Article By Scott Henderson, Director of finance, Clinton Climate Initiative (CCI)

With Washington stuck in gridlock on so many issues, innovative local government initiatives may offer the best hope for progress on job creation — and energy independence. New programs recently announced by the cities of Los Angeles and San Francisco are both inspiring and instructive in this regard.

Working with the Clinton Climate Initiative (CCI) and the C40 Cities Climate Leadership Group (C40), both cities launched Property Assessed Clean Energy (PACE) programs to help property owners finance energy efficiency retrofits and renewable energy projects in existing commercial buildings. The programs forge public-private partnerships that aim to spur investment in our built environment, leading to significant energy savings and the creation of construction and engineering jobs. Together, Los Angeles and San Francisco Counties have two billion square feet of commercial building space that stand to benefit.

The potential market for energy efficiency retrofits in commercial buildings has been much discussed. The energy services firm Johnson Controls estimates that these buildings, on average, can be made 22 percent more energy efficient using commercially available technologies such as LED lighting. Capturing these savings would require $12 billion in annual project investment over the next decade. Yet, this potential has largely gone unrealized, due to the limited availability of capital for these improvements.

PACE programs address this challenge by allowing building owners to borrow funds from their local government to pay for qualified energy upgrade projects. Owners repay those funds (plus interest) through a tax assessment which is added to the property tax bill and secured by a lien on the property.

To date, local governments have borne the responsibility for arranging the up-front funds. But the Los Angeles and San Francisco programs utilize a different approach — labeled “open-market PACE” — in which the owner secures funds from private investors. Developed in large part by CCI and C40, the open-market model allows an owner to design a project on their own timeline and then negotiate financing of that project with any number of private investors. It is believed that this flexible approach will make PACE more attractive to commercial building owners, particularly those undertaking large, complex projects with long development cycles.

By leveraging the property tax system to secure repayment from owners, PACE investors can provide financing at more attractive rates and over terms up to 20 years, both of which were previously unavailable to owners for energy projects in existing buildings. The result is that owners can now more easily replace major equipment such as chillers and elevators, which have longer “paybacks” but which also lead to deeper savings.

In this era of government austerity, the programs represent a promising model for public-private partnership. They require no public funding beyond modest start-up costs; and once the local government sets up the program, the private sector can provide the investment capital.

To quell concerns about the property liens that result from PACE tax assessments, San Francisco and Los Angeles have taken great care to design programs that protect the interests of existing lien holders such as the first mortgagee. For example, both programs require written consent from existing lien holders before any tax assessment can be levied, further incentivizing owners to develop best-in-class projects that benefit all stakeholders in the property.

During the program development process, CCI and C40 facilitated active sharing of ideas and best practices between both cities, in an effort to quickly standardize the open-market approach. As a result, Los Angeles and San Francisco will utilize very similar transaction documents and eligibility requirements, allowing investors and contractors to work seamlessly across programs.

San Francisco and Los Angeles stand together with a wide range of local governments, entrepreneurs and investors that have already begun helping our nation put innovative financing tools such as PACE to work. The stakes are high: energy efficiency investment in existing commercial buildings could create 240,000 jobs in the U.S. over the next decade, and avoid some 128 million metric tons of annual CO2 emissions. Without question, PACE programs are gaining momentum and with effective implementation, have the potential to achieve these important results for our economy and environment.

This article discusses the architectural and design elements that make the aforementioned office building environmentally sensitive while providing a pleasant workspace for the building’s employees.

Education Executive Agency and Tax Offices

Unique shape, like the top of a modern cruise ship

What I Liked
Duo2, the design and engineering group responsible for the construction of this building, in collaboration with UN Studio, utilized the windy Netherlands locale to its advantage and surrounded each floor of the building’s façade with amazing white aluminum “fins.” I was impressed with what this one panacea-like architectural element can accomplish, addressing environmental concerns while contributing to energy efficiency. These fins help preserve the ecological balance of the neighboring woods by directing the wind over the tree canopy, thus preventing the problems of dry soil, damage to old-growth trees, and disturbed bat habitats. The energy-efficient fins also contribute to shading (keeping the building cooler in the summer and warmer in the winter); daylighting (workers can use less intense overhead lighting due to the reflected light); and ventilation efficiency (I thought it was particularly ingenious of the builders to use adjustable vents to capture the wind flowing off the upper-floor fins and aim it towards the building’s super-heated data center).

What Made it Helpful
The article demonstrated the ways in which a building can be sensitive to both the environment and to the physical and psychological needs of the building’s occupants. The building provides the physical need for clean (so clean, in fact, that it is “hospital-clean”), fresh air and a comfortable indoor climate. The psychological need is addressed by providing a cheerful environment to work in, one that is full of vibrant color, has a fun, quirky design (for instance, the main corridors are easily differentiated by their sizes and fresh air wafts through stylized punch-holes rather than through conventional slatted vents), and connects to the outdoors through big windows affording wonderful, “orienting” city views.

In addition, Duo2 sets the valuable example of reducing unnecessary costs (by decreasing the floor-to-floor height) in order to utilize the savings for useful green design elements, materials and equipment, such as natural heating and cooling wells. I also admired the building’s intelligent, resource-saving use of space; by using the concept of hoteling, 2,500 workstations can support 3,500 employees.

General Thoughts
The building has accomplished a great feat by addressing so many crucial needs, and I particularly admire how it had thoughtfully taken into account the locale’s climate and brilliantly utilized it in an energy-efficient and environmentally helpful manner. This edifice, aptly described as resembling such mighty forces as a whale and a ship, evokes dynamic power and serves as an excellent example of intelligent construction.

AEF Consulting, Engineering & Construction Inc., a company specializing in General Contracting, Green Buildings and Reducing Energy costs for commercial and residential properties, is now able to assist home owners apply for rebates on projects that reduce operating expenses.

For every 10% reduction in energy use, a home owner may receive a $1,000 rebate up to $4,000, and $500 in federal tax credits.  In the Los Angeles Department of Water & Power (LADWP) service area, homes may earn an additional $2,000 in rebate money making the total potential rebate for that region $6,500.  So not only do home owners receive  rebate money, but they also reduce their utility bills from 10% to 40% thus allowing for continued return on investment over time.  What’s more, if done correctly, homes that engage in utility conservation measures also deliver better comfort to its occupants – something that can’t be measured.

Energy Upgrade California also offers a program called Energy Savings Assistance Program, which allows a home owner or renter to be eligible for free weatherization services and energy efficient appliances. The Energy Savings Assistance Program provides income-qualified households with free energy-efficient appliances and equipment, as well as energy education on how to conserve energy and reduce utility bills. Services provided may include attic insulation, energy efficient refrigerators, energy efficient furnaces, weather stripping, caulking, low-flow showerheads, water heater blankets, and door and building envelope repairs, which reduce air infiltration, among other measures.

The Energy Savings Assistance Program is free to eligible customers and is available to both homeowners and renters, here www.cpuc.ca.gov.