With over four billion square feet already covered under building benchmarking ordnances in major cities across the country, chances are, if you are thinking about energy efficiency policy and program design, you are taking notice.  

Building benchmarking refers to the rating of the relative energy efficiency of a building compared to its peers, and in many cases also includes making this information known to consumers. The mechanism aims to raise consumer awareness about energy performance and encourage building energy improvements through greater market transparency.

Benchmarking initiatives are growing in popularity and early results seem to support that there is a significant positive impact on demand for energy efficiency upgrades.  

In 2012, an EPA analysis of 35,000 benchmarked buildings around the U.S. found that benchmarked buildings experienced, on average, 2.4% energy savings annually. Buildings that benchmarked for three years running saw an average energy savings of 7% during that same period. A 2012 report by the Georgia Tech Ivan Allen College School of Public Policy found that energy benchmarking in commercial properties could reduce national energy consumption by 5.6 percent in 2035. Another 2012 report, commissioned by the California Public Utilities Commission, found that benchmarking was highly correlated with building energy improvements and management actions, and was a strong catalyst for customer participation in utility clean energy rebate and incentive programs.

The Investor Confidence Project (ICP) supports benchmarking initiatives as critical to helping establish a linkage between energy performance and asset value, tenancy rates, rent levels and other key values of importance to building owners and tenants alike. Additionally, promoting transparency within energy performance puts pressure on building owners to ensure their buildings are competitive compared with their peers.

Generating demand for energy efficiency upgrades is the fundamental barrier in the market and benchmarking is a primary strategy to overcome this obstacle.  However, there remains a critical need once a project has been developed to connect it with necessary investors in a form that enables underwriting and pooling of projects into understood asset classes.

The Investor Confidence Project’s Role in Building Energy Benchmarking

The ICP supports benchmarking programs by helping to create a roadmap from energy efficiency project development to the necessary array of investors and capital sources.  The ICP Energy Performance Protocols (ICP Protocols) come into play once a building owner is ready to move forward with a specific energy efficiency project, providing a next step once a benchmarking program has helped establish demand.

Once a building owner has undergone a benchmarking and is ready to move forward with an actual upgrade to improve a building’s efficiency score as a way to improve cash-flow, the ICP establishes a pathway to develop a project in a form that enables a transparent market and reduces underwriting and engineering costs for investors. It is a common misunderstanding that there is not enough capital available. In reality, the true barrier is the lack of deal-flow.  And the deals that do emerge are often apples and oranges, rather than apples to apples. Standardization will allow investors to more easily pool projects into large enough funds for senior capital investors, and will dramatically reduce costs associated with technical vetting and performance underwriting.

As the ICP Protocols begin to standardize benchmarking programs, they will help establish a single marketplace for commercial energy efficiency projects that will encourage investment and bring down the cost of capital.  With more participation and standardization, this market will grow the bigger and become more attractive to clean energy investors.

We believe that there is great value for benchmarking programs to adopt the ICP Protocols as a standard approach to project requirements. This will help enable a nationwide market with sufficient scale to attract the array of investors and capital needed to realize energy efficiency’s full potential.  This single market of similar projects makes attracting investors to energy efficiency substantially easier, and is a win-win for programs and building owners.

If you would like to learn how you can leverage the ICP protocols in your program, or for your projects, please become a project ally, and help us accelerate investment in energy efficiency.

The Investor Confidence Project was recently featured in an article by Intelligent Utility, a publication focused on connecting the utility sector with the smart grid and reality.  We could not agree more with this mission.

The article takes a look at some of the key barriers associated with financing energy efficiency, and some of the key issues that the Investor Confidence Project addresses related to managing performance risk and creating a standardized approach to developing and measuring energy efficiency projects.

The Investor Confidence Project believes that an energy efficiency "investor" can be defined as any organization that receives a revenue stream derived from energy savings in return for taking a performance risk on energy efficiency projects.  Utilities through rebates and rate payer incentives often become investors (sometimes unwillingly) in this context.  As with other investor classes, the utilities are challenged by the need to make a project finance decision by the ability to accurately predicting ROI based on costs and benefits.  In the case of utilities, evaluating returns based on cost avoidance for investments in grid capacity and reliability can be quite challenging.  It is especially critical as they must not only determine how to allocate resources to ensure a maximum return fr rate payers, but they must above all ensure that every home and business will access electrical power reliably all the time.

