As we posted in June, President Obama’s Better Buildings Initiative updated tax incentives aimed to encourage retrofitting buildings to reduce energy bills. Although considered the “low-hanging fruit” of carbon reduction, financing of commercial building retrofits for energy efficiency has largely remained in the realm of public subsidies. Opening the floodgates of private financing could expand the scale and reach of such projects, and a study released Tuesday by the Deutsche Bank Americas Foundation aims to nudge lenders to do just that.
Energy savings projections have accompanied building and financing proposals for some time, but loan underwriters have long looked at these projections with a skeptical eye, rarely incorporating them into underwriting models. There are no consolidated results showing energy savings from subsidized retrofitting projects – around since the Carter administration – nor from the Energy Star programs run by utilities across the country, leaving little data for the underwriting models of financial institutions. Similarly, energy audits are not usually subject to follow-ups and are subject to little accountability. Which is where the Deutsche Bank study comes in.
Analyzing the accuracy and reliability of energy audits associated with more than 230 apartment building retrofitting projects in New York City, the study offers data to instill a measure of confidence in lenders who have generally been reluctant to underwrite energy savings. The Foundation touts that their data-driven findings lay the foundation for lenders and builders to collaborate to develop standards for reporting, best practices, and energy monitoring. The New York City Energy Efficiency Corporation will take this next step, using the data to pilot underwriting guidelines as a starting point for the first transactions that underwrite energy-saving projects.
Accompanying the study is a companion document summarizing the wide ranging benefits of energy efficiency retrofits for building owners and tenants. A New York Times article from June describes the demand for the Deutsche Bank study, and a November article covers some of its early findings.