to get to scale, we need to standardize across all sectors. We need to make this more cookie cutter.”

“We’re training these companies to create a project that can be turned into an Investor Ready Energy Efficiency project. We’re not telling them how to build their buildings,” said Golden. The companies involved must have a professional engineer or certified energy manager on staff. When a project is credentialed, “all facets of the project have been put together following the investor confidence protocols,” he said.

It may sound pretty basic, said Golden, but investor confidence in energy efficiency will create a big leap for the resource — and the environmental and economic benefits it yields.

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Comments

  1. “The project aims to create a recognized “logo in the lobby” for efficiency projects that will show investors they can trust in the promised efficiency savings.”

    Not sure how a logo in the lobby leads to investor trust. I’d prefer past performance.

    Also not clear is what’s meant by making projects cookie cutter. Prescriptive approach to design doesn’t yield best results, and too often it yields very poor results. Again, not something I’d invest in.

    Let’s focus on the what, not the how. As investor, I want results not products. I don’t want to invest $100,000 in a more efficient boiler that might save $X, I want to buy free cash flow. I’ll buy that boiler in situations where it will provide that, and NOT buy it where they won’t.

    • If you take a moment to visit the Investor Confidence Project website (www.EEPerformance.org) you will find that we also agree it is about the data and you can see exactly what we mean by standard projects in the ICP Protocols – which you will find standardizes methods, documentation, and review, but are not prescriptive.

      In order for an investor of any type (building owner, utility, energy service provider, etc.) to make a decision to invest in a project, they want to see representative performance data associated with recognizable asset. This is true of individual transaction and even more true as portfolios reach capital markets — the people buying efficiency are not engineers, so that logo in the lobby is what replaces the binders of project documentation and says to investors, you know what you’re getting and you can have confidence in your returns.

  2. I think LEED and RESNET have queered the public on logos to the point where it engenders distrust. Self congratulatory false proxies without accountability or substance.

    I suppose if some new logo in the lobby provided clear connection to consumption, say a qr code linking to actual performance, to transparent results, that could rebuild goodwill around labeling.

    • The Investor Confidence Project is about creating confidence at the point of underwriting a project investment, and that has to be done based on a set of engineering predictions and operational plans. Performance data comes later and after investments have already been made.

      The goal is that if there are standard and verified project assets, that can then be connected to performance of that class, then risk can be priced and managed, to enable investment with more confidence.

      The notion of the logo in the lobby is simply that those who are making these investments are typically not energy engineers and having a system to third party verify projects relieves building owners and finance companies from having to do technical diligence on each project from scratch.

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