CO2 to Energy Efficiency Model

Co-development of financing mechanisms is an on-going, iterative process. Status below as of January 2011.


MODEL DESCRIPTION

Building energy efficiency is the single largest, low-cost opportunity for CO2 reductions, and is central to California’s Long Term Strategic Energy Efficiency Plan. But, for CO2 value to drive increased energy efficiency investments, building owners should receive or be able to monetize the value of the associated CO2 reductions when they make EE investments. A model that would enable third-party Intermediaries to efficiently document, aggregate, and trade/sell CO2 reduction value on behalf of business, industry, real estate and municipal clients would allow building owners, companies, etc. investing in electrical or natural gas efficiency to receive the value of the associated CO2 reductions at the point of investment. The CO2 to EE financing mechanism would harness the market by rewarding a building owner or company with the value of the CO2 reduction that results from their energy efficiency investments.


Starting in 2012, the California Air Resources Board (CARB) will allocate CO2 emissions, including auction a portion of emissions allowances to the electricity sector. In the proposed mechanism:

  1. •California PUCs would create a mechanism to award the CO2 reduction value generated through EERE investments to the building owners/companies that make EE investments.

  2. •Utilities would have the option of contracting with EE aggregators, including energy efficiency aggregators (e.g. EnerNOC, Comverge), smart grid companies (e.g. OPower, Tendril) and ESCOs (e.g. Honeywell, Ameresco) who represent large numbers of companies and real estate owners seeking efficiency upgrades.

  3. •A new organization would be established by the California PUC (for now called the Competitive Mechanism, per the PUC’s suggestion) to enable funds to flow through aggregators to EERE investors at time of investment, reducing upfront project costs.

Learn more about the CO2 to EE mechanismCO2_to_Energy_Efficiency_files/Preliminary%20Draft%20-%20CO2%20to%20EE%20Financing%20Model%208%2030%202011.pdfCO2_to_Energy_Efficiency_files/CO2%20to%20EE_Two%20Pager112012.docxshapeimage_1_link_0
 

A Steering Committee including:

Greg Kats - President of Capital E, Former Director of Financing for Energy Efficiency and Renewable Energy at the U.S. Department of Energy, are leading work with NASEO (National Association of State Energy Officials), CPUC (California Public Utilities Commission), CARB (California Air Resources Board), and CEC (California Energy Commission).


Rex Hime - President and CEO of California Business Properties Association, Former California State Assembly Representative on the Tahoe Regional Planning Agency, Former Member of the California Task Force on Violence Prevention, Served as a Regent of the University of California, Former Executive Director of the California State Commission for Economic Development


Daniel Kammen -- Class of 1935 Distinguished Professor of Energy with appointments in the Energy and Resources Group, The Goldman School of Public Policy, and the Department of Nuclear Engineering at UC-Berkeley, Director of the Renewable and Appropriate Energy Laboratory and the Transportation Sustainability Research Center, served as the first Chief Technical Specialist for Renewable Energy and Energy Efficiency, currently serves as a Fellow of the US State Department’s Energy and Climate Partnership for the Americas


Donald Kennedy - President Emeritus of Stanford University, Former Editor in Chief of Science


Brenna Walraven - Managing Director at USAA Real Estate Company, Former Chair of BOMA International


COMPARISON TO EXISTING MODELS/STRATEGIES

Carbon value does not presently accrue to the energy efficiency investor. Energy efficiency measures currently represent a small portion of carbon offsets.


POTENTIAL IMPACT

  1. •Reduces up-front EE project cost, making return profile of retrofits more attractive to private investors

  2. •Improves the efficiency, transparency and credibility of developing carbon markets

  3. •Creates a new constituency to advocate for carbon pricing

  4. •Expands role of EE as a carbon offset

  5. •Generates green jobs, enhances national security and increases economic competitiveness by driving more energy efficiency

  6. •Slows climate change cost effectively.