he City of San Francisco is paving the way for owners of residential and commercial buildings to conduct green upgrades to their properties through an innovative financing program. The San Francisco Sustainable Financing Program (SF2) will provide owners with affordable financing for green retrofit projects, with the repayment obligations tied to the property rather than the owner. The loan repayments and interest will be added to the building’s property tax bill, and paid back over the loan period.
Energy-saving upgrades, such as solar installations and replacement heating systems, are often unattractive to owners because they require sizable upfront expense, whereas it takes many years for the benefits from these improvements to accrue in the form of lower energy bills. In a traditional financing arrangement, the owner who arranges the financing is responsible for future repayments, even if they were to sell the property during the life of the financing. The property tax assessment model takes this problem away and allows owners to invest in the sustainability of their property and enjoy the many benefits that are gained from a cleaner, more efficient and healthier building.
The San Francisco program is based on the PACE (Property Assessed Clean Energy) framework that was pioneered in Berkeley and has since been adopted by municipalities across the nation. Unlike some other property tax repayment models, which are solely for solar installations, the San Francisco program will also be used for energy efficiency and water conservation initiatives. Under the program terms, participants are required to conduct an energy audit and install energy efficiency upgrades before any renewable energy improvements are allowed.
Also, in contrast to many similar government-funded programs, the San Francisco initiative will be financed using up to $150 million of private capital, plus any available state and federal grants.
As one of the leading global real estate services firms, CB Richard Ellis (CBRE) made an early commitment to the promotion of sustainability in real estate, both in its work with clients and in its own operations. Reflecting this, the firm released corporate responsibility reports in 2007 and 2008 and declared its goal to be carbon neutral in operations by 2010. CBRE's December newsletter, "6 Degrees of Sustainability", provides a good insight to the kind of activities that CBRE is initiating across the green building spectrum. These include:
Training of staff in green building practices: CBRE now has 400 LEED Accredited Professionals.
Developing tools to assist owners and occupiers, such as eTrack, a web-based tool that monitors building energy performance and allows owners to track tasks related to building operations and initiatives such as LEED EB accreditation.
Real estate professional service firms like CBRE have a key role to play in the promotion of green building practices, and we expect to see that role - and their influence - increasing as sustainability becomes mainstream in the commercial real estate industry.
Copenhagen, December 13, 2009 - I am writing this early Sunday morning as my flight arches across the North Sea and begins a slow descent over the Danish Archipelago. It is clear day and the sun is catching the graceful rotations of hundreds if not thousands of windmills that dot the Danish countryside. I am headed to Copenhagen to attend the climate meetings there this week, and as the plane begins its final approach I am thinking about how my journey from Toronto to Copenhagen really began over twenty years ago.
Climate change first burst on the international agenda in the sweltering summer of 1988. Throughout the 1980’s there had been a growing sense of concern among climatologists (scientists who study the physical and chemical processes in that thin layer of life-giving gas that surrounds our planet) that human activities were altering the atmosphere in potentially dangerous ways. In June of 1988 Canada hosted the Toronto Conference on the Changing Atmosphere which brought together climate scientists, energy experts, policy makers and others from around the world to address the problem. I had been working on energy and environment issues for over ten years by then, and the Canadian government asked me if I would organize the energy workshop for the Toronto conference.
Already by 1988 the case for human-induced climate change was strong. The greenhouse effect itself had been understood since the 19th century and the concentration of carbon dioxide in the upper atmosphere was clearly on the rise. Carbon dioxide emissions from fossil fuel combustion were double the level that the ecosphere could absorb, and the surplus was accumulating in the atmosphere. This in turn was enhancing the natural greenhouse effect, and the result would be an increase in the average global temperature. The theory was sound and well established, but in 1988 the signal – the actual increase in global average temperature – was difficult to detect amidst the natural temperature variations.
