The White House gathered the heads of 60 business, labor, municipal, and academic organizations on Friday to announce plans to invest $4 billion in building energy efficiency over the next 24 months, and none of that will be taxpayer money.
The investments will come in what’s called performance contracting, by which companies specializing in building efficiency retrofit buildings and are paid from the energy savings that result. Up-front investment is financed by banks based on contractor-guaranteed annual savings. Once the loan is repaid, the building owner gets the savings.
Of the $4 billion in building efficiency projects being announced, half will be spent in the private sector and half in the federal government.
The Triple Win
President Barack Obama was joined by former president Bill Clinton, Chamber of Commerce CEO Thomas Donohue, American Federation of Teachers President Randi Weingarten for the AFL-CIO, and CEOs of major retailers, manufacturers and other large facility owners. The Clinton Global Initiative has been working with the national business and labor groups since Obama launched the Better Buildings Initiative in February, and today’s announcement is the result.
National Economic Council Director Gene Sperling called it “a triple win initiative:” buildings waste less energy, jobs are created to do the work, and the work pays for itself.
Obama is ordering federal agencies to contract a minimum of $2 billion in the next two years under energy performance contracts. The model has been around from some years, and the administration has set goals of improving building efficiency, but with large federal facilities the contracting has proven complex and slow. Obama is ordering agencies to get moving.
Corporate America Joins Up
The other $2 billion is being committed by the private sector. Participants in today’s announcement include financial institutions committing funds to energy-saving projects, firms providing the retrofit services, and large commercial and industrial firms that see energy efficiency as a competitive imperative.
Sperling said an estimate from University of Massachusetts Amherst experts puts potential job creation at “over 50,000 jobs.”
Paul Hamilton, vice president of government affairs for Schneider Electric, one of the companies participating both as an efficiency contractor and as a facility owner, said his company figures that for every job it creates on a project, three more are spawned on subcontracts.
The retrofits usually include more efficient heating, air-conditioning and lighting systems, advanced sensors and controls, and high-efficiency windows. Hamilton said Schneider has been able to save 20% or more on its own buildings’ annual energy bills.
Hamilton said there are 18 “super ESCOs” – energy service companies – including Schneider, and about 60 companies total offering energy efficiency performance contracting services, so he believes the private sector is ready to handle any influx of new contracts from the President’s initiative.
Some of the companies involved today, like Schneider, have committed to the Better Business Challenge, under which each company turns one facility into a showcase of energy savings. “In our showcase, we’ve probably invested over $5 million, but we have been able to reduce energy usage over 40%,” Hamilton said. “That’s not typical, but it shows what is possible.”
Capital Challenge
The major holdup in more contracting, he said, has been funding availability. In the economic downturn, large companies have to prioritize capital commitments and smaller companies have found it more difficult to get financing.
But Hamilton said the Chamber of Commerce has been strongly supporting the concept because it creates jobs locally. While equipment might be brought in from outside, the work itself can’t be outsourced.
“It’s job-intensive, and it doesn’t cost the government anything,” Hamilton said. “Performance contracting is a great opportunity to upgrade federal facilities at little cost.”
