In their report, Peter Sweatman, founder and CEO of the UK-based Climate Strategy and Partners, and Katrina Managan, Fulbright Scholar and International MBA Candidate at IE Business School in Madrid, provide an in-depth review of policy and retrofit activity in the US, UK and Spain.
They then move on to a discussion on the performance of current retrofit business models, and presents their own Aggregated Investment Model, which they contend will overcome many of the structural and financial barriers in the market today.
Best of all, the paper provides all this information in an easily accessible language. As Sweatman explained, “We set out to design a solution to make it as easy to undertake and finance an energy efficiency upgrade as it is to sign up for a new credit card or take out a car loan.”
According to the authors, the size of the opportunity in this sector is enormous. Buildings use 40-45 percent of the energy consumed in the US, UK, and Europe and studies show that this could be cost effectively reduced by 20-50 percent.
Energy efficiency retrofits will reduce greenhouse gas emissions and improve the energy security of any country where they are implemented by reducing energy demand. Yet, deploying energy efficiency upgrades in buildings at scale has proven elusive, to date, as there are insufficient financial resources available to energy efficiency upgrades and many stakeholders’ interests in individual projects are miss-aligned.
The authors propose creating bankable energy efficiency assets that have broad access to wholesale, efficient financing in the capital markets. These assets are standardized and designed using an open-origination architecture to spur competition among many possible distributors such as banks, utilities, ESCOs and other retail outlets.
“Energy efficiency upgrades provide a win, win, win, opportunity for the economy, the environment, and energy security,” Managan said. “Our recommended business model applies good sense energy conservation within the context of the energy bill itself.”
The right policy framework will accelerate deployment of the Aggregated Investments Model., the authors said.
Integral to the their regulatory recommendations is the enabling of on-bill upgrade repayment and government credit enhancement to kick-start a market which is in its early stages of development.
The Climate Strategy & Partners paper is based on a detailed literature review of over 120 reports, journal articles and interviews subsequently reviewed by 35 experts selected equally from the US, UK and Spain. Expert reviewers included representatives of the key stakeholder groups, including banks, energy companies, NGOs/ think tanks and academia.
Among them was Eric Schlie, vice dean of the MBA programme at IE Business School, who said “The field of energy efficiency in buildings has received relatively little attention in recent years, and yet its importance is undeniable, which is precisely what makes this paper so timely.”
Similarly enthused was José Javier Guerra, director of Gas Natural Fenosa’s Energy Efficiency Centre, whose firm is underwriting the launch of the report.
“Gas Natural Group is aware that the application of retrofit energy efficiency measures in buildings requires new business models to enable society to extract the potential savings,” Guerra said. “Through this report, Climate Strategy initiates the right dialogue so that the various stakeholders, agencies, energy service companies and financial institutions can build a common language and understanding for that purpose.”
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