If the consequence of climate disruption were not so serious, a “wait and see” attitude might have been justified in 1988, but therein lies one of the central dilemmas of this issue. Increases in greenhouses gases today continue to affect climate for decades and even centuries into the future. Every day we continue to emit greenhouse gas emissions at current rates or higher, we lock into place the long term consequences of those emissions. And the consequences of upsetting the global climate system go far beyond simple warming. It’s not unlike the fever we get when suffering from the ‘flu; the average global temperature increase is a symptom of deeper problems. By the time the global atmosphere is running a fever of even one or two degrees Celsius, it represents a significant destabilization of the planetary climate system and anything that is connected to it. And everything is connected to it, including us.
This is where the “precautionary principle” comes into the picture.The precautionary principle states that if an action or policy might cause severe or irreversible harm to the environment, then in the absence of a scientific consensus that harm would not ensue, the burden of proof falls on those who would advocate taking the action. Unless and until such proof can be provided, the action should not be taken. The case of human-induced climate change is clearly such an action. Simply put, we should not risk upsetting the global climate system – the stakes are too high. The precautionary principle was clearly at work in the final statement of the Toronto Conference in 1988 which began with the stark warning that "humanity is conducting an unintended, uncontrolled, globally pervasive experiment whose ultimate consequences could be second only to a global nuclear war.” The statement went on to endorse emission reduction targets that had been worked out in the energy workshop, calling for a 50% reduction in greenhouse gas emissions by 2050, and for immediate actions to reduce global emissions by 20% by the year 2005.
The 20% target became known around the world as “the Toronto target” and it began a profound rethinking of the way we use energy that continues to this day. In the next few years, an international treaty on climate change was drafted, signed and ratified by most of the nations of the world, agreeing that atmospheric concentrations of greenhouse gases must not be allowed to reach dangerous levels. In recognition of the fact that most of the historical increase in greenhouse gas concentrations from fossil fuel combustion was the result of activities in the rich, industrial economies, it was also agreed in the treaty that the onus was on those countries to take the lead in financing and deploying the technologies and solutions for reducing emissions.
By the time we got to Kyoto in December of 1997, individual national targets and timetables were agreed to that specified the emission reductions each of the rich, industrial countries would achieve by 2012. In fact, the targets agreed to in Kyoto fell far short of what everyone knew would be required to stop climate change, but politically they were all that was possible. Even so, the United States Congress would not ratify the Kyoto Protocol, pointing to the futility of reducing emissions in the rich countries while emissions from the developing world continued to grow exponentially. Some countries, like Canada, ratified the Protocol but failed to follow through with the policies and actions that would have been necessary to meet their targets. Other countries, particularly in Europe, went to work developing the policies, regulations and energy efficiency and renewable energy industries that could get the job done, and will meet their Kyoto commitments. Hence the windmills in the Danish countryside.
But the bottom line is that global greenhouse gas emissions have continued to rise, the precautionary principle has not prevailed, and human-induced global warming has moved from a dire warning to a clearly evident and measurable reality. Without the early and active engagement of the United States, Canada and some other industrial countries, and with the double digit economic growth rates that have prevailed in China and other emerging economies, fossil fuel burning has continued to drive up the concentration of carbon dioxide in the atmosphere. We are now irreversibly committed to continued global warming for most of this century, even with the recent reversal of U.S. policy and even if we can achieve a global acceleration of efficiency and renewable energy technology on an unprecedented scale.
That is the situation as the world gathers in Copenhagen this week, and the mood on the ground is tense. Thousands of young people are here, many of them angry, frustrated and bitter at the failure of their elders to take effective actions, to lead. That frustration extends to many of the official delegations from the poorest nations of the world, for whom the impacts of global warming will be most severe, and for whom a fossil fuel driven rise out of poverty seems to be a vanishing option. At the same time, it is more clear than ever that future growth in greenhouse gas emissions will be driven largely by China and other large developing countries, and that they are key to any viable solution for avoiding global warming beyond what is already locked and loaded into the atmosphere from historical emissions and the inadequate responses of the past twenty years.
But, at least we are talking, and there seems to be an understanding of the gravity and the urgency of the choices we face that is greater than I have experienced at previous gatherings of this type. Heads of state will start arriving here over the next few days, including President Obama, and they don’t like to come home empty-handed from such high profile negotiations. It has been a long and winding road from Toronto to Copenhagen, but we will make a choice this week where we go next.
