Three hospitals in England recently cut energy costs in half after spending the equivalent of $18 million in energy efficiency upgrades. The projects got a much-needed boost from a certification that gave investors confidence the retrofits would bring returns.
With millions of buildings in need of upgrades and the emergence of a $20-billion retrofit industry in the United States alone, there is neither a shortage of projects nor capital looking for environmental opportunities in which to invest. What has been lacking is a way to grow the market to scale.
Even with an energy efficiency market topping $1 trillion, investors have historically considered such retrofits risky. All this is changing quickly with a new and global underwriting standard mitigating the risk of such investments.
Nations embrace new certification
One investor in the 2016 landmark hospital project in Liverpool, England, predicted the new model would “unlock the European retrofit market.” Since then, a number of countries on the continent have expressed interest in the Investor Confidence Project.
We believe a global market for retrofits can now be unlocked after ICP’s Investor-Ready Energy Efficiency certification, or IREE, last month joined the platform of global certifications delivered by Green Business Certification Inc.
The company administers LEED for green buildings, along with protocols for real estate portfolios and healthy buildings – and will now offer training and support for IREE.
After building momentum in the U.S., Canada and Europe for the past five years, the certification could now gain a global reach.
It gives investors peace of mind
To upgrade a building takes capital investment up front. Because each building is unique and does its math differently, it’s hard to aggregate energy efficiency projects, predict their return on investment, and bring them to scale.
In many cases, the projects look too small to be of interest to investors. ICP changes this by providing standards to build confidence that a project will perform as anticipated in the form of lower electricity bills, higher energy savings and returns on investment.
The ICP tool brings rigorous protocols as well as measurement and verification metrics to energy efficiency building retrofits. It creates a replicable pipeline of projects, standardizing the way they are developed and brought to market at scale.
Its IREE certification for commercial and multifamily projects lets investors and building owners know that a particular project is “investor-ready,” making potential energy efficiency upgrades more attractive to both parties.
With the standardization ICP and IREE bring to the table, we’re on a path to scaling energy efficiency investments from a one-building-at-a-time approach to a portfolio approach. On this smarter path to boosting financial savings, while cutting energy use and pollution, we can all breathe a bit easier.
I don’t really understand how this changes what is an already scaling market; the biggest problem for lenders/equity providers is that ICP and other M&V companies will not “backstop” the savings to ensure that lenders get paid back. We need companies with balance sheets to do this.
Thanks, Daniel, for sharing your thoughts. While the market may be scaling, it is our view that it is not scaling rapidly enough. It is also our view that ICP can further bridge the gap between projects and capital. Through the standardization of project design/development, as well as measurement and verification on the back end, ICP will accelerate energy efficiency project development and private capital deployment at scale. ICP clearly was not designed to “backstop the savings to ensure that lenders get paid back.” That said, by creating a system that increases confidence in project performance, lenders will be less reluctant to step forward and more willing to invest in energy efficiency.
Thanks, Daniel, for sharing your thoughts. While the market may be scaling, it is our view that it is not scaling rapidly enough.
Wow, 50%, that’s quite a savings. What was their collective energy cost before the modifications?
James SmithMarch 10, 2018 at 7:25 am