A Roadmap to Energy Efficiency

The California Public Utilities Commission released a draft document on energy efficiency (EE) titled California’s Existing Buildings Energy Efficiency Action Plan on March 10. The document is a “10 year roadmap to activate market forces and transform California’s existing residential, commercial, and public building stock into high performing and energy efficient buildings.” As previously noted here and here, what the 8th largest economy in the world does in its ambitious plans to improve building energy efficiency will have impacts far beyond its borders. This new document identifies policy directions that will have profound economic and environmental implications in California and beyond its borders.

According to the Department of Energy, buildings take 73% of the electricity consumption in the USA. Residential and commercial buildings that are retrofitted to consume less electricity and natural gas put more money into consumer pockets and improve the bottom lines for businesses. Those reductions become widely-distributed and persistent savings.

There are employment benefits as well. Approximately 61% of all construction projects are retrofit projects, and require onsite labor to complete them. That means local economies benefit from increased employment in skilled blue collar trades. But many EE retrofits also include high tech solutions that make buildings smart – sensors, wireless communications, and analytics software, with concomitant increases in sales and growth in the companies that provide these solutions.

The CPUC roadmap outlines five goals that include objectives, strategies, and partnering arrangements within each goal. A striking common characteristic is the transparency that the five goals strive to create about energy and water efficiency through the collection and management of data. Starting with benchmarking and disclosing building performance, which sets an invaluable data foundation, the other goals methodically leverage this performance data to provide new perspectives for decision-making. Increased access to and understanding of building performance data can lead to more informed actions regarding investments. This transparency also serves to promote awareness of the value of EE programs to all stakeholders, but perhaps most especially to utility customers, who may not be well-acquainted with the overall benefits of programs funded through their electricity rates.

Another positive aspect of this document is its broach approach to EE in buildings. Single family, multifamily, small to large commercial buildings and public buildings are identified and addressed. While there are common objectives of reducing energy and water use for all these buildings, the technologies, market structures, and financial approaches are uniquely different. There’s an urgent need for innovations in how EE programs for multifamily and many commercial buildings are financed that overcome split incentive challenges. While green leases and other similar measures help tackle these problems, much more “friction-less” processes and financial benefits to those investing the upfront capital for upgrades will be necessary to accelerate increased EE in the California building stock.

Encouraging the transparency of building data with regards to energy efficiency has another benefit. The barriers to technology innovations in materials sciences will be reduced because innovators and their funders will increasingly see that there are addressable markets for their solutions. But in the short run, the policy and capital innovations based on this roadmap for energy efficiency may for once leapfrog technology innovations.

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