Energy Efficiency & Demand Response Finds New Footing
Thirty years after U.S. President Jimmy Carter urged Americans to conserve in the wake of oil price shocks, energy efficiency has recovered from the disrespect of the Reagan era, the disincentives of cheap oil and gas, and the loss of state mandates that disappeared in the mid-1990s with U.S. electricity market restructuring. "As a community of people interested in energy efficiency, our time has finally arrived," said Dan Reicher, director of climate and energy initiatives for Google.org. Fueling the renaissance are the same drivers that animate the rest of the climate change industry: policies that encourage or require utilities and end-users to invest in carbon-reduction measures; the desire of businesses, institutions, governments and individuals to do something-and to show they're doing something-about the threat of climate change; and the rising costs of energy. Additionally, champions of energy efficiency now lead the White House and the Department of Energy. In June, President Obama called energy efficiency "one of the fastest, easiest, and cheapest ways to make our economy stronger and cleaner."
Go Forth And Aggregate, Say Investors and Lenders
Energy efficiency is a powerful tool for mitigating climate change. It can also save families and firms a lot of money-but not as quickly or obviously as many household and business decision-makers would like. Surveys have revealed that long payback periods are one of the primary objections energy users have to investing in all but the most immediately cost effective energy savings equipment. "[Most families] and businesses won't adopt any new efficiency improvement unless if has about a 2-year payback," said Skip Laitner, of ACEEE. With the right financing tools, however, the cost of energy efficiency investments can be spread over many years, allowing users to finance an energy-efficiency upgrade from actual savings. How to do this was the theme of the 3rd annual Energy Efficiency Finance Forum sponsored by the ACEEE and Financial Research Associates.
Venture Investors Warm To Energy Efficiency and Demand Response
CalCEF President Dan Adler says EE investments are more appealing to VCs than ever. In past years, "we heard them say that there really wasn't a lot of IP [intellectual property] in the energy efficiency world. ... Number two, they said, ‘even if we found something we liked, we'd have to deal with utilities and their constrained channels in the marketplace, and we need more flexibility in where we can sell products.'" What changed was the heightened profile of smart grid technologies and green building, combined with the credit crunch and slumping economy. "Now investors are looking for anyone with a balance sheet to make a deal," said Adler. Today when he attends events with investors and their partners, he hears a great deal of interest in utilities and their programs to certify equipment for rebate and incentive programs.
Changing Market Creates Openings for New Business Models
An entrepreneur and a utility expert say a shift in financing and pricing services is needed-and maybe inevitable. In spite of utility-provided incentives, many households and businesses have been reluctant to invest in major energy-efficiency upgrades due to the high upfront costs and long payback periods.In the current economic climate, commercial and industrial firms must devote any spare cash for core activities, while borrowing to finance energy efficiency upgrades is more difficult and costly than at any time in recent history. Meanwhile, investor-owned utilities must contend with flat or declining revenues and a looming $1.5 trillion bill to build a reliable low-carbon energy infrastructure. Could an energy service model be the solution for users and providers of energy?
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