Matt Golden, Senior Energy Finance Consultant with EDF, was interviewed for the article:

Once the marketplace reaches “a critical mass of deal flow and investors willing to commit capital,” more traditional market players such as investment banks and utilities may be eager to enter (or re-enter) the game.

Golden believes the winner of the marketplace game here will be the one who does the best job of catering to investors and project developers. And that doesn’t mean variety. It means security, stability, calm.

“Investors don’t want a choice of 31 flavors; they want vanilla,” he advised. “Creating a marketplace where investors can evaluate projects on an apples-to-apples basis is imperative. Once again, the precursor to this capability is the standardization of projects and datasets that allow for the analysis of credit, asset and performance risk factors. Establish an environment where investors feel that they can manage risk, and the market will thrive.”

Whatever marketplace ends up the winner, Golden sees a bit of underlying good news: All of them seem to understand that “standards cannot be proprietary, and consolidating the industry around common standards benefit all,” Golden noted.

The complete article can be read on the Intelligent Utility.

This week, the US Department of Energy (DOE) released a new report defining an important effort to develop a consensus Building Energy Data Exchange Specification (BEDES). This effort will result in a common language for key data elements required for energy efficiency to achieve its full potential. 

BEDES will help a range of stakeholders communicate more efficiently by essentially defining the dictionary so programs, contractors, software vendors, finance companies, utilities, Public Utility Commissions, and a range of other stakeholders are finally all speaking the same language. Data can be shared and aggregated without laborious scrubbing and translation, which will help us more rapidly answer the key questions related to energy savings and financial performance that remain barriers to energy efficiency adoption.

We are pleased that the Investor Confidence Project (ICP) was highlighted as one of five key projects aligned with BEDES goals and prioritized for collaboration as the project moves forward.  

The ICP has defined a standard set of documentation that defines a Investment Quality Energy Efficiency project through its lifecycle from baselining through commissioning and M&V.  However, we have long believed that many of the key data elements would be significantly more useful if expressed as standardized xml versus the current range of formats and documents. The Investor Confidence Project applauds this important effort and looks forward to collaborating with fellow stakeholders and the DOE and LBNL team.

The summary for the report clearly expresses some of the key data issues and potential solutions that this ambitious project will attempt to solve:

One of the primary challenges to expanding the building energy efficiency retrofit market is the lack of empirical data on the energy performance and physical and operational characteristics of commercial and residential buildings. This makes it difficult for building-level decision-makers to identify efficiency investment opportunities, project the likely savings from investments, and understand the drivers of variations in building performance. Moreover, the lack of empirical market data limits the ability of public sector actors to tailor the design and implementation of energy efficiency programs and policies to be most effective given local market conditions and trends. 

Recent technology, market and policy drivers (smart meters, energy performance disclosure laws, etc.) are resulting in a rapid increase in the generation of building and energy data that has the potential to address these issues. But this data is still hard to access, aggregate, share and utilize because it is being housed in many decentralized databases, and in different formats. Stakeholders consistently reported that they spend more time on data formatting and cleaning than they do on conducting analysis. The lack of standard data formats, terms and definitions is a significant ongoing barrier to realizing the full utility of empirical information about building energy performance. 

Data exchange specifications can unlock the power of data and make it easier for a range of products and services to interact. A data spec increases the clarity and consistency of individual data points, and therefore allows for more effective exchange, verification, and analysis of information. Data specs have been vital to the growth of technologies like the internet and cellular communications. For example, Universal Product Codes (bar codes) are used to identify trade items at the point of sale, and are based on a specification that is used to manage these items through supply and demand chains in multiple sectors. But building energy performance data is not currently standardized, particularly as relates to building equipment characteristics and energy conservation measures. 

The Building Energy Data Exchange Specification (BEDES) could serve as a central “data dictionary” that a range of tools and platforms can either adopt or map to. A common data format will increase the interoperability among tools by mitigating the ambiguity and transaction costs associated with sharing and aggregating data. Moreover, this will enable data from multiple sources to be combined into richer datasets that can be used to conduct more advanced analysis. 

The potential benefits from utilizing a common data format are staggering for the industry. It will lower the cost and increase the availability of products and services that utilize energy data. As a result, these products and services will achieve greater market penetration and deliver better information to decision-makers. This could increase investments in energy efficiency and lead to a greater recognition of energy efficiency’s contribution.

The BEDES beta and the scoping report are available at http://buildings.energy.gov/bedes.