A Public Policy Gimme: Financing Green Construction and Retrofits

grist.org

Steve Heckeroth's piece "Solar is the solution" has been recommended all over the green blogosphere, first by Robert Rapier, I think. It's great reading, but I wanted to hone in on one thing he mentions -- a piece of public policy that has been woefully under-hyped.

To wit: with today's technology, we know how to make new buildings net energy generators, and we know how to retrofit existing buildings to reduce their energy consumption by well over 50%, in some cases 90-95%. We just need someone to pay for it.

That, however, turns out to be the rub. An investment in green construction or retrofit has these basic features:

1. It's capital intensive up front. CHP units, glazed glass, thicker than standard walls, solar panels, specialized architects and builders who have familiarity with green techniques -- all these cost more at the outset than building with cheaper, more familiar materials and methods. And retrofitting buildings is labor intensive, labor being a cost that most money types these days reflexively seek to reduce.
2. It pays off slowly and modestly. It takes time for the extra money invested in green building to pay off; same with retrofits. The return on investment is modest even for a while after that. Only in the long term do these investments offer a handsome dividend.
3. It is a sure thing. No investment is risk free, but money spent reducing the energy consumption costs of a building will almost certainly pay itself back, given proper maintenance and a sufficiently long time horizon. This is particularly true with energy costs, particularly natural gas for heat, slated to rise.

Hyper-capitalism being what it is, and people being how they are, investors are heavily predisposed against investments with features 1 and 2. It's all about quarterly numbers these days.

For this reason, it seems like an obvious place for government and civil society to step in. Figuring out financing mechanisms for such investments is a public policy with guaranteed payback, considerable social benefit, and built-in political support -- a gimme.

Why doesn't every city do what Berkeley, Calif. is doing? The city loans money to homeowners to add solar panels; the homeowner pays the city back over 20 years via a small addition to their property tax. The city makes a modestly profitable loan, the homeowner pays nothing, and all owners of the home from the 20-year mark on get a permanent reduction in energy costs. Oh, and let's not forget you get a reduction in greenhouse gases and a homeowner who can strut around his neighborhood bragging about his solar home.

The Clinton Global Initiative is doing something similar around NYC public housing, working with banks to finance upfront green retrofit costs that will be paid back over time via energy savings.

My point is, how is this not a silver bullet? Why isn't every city in every country in the world doing this? It's win-win-win.

Like I said, I'm so sick of hearing how we can't do anything about climate change without future technology. Here's a cherry solution, staring us in the face, perfectly available now. Let's just get on it.

Comments

[jdm58]

Right there with you!

[zaneblue]

That's inefficient. Somehow some smart person could get mortgage lenders in on this. The problem is dropping home values and pinched homeowners--houses with solar panels do not lose value, even in this market, and the energy savings helps the person to afford to pay off their loan. Maybe if there was some way the Fed could help those specific types of loans, it could work.

And I work for a data mining marketing company that could specifically target individuals in sunny climates, with the right credit, and with a large enough house to make it economical for them, even specific zipcodes that have good tax advantages. Big Business has to buy into this to get it to work fast on a national scale.

[philistine]

Your post is absolutely on-point. Sadly, big energy conglomerates and oil companies fight any decentralized solutions to high energy costs, since they lose by their implementation.

Keep pushing. Our currrent spineless Congress just pulled support for renewable energy from the budget in response to Chimpy the Oily's veto pen; but the next Congress should be able to do better, if we keep the heat on (maybe I should use a better expression).

Cheers!