Spotlight on California

by Andrew McAllister, Commissioner, California Energy Commission

Source: State of California Energy Commission

California’s long-standing commitment to the environment has been consistent and creative: we pave the way for the rest of the nation. In his fourth inaugural address in January, California Governor Edmund G. Brown, Jr. continues that leadership for at least the next 15 years, through three bold energy-related commitments: (1) increase to 50 percent (from the current goal of 33 percent by 2020) the portion of our electricity derived from renewable sources; (2) reduce today’s petroleum use in cars and trucks by up to 50 percent; and (3) double the current rate of energy efficiency savings in existing buildings while transitioning to cleaner heating fuels.

At the California Energy Commission we are focused on the last of these goals: energy efficiency in existing buildings. Governor Brown highlighted existing buildings because it is clear that without improving energy performance it will be unnecessarily difficult and expensive to reach our long-term carbon reduction goals.

This year the California Energy Commission celebrates four decades of investments into efficiency programs. Over that period our building and appliance energy efficiency standards have saved Californians well over $100B (yes, Billion) in electricity and natural gas costs. In addition, California ratepayers have invested in energy efficiency programs that have provided over $2 billion in net benefits over just the past nine years.

California also invests extensively—roughly $290M annually—to develop and commercialize new clean energy technologies. These programs have contributed to keeping the state’s rate of growth in energy consumption low relative to the country as a whole. They provide not only funding itself but also the strong, consistent high-level policy signal necessary to move markets forward in ways that impact how we all consume energy.

Energy efficiency in existing buildings is an important element of an integrated approach to mitigate the impacts of climate change and complement the state’s sustainability efforts. In 2015 the California Energy Commission will release the California Existing Buildings Energy Efficiency (EBEE) Action Plan. Building on past efforts, the Action Plan will outline the goals and strategies of California’s long-term vision to improve buildings and operate their equipment with low energy and greenhouse gas footprints, at a reasonable cost.

Given California’s demographics and energy demand characteristics, it is clear that any successful strategy will need to target not just single-family homes and large commercial facilities, but also multifamily housing and small commercial sectors—much of which are tenant-occupied.

The overarching focus of the Energy Commission’s efforts is to ensure that the conditions exist for market growth in energy efficiency, creating value for a consumer or building owner. To support good energy-related decision making and investment, government leadership is critical. The state should provide clear and consistent policy direction, avoid regulatory or process barriers, and facilitate access to helpful analytical tools and appropriate project financing.

Equally important is broader access to reliable, relevant information, because data drives markets. Energy consumption and building-related data, properly interpreted, empowers building owners, operators and residents to make informed decisions about their energy usage and building investments. California enjoys very high penetration of smart meters, which enables a whole new level of low-cost decision support tools—IF we can get these resources into the right hands. Further, well-designed informational tools are essential for monitoring the impact and determining the effectiveness of local, regional and state initiatives. The federal government has shown laudable leadership by developing a suite of data management, building modeling and benchmarking tools; California is keen to utilize and leverage them in continued partnership with USDOE and USEPA.

Even for projects with a willing customer and a clear value proposition, financing can be essential for closing the deal. Large commercial properties tend to have access to capital from experienced, willing investors. Scaling in other building sectors is happening, though more slowly. But the project landscape is as diverse as the building stock.

Specific barriers require targeted solutions, and this is where government and private industry must work together. The Office of the California State Treasurer offers various programs under the California Alternative Energy and Advanced Transportation Financing Authority (CAEATFA). CAEATFA works with public and private partners to provide innovative financing options for the development and deployment of renewable energy sources, energy efficiency, and advanced transportation and manufacturing technologies. Further, in coordination with CAEATFA the California Public Utilities Commission (CPUC) will deploy utility ratepayer funds to launch statewide efficiency finance pilots. The aim is to attract private capital for unsecured financing to targeted market sectors needing better options. All pilot loan and repayment history will be compiled in a master database for the use of financial institutions.

The investment community has been clear that product standardization and reliable financial and energy performance data are necessary conditions for attracting private capital to energy efficiency projects. We envision a broad platform of traditional mortgage, PACE, and attractive unsecured financing offered in a self-sustaining finance market encouraging buyers and lenders to select appropriate finance products to undertake energy improvements. For cases where efficiency investments do not met a short return timeframe, innovative financing matching payments to savings will be needed to motivate and support efficiency improvements. Low-income households will need focused attention to ensure affordable access to the benefits of efficiency improvements.

If we are to achieve Governor Brown’s bold goals, we will need more than just financing. We need to address other barriers such as access to data and improved transparency, provide strong government leadership to streamline efficiency efforts and programs, strengthen our workforce training programs, and create an environment that facilitates market growth. Thankfully California agencies and departments are working tirelessly on all angles to combat greenhouse gas emissions and increase energy efficiency with partners throughout the state and beyond.