Energy efficiency measures, both for retrofitting the existing building stock and for the design of new buildings, offer a large opportunity for cost-effective reductions in energy use – and results are available immediately. Historically, energy efficiency retrofits have driven mortgages, performance contracting (ESCOs) and utility rebates. 30 years of such programs have had a limited effect on creating scalable impact, despite the demonstrated business opportunity presented by energy efficiency.
Energy efficiency remains the only component of clean energy cost-effective today on a global basis irrespective of government incentives. In simple terms, it is cheaper to capture energy that would otherwise escape than it is to generate new electricity. Given that emissions from buildings – including electricity use – are responsible for over 20% of global CO2e output annually and could be profitably reduced by up to 80% using existing technology and financial mechanisms, a Building Efficiency Operation that catalyzes private capital into retrofits represents a truly gigaton-scale opportunity.
New financial products that either utilize low-cost or off-balance sheet financing are required to overcome the various structural barriers preventing energy efficiency retrofits. In addition, business models are needed to address the fundamental market barriers that prevent the scale-up of energy efficiency retrofits: high upfront costs for consumers, inconvenience of retrofits, lack of consumer information, over-stretched balance sheets, inability to secure additional capital, and a significant principal-agent problem due to split incentives.