Greening Commercial Buildings - $5 Billion in New Financing Available
By Mark E. Casey
Greening our stock of existing commercial buildings offers tremendous potential for reducing carbon emissions, conserving fossil fuels and saving money. Estimates suggest that within the City of Boulder, commercial and industrial facilities account for 58% of total greenhouse gas emissions. One of the best ways to green our existing commercial and industrial buildings is to make them to solar generators of electricity. The large roof-tops of industrial buildings and South-facing facades of office building are natural locations for photovoltaic panels and solar hot water tubes.
Legislative Background
With the passage of Amendment 37 in November 2004 and House Bill 1281 in May 2007, Xcel Energy is required to generate 0.8% of its electricity through solar by 2020. To comply with this voter mandate, Xcel established a rebate program to provide financial incentives of up to 60% of the total cost of installing solar electric systems on privately-owned buildings. Some solar energy contractors will ‘float' the rebate, so that the owner(s) of the system do not have to be out-of-pocket waiting for Xcel's check to arrive. In addition, federal income tax credits are available to further incentivize investment in renewable energy.
Owning a solar electric system allows a commercial tenant and/or landlord to produce its own electricity and therefore reduce its electricity bills. As solar electric systems last for 25 years or more, buying one is like paying for 25+ years of electricity with a one-time, upfront cost. The more that electricity prices go up, the more valuable your system becomes via saving larger and larger amounts on your utility bills. Plus, these renewable energy systems will substantially reduce greenhouse emissions, which is essential to improving the health of our planet.
New Private Financing
With the announcement of the “Energy Performance Contract Model” created by the Clinton Climate Initiative and the Building Owners and Managers Association (BOMA), financing these renewable energy generators on commercial buildings has just gotten easier. Under this program, $5-Billion in private financing will be available to make commercial buildings more energy efficient.
If using our commercial and industrial facilities to generate electricity and reduce greenhouse gas emissions, is such a good idea, why don't we have more photovoltaic panels and solar tubes on our buildings in Boulder? The answer is that there is a ‘split incentive' between landlords and tenants. Most commercial buildings in Boulder are owned by landlords who lease space to a tenants. The tenant, in most cases, pays for the utilities. Accordingly, the landlord is not incentivized to reduce tenant utilities expenses. The exception to this situation is the owner-occupied commercial property in which no split incentive exists.
What is Needed Now
If we are to take full advantage of Amendment 37 and significantly reduce greenhouse gas emissions in Boulder, we need solutions to this split incentive. The $5-Billion Energy Performance Contract Model is a way to prime the pump, but it is not enough. We need commercial landlords, particularly large property owners in Boulder, to immediately begin working shoulder-to-shoulder with tenants to bridge this split incentive so that both parties can win through the investment in renewal energy generation When that happens all Boulder residents will benefit…..and the planet, as well.
About the Author
Mark Casey is founder of Casey Partner, Ltd. a sustainable real estate consulting and investment firm headquarted in Boulder. Mark holds a BS degree in Public Administration from the University of Missouri and an Master of Business Administration (MBA) from the University of Virginia. Mark began his real estate career with Trammell Crow Company in the 1980's and spent twelve years with The Neenan Company, before founding Casey Partners, Ltd. He is a member of CEBA/P3 and the Urban Land Institute (ULI).