Renew Boston Trust

Bankable Finance Structures for Energy Efficiency

Boston Seal

The City of Boston is a leader in energy efficiency, just ask the American Council for an Energy-Efficient Economy (ACEEE) who ranked Boston #1 in its first City Energy Efficiency Scorecard in 2013. Now Boston is poised to build on that leadership to be the first city in the US to establish bankable finance structures and investment opportunities for energy efficiency projects. Boston is not alone in this effort, however, as it is part of a 10-city consortium that includes Chicago, Philadelphia, Kansas City, Salt Lake City, Los Angeles, Atlanta, Orlando, Houston, and Denver to develop energy efficiency financing best practices. In February, Boston University was honored to host the launch of the Renew Boston Trust and engage in the dialog.

Milton Bevington, advisor to the City Energy Project for the City of Boston set the tone for the conference and outlined the challenges and opportunities for energy efficiency investing. Conserving energy improves financial operations, but energy efficiency investment has only reached about 1/5th of its economic potential. The answer to unlocking this potential is improving performance in two ways, 1) by developing energy efficiency projects who’s savings are guaranteed, and 2) creating institutions that both standardize and scale the energy efficiency investment process, improving access to energy efficiency returns by mainstream investors. What we need are higher quality investment grade energy efficiency projects. So, how do we do this?

To begin unraveling that question, Peter Coveliers from the European Investment Bank’s Climate Change and Energy Division keynoted the event. Coveliers described how great gains can be made from the financial opportunities that leverage energy efficiency savings. He explained how this is accomplished through a public/private partnership and the European Energy Efficiency Fund (EEEF). The European Union member states have committed to the 20/20/20 goals, cutting greenhouse gas emissions by 20%, increasing the use of renewable energy by 20%, and cutting energy consumption through improved energy efficiency by 20%. The EEEF aims to support the goals of the European Union to promote a sustainable energy market and climate protection. Capital markets are developing for energy efficiency investing and Deutsche Bank has a team dedicated to this.

Coveliers provided several examples on how energy efficiency projects were developed with energy service companies (ESCOs) in Italy, France, Spain, The Netherlands, and Germany. He noted the importance of standardization so projects are replicable with financing vehicles. One example was the Berlin Jewish Museum, where they created an ESCO funded by the energy savings generated by project. The revenue was split between operations and the fund so the Museum didn’t have to put initial funding into the project.

The day included a panel on provisioning energy efficiency with Sarah Slaughter from the Built Environment Coalition, Sean Kidney from the Climate Bonds Initiative, Dean Papademetriou from the Boston Housing Authority, Sean Neill from Cycle-7, and Milton Bevington from the City of Boston. John Macomber from the Harvard Business School moderated the panel exploring the current state of the art for energy efficiency investing.

All of the panel participants made important contributions to the discussion. Sean Neal noted that continuous commissioning is key to success, as it has a direct relationship with the value of green bonds. Now that private equity is getting into energy efficiency investing, the saving has to be there. Slaughter brought it back to tie energy efficiency investment opportunities with resilient design investment. Bevington wrapped up the conversation, noting Mayor Walsh is looking to implement energy efficiency investing through the launch of the Renew Boston Trust to move from the era of incentives to era of implementation.

The day concluded with breakout sessions addressing the following areas:

  • Multi-family Housing: Multi-tiered, on-lending facility for issuing subordinated debt to mid-cycle properties
  • Nonprofits: Social-impact & off-balance-sheet debt for higher education, healthcare, and cultural institutions
  • Commercial property: Public-private finance authorities & third-party utilities management structure
  • Municipal facilities: Green debt certification for bonding and municipal leasing

 The City Energy Project is administered by the National Resources Defense Council (NRDC) and the Institute for Market Transformation (IMT).

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