There are circumstances when a “wait and see” attitude is the appropriate response. This isn’t one of them.
According to a Pike Research report released this week, the market for energy management systems (EMS) in commercial buildings will grow rapidly to become a $6.3 billion industry by 2020. The reason behind this growth is the expected widespread adoption of demand response in commercial buildings. EMS systems are based on hi-tech building management software, which enables demand response by allowing building systems to adjust power usage to reflect grid conditions.
Reports of new product launches of smart grid and energy management tools and software by clean energy companies, such as Comverge and Sequentric, are now daily events. Many of these companies gathered this week at the 2009 Cleantech Open in San Francisco, where Redwood City company EcoFactorwon the Cleantech Open award for its energy management system that can talk to home thermostats to reduce energy usage.
The California Public Utilities Commission (CPUC) last week approved a $3.1 billion budget for energy efficiency programs for the years 2010-2012, a 40% increase over the previous program cycle. The funds will be directed through the state’s publicly owned utilities and are expected to create energy savings of almost 7,000 gigawatt hours, avoid 3 million tons of greenhouse gas emissions and create between 15,000 and 18,000 skilled green jobs.
The $3.1 billion budget includes hundreds of millions that will be available for commercial real estate owners who want to improve their sustainability and who have the smarts to take advantage of the subsidies and incentives that are available.
Never before have there been so many programs, subsidies and incentives available to building owners. Here are five steps to tap into state funds to transform your CRE business from a green laggard to a green leader:
1. Find out your energy efficiency score
The state has ambitious goals to make all new buildings Zero Net Energy by 2030 and achieve major energy reductions in existing buildings...
But there’s currently a lack of data about how existing buildings perform, which the CPUC wants to overcome through benchmarking:
“Benchmarking is a beginning step in managing a building's energy cost, one that should motivate the building's owner or manager to take actions to improve the building's energy profile."
The public utilities are charged with implementing massive benchmarking programs. You can get them to measure the performance of your building and provide you with valuable information about its current energy usage and how it compares to buildings of a similar type.
2. Get an energy efficiency audit
An energy audit takes benchmarking a stage further by first assessing the building’s current technologies and systems, and then identifying energy saving opportunities. The state owned utilities operate various programs that provide commercial building energy audits, such as Direct Install, which provides free energy efficiency audits and hardware upgrades through third party contractors.
3. Prioritize and plan for retrofits and upgrades
Your energy audit will identify the low cost or no-cost initiatives that can be implemented immediately. It will also list retrofit options and other major initiatives that have a longer payback. At this stage you’ll need to assess retrofit options against the available incentives and upgrade programs that are available. You should also use life cycle cost analysis to assess the true financial impact of the retrofit options, and make sure the full impacts of tax incentives and other subsidy programs are incorporated in the ROE calculation.
4. Acquire financing and incentives
Financing initiatives, such as on bill financing, and AB-811 municipal district financing programs, are already being developed and implemented across the state; expect to see new programs and pilots being rolled out after the CPUC’s adoption of the enhanced budget. Ambitious owners should contact their local public utility to get in early with pilot programs while funding is available.
5. Complete the transformation with green leasing, training and recognition
Greening a commercial building requires more than retrofits to the building systems. Most of the benefits of an energy efficient building are only harvested if the building is maintained and operated using sustainable principles and procedures. For a leased multi-tenant building this means ensuring that the occupants adhere to the building’s green policies and procedures. Green leasing provides the framework for green behavior using a modified version of the commercial lease. Expect to see new programs from utilities that focus on promotion of green leasing.
Training for jobs in the green economy is a key component of the state and federal government’s sustainability strategy. Take advantage of subsidized programs to get your property managers and engineers trained in green building technologies and practices.
Your building may also be a candidate for certification under LEED and/or EnergyStar. Certification provides great publicity for the building and the owner. Studies show that certified buildings have higher values and better rental and occupancy performance than their non-green peers.
Another blog on environment and sustainability? You are probably thinking, “More information – just what I don’t need”.
We couldn’t agree more.
