By: Francis Koster, Ed.D.
One of the largest contributors to making a community poor is to spend big dollars on energy created elsewhere. A dollar spent on coal or oil or natural gas leaves the neighborhood forever, and therefore cannot pay for local labor or local services – an exported dollar that hurts everyone.
A strategy that some communities have used to reduce the outflow of money used to purchase energy is to invite private investors to invest in public buildings in exchange for a share of the energy savings achieved.
One example of private money investing in not-for-profit buildings can be found at Wellesley College located outside Boston in Wellesley, MA. They contracted for a private investment group to replace their parking garage lights, and saved $26,536 the first year without spending a penny. The project was completed in two weeks, without any disruption to the parking operation of the garage.
The retrofit project reduced energy consumption by 57%, increased light levels by 32%, and
doubled the fixture’s lamp life, which reduced maintanence costs. Light bills went down $26,536 annually, and maintanence costs were reduced almost $4,000. Because the private invester could take advantage of favorable tax treatment that the school could not, the actual net investment was less than $40,000, resulting in an 81% return on investment split between the invester and the school (which put in no money).
In order to imitate these success stories, the host school, or city hall, or bus system negotiates a business arrangement with a local investor, who pays for new windows or air conditioning equipment, or updated engines – all of which save a lot of money this year, next year, endlessly. The taxpayer energy cost goes down, and the investor earns a handsome rate of return from the savings – and it is safe, because if there are no savings, there is no return to the investor.
As a rule of thumb, almost any mature building can achieve a savings of 25% in energy costs by installing “low hanging fruit” energy conservation. This creates the opportunity for a private investor to realize a negotiated payback rate of , lets say, 15% for a fixed period of time, and the taxpayer the other 10% (for no outlay of money) until the investor has achieved their return, after which the taxpayer receives the full 25%.
Additional incentives which are available to private investors exist in the form of federal and state tax incentives which public institutions financing their own improvement cannot take advantage of. However, the same investment made in the same building by a private investor can qualify under some circumstances, and bring many sound investments into the exciting range. All of these investments return more than the bond market is likely to pay for the foreseeable future.
A useful reference book is Climate Capitalism, by l. Hunter Lovins, and the work done by The Climate Corps of the Environmental Defense Fund (which identified cost effective investment opportunities in the range of 46% reduction in energy use in public buildings!), found at http://www.edf.org/page.cfm?tagID=60252
One thing that you could do is ask your elected officials how much taxpayer money is spent on energy for public facilities, including schools. If the total number is attention getting, (and I bet it is) the officials could issue a Request For Proposals offering local private investors the opportunity to participate in a win/win/win/win (lower taxes/jobs created/money staying in the community/lower pollution)
Many many cities and towns have adopted this method of financing energy conservation. For a very long list of further information, simply google “shared savings energy conservation”.
To assist the Editor in Fact Checking
The Welsly example came from Groome Energy, located in Salem Mass. I spoke to one of the owners there, who referred to me this case study on their website. http://www.groomenergy.com/case_study_ges_hybrid_lighting.html