Private Sector Creatively Finances Green Commercial Buildings



In a move that should have lawmakers in Washington D.C. turning red with embarrassment, a few entrepreneurs have come up with a plan to slash energy costs for commercial properties by as much as 30% on a global level.

This plan has the makings to solve several problems that have afflicted the commercial sector for years. It will allow building owners to dramatically improve the energy efficiency of their buildings with NO up front costs. The energy savings will be greater than the repayment costs that will be spread over 5 to 20 years. And it could create tens of thousands of jobs in the construction sector without costing taxpayers anything. It’s so simple, even a Washington politician should have been able to think it up.

 

© tdelpiano - Fotolia.com

© tdelpiano – Fotolia.com

The Carbon War Room

Richard Branson, the British entrepreneur and billionaire has put together a private syndicate named The Carbon War Room. The syndicate includes Lockheed Martin and Barclays Bank investing $650 million over the next few years in greening commercial buildings across the country. The early focus is on states and communities that have already approved funding retrofit projects through property tax surcharges.

You might be thinking that involves taxpayer money but you’d be wrong. The financing comes from the private sector but the local tax authorities collect the payments to assure the loans are repaid by placing a tax lien on the property. This is a great solution that brings in global financing but leaves decision making at the local level. Environmental activists estimate that over the long-term, tens of billions of dollars in improvements will be made, while at the same time saving commercial property owners ten times that amount in energy costs.

Green Guarantee

Contractors will be required to guarantee the upgrades they make will deliver the energy savings they claim. They will also be required to cover that guarantee with an insurance policy. The way the financing is expected to work is Barclays will provide short term financing. As projects are completed, the loans will be bundled into long-term bonds resembling those typically offered by states and municipalities. These will be sold to investment groups like insurance companies and retirement funds. The bonds will be paid off from property tax surcharges levied against the properties receiving the upgrades.

This innovative financing approach has become known as Property Assessed Clean Energy – PACE. To date, 25 states and Washington D.C. have passed some version of PACE legislation.With the vast majority of humans now living in cities, buildings offer the biggest opportunity to reduce energy consumption and the associated carbon emissions. Retrofitting older buildings to be energy efficient is estimated to have the ability to reduce total carbon emissions by 10% by the year 2020. At the same time, the cost to conduct business will be greatly reduced. Every way you look at this solution, it works for everyone except the coal industry where up to 30% of U.S. plants are expected to be shut down.

The Carbon War Room intends to distribute the most effective local models across not only the country but across the world. The Carbon War Room sees themselves as the visionary leader that local communities come to for innovative energy and related financing needs for many years to come.

 

Brian Kline

Author bio: Brian Kline has been investing in real estate for more than 30 years and writing about real estate investing for seven years. He also draws upon 25 plus years of business experience including 12 years as a manager at Boeing Aircraft Company. Brian currently lives at Lake Cushman, Washington. A vacation destination, a few short miles from a national forest in the Olympic Mountains with the Pacific Ocean a couple of miles in the opposite direction.


Comments

  1. Dear Brian,

    Thank you for taking an interest, we appreciate your interest in our work. Your article is a great piece about how we began efforts on PACE. Since we announced the PACE commercial consortium in September 2011, there have been some amazing advances especially in Sacramento and Miami with Ygrene (the only remaining original member of the consortium) and more than 200 other contractors. We are well on the way to seeing ‘white vans’ pulling up to begin work on a pretty expressive scale.

    With regards to specific points in your piece: Lockheed Martin was never intending to finance projects nor were contractors ever “required” to “guarantee” the savings. Yes, projects were intended to have an insurance policy to backstop part of the performance risk, however, this is not the same thing as saying that the contractors were guaranteeing project savings.

    Additionally, 31 states and the District of Columbia (not 25) have passed enabling legislation. For more information about the market development of PACE, I highly recommend checking out the PACENow website (http://pacenow.org/pace-programs/).

    Kind Regards,
    Joshua Kagan – Operations Lead, Energy Efficiency
    Carbon War Room