Those of us who work on energy and environment issues, especially here in California, face a relentless barrage of research results, news stories, technology bulletins, and government announcements. Between the universities, the NGO’s and think tanks, the private consulting companies and the various levels of governments, it seems like hardly a day goes by without a “major new report” on climate change, water or some aspect of sustainability.
We in the “sustainability industry” work in a blizzard of information. But blizzards have a tendency to reduce visibility, and information blizzards are no different in that regard. In the midst of all this information, are we making progress toward sustainability? Are we seeing the patterns in the data that will help us make the dramatic changes needed in our energy and water consumption that the goal of sustainability demands, and make them soon enough to avoid the worst consequences of our present course? Are we identifying in the “white noise” of climate change responses the public policy and business strategies that can take our sustainability efforts to the next level? Are we learning?
When it comes to sustainability and environmental issues, the rest of the nation looks to California for ideas and leadership, but where does California turn? What we might call the first generation of sustainability and climate change response strategies is further developed here than anywhere else in America. From carbon markets to automobile fuel efficiency standards, from energy and water efficiency programs to renewable energy business ventures, California has been at the forefront of institutional, policy and business innovation for sustainability.
Are the strategies working? Yes. California has achieved reductions in the use of fuels and electricity per dollar of GDP and per capita that many experts did not believe possible. Traditional energy utilities are shifting their objectives from commodity supply to service provision, opening up new possibilities for growth, innovation and sustainability. The wave of green energy businesses throughout the state is reminiscent of the high tech wave of twenty years ago in terms of the excitement and sense of possibility it is generating. Local authorities throughout the state have identified the synergies between economic development and community greening, and this has sparked healthy competition among communities to be the greenest, the most “climate friendly”, the most “sustainable”. The California Sustainability Alliance is part of all this activity, and we will be using this blog to highlight particularly interesting initiatives and to analyze the lessons we can draw from them.
Are the strategies enough? We know they are not. Take greenhouse gas emissions, for example. In response to hardening consensus within the climate science community, political leaders – including here in California – are calling for greenhouse gas emission levels to be brought down to 20% or less of their current levels, by the middle of this century. We are not yet on a course that would take us to such a low emission future, but neither can it be dismissed as an impossible dream.
We know a great deal about the technological components of such a future. Increases in the efficiency of fuel and electricity use are the central component of virtually all low emission scenarios, as is the rapid deployment of renewable and low carbon fuels. Beyond these adjustments to the efficiency and the carbon intensity of our fuel and electricity use there is deeper, more profound transition that will be required, a design transition. We must learn to provide the amenities and services that underpin our advanced civilization with techniques and technologies that are fundamentally less energy dependent. This may sound like a variation on energy efficiency on the surface, but it is more than that. The design challenge involves finding ways to access goods and services with less mobility, to create comfortable and productive homes and buildings with little or no need for outside supplies of fuel and electricity, and to wherever possible substitute genius, innovation, and ecological design for energy and power. We will explore these themes in this blog, and draw attention to the innovations that could play a significant role in the transition to a low carbon future.
We also know that it is not technological innovation that is the limiting factor in our progress toward sustainability, but logistical, financing, institutional and business innovation. When we flip an electric switch or squeeze the pump handle to gas up our car, over a hundred years of collective experience in business, institution building, finance, technology, and public policy goes to work; all we see is 15 cents per kilowatt-hour or $2.50 a gallon. It needs to be as easy and as risk-free to improve efficiency as it is to turn on a light or fill your tank with gas. This goes to the heart of the mission of the California Sustainability Alliance and we will also be using this blog to highlight progress being made in accelerating deployment of sustainable technologies through organizational and financing and even legal innovations.
Many of the entries here will be connected in some way to energy, water and the built environment. These are not the only dimensions to sustainability, far from it, but they are important and they are areas in which the California Sustainability Alliance is actively pursuing innovative solutions. We will use analysis, stories, and conversations to explore these themes in this blog. We hope it will be a refuge from the blizzard, a place that will help you make sense of the information you are receiving and the experiences you are having in your efforts to align your activities and those of your organization with the common goal of achieving a sustainable future. We welcome your suggestions, your responses and your participation.
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