Deep retrofits: Financing needs to play a critical role

(ACEEE blog, 14 May 2019) Deep retrofits to existing buildings will be critical for reducing energy use and greenhouse gas emissions over the next 30 years. But such retrofits can be expensive, so financing is vital for unlocking energy savings. Several recent projects illustrate innovative ways to finance these retrofits.

In 2050, roughly half the US building stock will be buildings that are standing today (see figure below). Yes, we can and should build new buildings well, but we will also need to substantially reduce energy use and emissions from existing buildings. Typical building retrofits reduce energy use by 10-25%, but deep retrofits save at least 30%, sometimes more than 50%.

Government projects use ESPCs

The US government is using one kind of financing tool for deep building projects – Energy Saving Performance Contracts (ESPCs). With ESPCs, an energy service company (ESCo) designs projects, finances them, and oversees both their initial installation and ongoing maintenance. The ESCo is paid based on the actual energy savings. The General Services Administration (GSA) used ESPCs to finance deep retrofits on seven buildings across the United States, achieving an average energy use reduction of 58%.

In the GSA effort, a different energy service company was involved in each project. The projects typically involved major building renovations. To finance deep retrofits, energy performance contract terms were typically 25 years, the longest permitted for federal government projects. In one example, a comprehensive retrofit of a federal office building in New Carrollton, MD, the retrofit included a new central chilled water plant, integrative building controls and sensors, geothermal heat rejection, an exhaust to outdoor air heat recovery loop, LED lighting, and an 808 kW solar PV array that together reduced building energy use by 60%. The ESCo (Ameresco) invested a total of $40 million and estimates energy savings to be $2.5 million per year. A key component of the project was to reduce building loads, allowing the chiller to be downsized by 40% relative to the pre-retrofit system.

A report on the seven GSA projects identified six retrofit lessons:

  • Set aggressive long-term goals.
  • Engage and collaborate with diverse stakeholders.
  • Establish a support system.
  • Start with a clean sheet and a beginner’s mind.
  • Use an iterative, holistic design process.
  • Incorporate feedback and ongoing involvement.

External link

ACEEE blog, 14 May 2019: Deep retrofits: Financing needs to play a critical role