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Summary
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Resulting Action

Summary

Energy Efficiency Paying the Way: New Financing Strategies Remove First-Cost Hurdles

Author: Bob Hinkle

This paper—a follow-on to the March 2009 project—focuses on a subset of financing options that can foster the accelerated implementation of energy efficiency measures through the aggregation of individual projects, technologies, service offerings and investments into a larger and more cohesive combination of business opportunities. It describes the implementation and utilization of six emerging financing options by companies and organizations, including public sector entities and utilities. Each model provides funding for EE projects with zero cost up-front for customers.

The spectrum of selected financing options provides solutions for a diverse group of residential, commercial and industrial end-users, including the market subsets of single and multi-tenant buildings and owner-occupied facilities. A discussion is presented on how each of these financing options could benefit from tapping into pools of capital from private sector investors that seek clean energy investments as well as from federal, state or utility funds that are earmarked for energy efficiency. Further, a review of actions that can be taken at the state/federal level to support the growth of these financing options is presented, with a focus on ensuring that energy efficiency receives benefits that are on par with those currently received by solar energy.

Workshop

Energy Efficiency Paying the Way: New Financing Strategies Remove First-Cost Hurdles - CalCEF

Individual stakeholder meetings were held in place of a workshop

Resulting Action

Energy Efficiency Paying the Way: New Financing Strategies Remove First-Cost Hurdles - CalCEF

With NRDC, the Real Estate Roundtable, US Green Buildings Coalition, Energy Future Coalition, and various other organizations, CalCEF crafted a proposal that improves the tax incentives for energy efficiency investments, currently located in Section 179D of the Federal Tax Code.  The existing 179D deduction provides a tax deduction up to $1.80 per square foot for a 50% reduction in total annual energy and power costs.  Partial deduction is $0.60 per square foot for a 25% to 40% reduction.  The program is set to sunset in 2013.  In our current proposal to revise 179D (tentatively called the “179F” proposal), the significant proposed changes include:

  • the introduction of more granular tiers that provide incentives to achieve EE improvements in the 20% to 49% reduction range;
  • clarification of the ability for building owners to allocate the deduction to a funder or financier for commercial or multifamily improvements;
  • the ability for tenants to take deductions for improvements in defined spaces (e.g. leased space in a building); and
  • the inclusion of “cool roofs” and efficient external lighting as energy saving technology measures.

This 179F proposal is congruent with the President’s Better Buildings Initiative, which focuses on changing the deduction to a tax credit, making the credit available to REITs and other changes to increase commercial retrofit uptake, and creating jobs.  With the momentum of the Better Buildings Initiative, the time is ripe for this proposal to be introduced into the legislative process for consideration by Congress.