Energy Efficiency as a Commodity: the Emergence of a Secondary market for Efficiency Savings in Commercial Buildings

Gregory H. Kats, Arthur H. Rosenfeld, and Scott A. McGaraghan, U.S. Department of Energy

Abstract

With measurement, diagnosis, and the new NEMVP Protocol, retrofit becomes reliable. Greater consistency and improved savings can unleash private capital to replace diminishing DSM funds.

The energy efficiency industry is constrained by lack of financing. For example, in the United States, commercial and public buildings need an investment of $100 billion for cost-effective retrofits with an average payback of about four years. But the current level of financing in the U.S. is stagnant at only about $3-5 billion per year.
Worldwide, the potential is enormous. The U.S. Department of Energy (DOE) has led the development of the Building Energy Measurement and Verification Protocol (formerly the North American Energy Measurement and Verification Protocol). This Protocol will increase the reliability and quality of estimated efficiency savings and improve realized savings.

Increasing the reliability of savings can reduce interest rates for loans for energy efficiency. A critical element in the development of low cost financing and a secondary market?hether for homes or credit card debt?s the adoption of protocols to provide uniformity and reliability of the product. This is also true of energy efficiency installations, which have in the past been characterized by inconsistency in installation methodologies and, frequently, unreliability of savings.

This Building Measurement and Verification Protocol (BMVP), Version I of which was published in April 1996, is a DOE-led effort involving ASHRAE, NAESCO, NARUC, NASEO, EPA, Canada? CAESCO, and Mexico? CONAE and FIDE (see acronyms list at end of paper). DOE has begun to build on this Protocol to develop new forms of lower-cost financing including, ultimately, development of a secondary market for energy efficiency. This could double financing for building energy efficiency within five years.