energy efficiency and economic opportunity in grand traverse county

7/31/2019 Energy Efficiency and Economic Opportunity in Grand Traverse County

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Energy Efciency and Economic Opportunity in Grand raverse County

JU NE 2012

A Special Report to the Community Creating Jobs

Increasing Local InvestmentSaving Energy & Money

Boosting Pro ts


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This report is a project o the Michigan Land Use Institute,with technical assistance by SEEDS.

MLUI works with citizens, o cials, and organizations to protect theenvironment while building walkable communities, a locally based

ood system, and a clean-energy uture.

This report was written by

Jim Dulzo ,MLUIs senior editor,

who reports on clean energy issuesor the organization.

Reach him at [email protected].

Barton Kirk ,SEEDS energy and environmental analyst,

operated the LEEP-C system and provided alldata and projections or this report.

Reach him at [email protected].

For a brilliant, in-depth discussion o the economic potential o applying aggressive energy e ciency measuresto our nations buildings, we invite you to read the relevant sections o Reinventing Fire: Bold Business Solutions

or the New Energy Era , written by Amory Lovins and published by the Rocky Mountain Institute. There is more in ormation at http://www.rmi.org/Buildings.

P.O. Box 2454 Traverse City, Michigan

ecoseeds.org

231-947-0312

Bold Solutions or MichigansPeople and Places

148 E. Front Street, Suite 301 Traverse City, Michigan

mlui.org

231-941-6584


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2 0 1 2 / E N E R G Y E F F I C I E N C Y & E C O N O M I C O P P O RT U N I T Y I N G R A N D T R AV E R S E C O U N T Y

I N R O D U C I O N

Energy Efciency and Economic Opportunity

in Grand raverse County Investments in home, business, and public-building energy e ciency can pay excellent short- and long-term nancial dividends. Each dollar properly spent on improving a buildings e ciency saves multipledollars in energy costs over the li etime o the investment; provides a strong hedge against the increasinglyvolatile price o ossil uels; and helps meet increased demand ar more cheaply than investments in newgenerating capacity. (1)

Tis report investigates another crucial but o ten-overlooked aspect o energy efciency: its power to stimulate local economic development.

A properly designed, communitywide energy efciency program canincrease local employment, produce new business activity, exert downward pressure on local energy prices, capture and keep energy dollars in the local economy, make the wider community more attractive to amilies

and businesses, and reduce climate-changing greenhouse gases.

This study o the economic e ects o energy e ciency in the Traverse City area uses local, real-worldGrand Traverse County statistics instead o national or even state averages to calculate the economice ects o a program that increases the e ciency o all residential buildings and ty percent o public andcommercial buildings by 25 percent in 15 years. Those local statistics include an inventory o residential,commercial, and public buildings; climatic conditions; and electricity and ossil uel prices. We project the proposed programs administrative, capital, and nancing costs; the number o energydollars saved by individual amilies; and aggregated community savings. The report includes a surveyo possible community-based nancing arrangements that could drive a Grand Traverse e ciencyprogram, with or without taxpayer dollars, local utility or municipal participation, or new state or ederalpolicy developments. We do not necessarily endorse these, but o er them to start a communitywideconversation. Given the signi cant local employment that a 15-year, 25-percent increase in building energy e ciency

would produce; the e ect that such job growth and saved, re-circulated energy dollars would have onthe economy; and how attractive the results o such a program would be to people and businessesconsidering relocation in our community; we believe it behooves local civic, business, non-pro t, andgovernment leaders to orge an innovative, countywide alliance that designs, popularizes, and executessuch a program in a timely, even urgent manner.

This will increase the prosperity and the sustainability o Grand Traverse County, provide a model or othercounties and state lawmakers to emulate, and rea frm the regions reputation or innovation and leadershipin sustainable development.

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P A R I

Six Real-World Examples o Efciencys Power ul Economics

Energy e ciencys greatest advantages are its low cost and high return on investment. Examples abound,and we o er three rom small businesses that invested in their own energy e ciency measures, and three

rom utility-driven e ciency programs across the nation.

Small Businesses

Small businesses in the United States are discovering that spending some o their hard-earned capital on energy efciency measures pays big dividends. Tese

real-world examples are rom the Energy Star pages o U.S. EPAs Web site. LIGHT INDUSTRY: A.O.K. Body Shop, in Philadelphia, invested $7,832 in e ciency upgrades: improvedmodern lighting and xtures, more judicious use o lighting, motion detectors, timers, programmablethermostats, new re rigerator, new space heaters, and sta education. The business now saves $5,577

in energy costs annually, for a payback period of 1.4 years. HOME BUSINESSES: The owners o Thomas Mott Homestead Bed & Break ast, in Albert, Vermonta 4,200-sq.- t., ve-bedroom, pre-Civil War housewent all-out. They spent $60,000 to ll all walls withinsulation, rewire its electrical system, replace 39 windows, swap out baseboard electric heating with a

hot-water heating system and boiler, replace all conventional lights with compact fuorescents, and planttrees to shade the building. The building is now very comfortable, and saves about $10,000 in energy costs annually, for a payback period of six years. RETAIL: Working with rebates rom the progressive, e ciency-oriented Sacramento Municipal UtilityDistrict, Vics Market invested $144,000 in e ciency measures; new lights, lighting xtures, enclosed

reezers, compressors to cool them, and deli equipment. The store now saves $48,000 in energy costs annually, for a payback period of three years. Better yet, the now-more-attractive stores business increased by 15 percent.

Utilities Utilities can be a power ul, driving orce or expediting energy efciency

measures. Here are three examples, starting close to home with what Michigan utility companies are accomplishing.

STATE OF MICHIGAN: According to the Michigan Public Service Commissions report on initial returnsrom investments by Michigans utilities in state-mandated energy optimization e orts, most o Michigans

utilities are seeing impressive results. (2)

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Public Act 295, passed in 2008, requires Michigan utilities to help their customers use less electricity andnatural gasramping up over seven years rom a 0.3 percent cut or electricity and a 0.1 percent cut orgas in 2009, to, respectively, 1 percent and .75, annually, between 2012 and 2015.

The results or 2010, the programs rst ull year, released last December, are encouraging: Collectively

Michigans utilities accomplished 148 percent o their goal or electricity and 142 percent or natural gas. According to MPSC, in a summary o the EO per ormance o the states two largest utilities, DTE Energyand Consumers Energy together spent $113 million on customer incentives encouraging lower electricityand natural gas consumption, and those investments, over the next nine years, will save the companiesand their ratepayers $554 million in avoided costscosts the companies and their customers wouldhave incurred without installing e ciency measures.

Stated di erently, each $1.00 invested in e ciency measures by the utilities will save the companyandits ratepayers$4.88 over the next nine years, the minimum li e expectancy o the incentivized measurese ects. That equates to an annual return on investment o 22 percent.

The two utilities incentives or residential customers promoted appliance recycling, Energy Star lightingand appliances, home energy analyses, weatherization, HVAC and water heater upgrades, education,specially designed programs or low-income customers, and more. For commercial and industrial custom-ers, e orts included customized solution programs, incentives or new construction, pilot and educationalprograms, and more. Based on these initial results, MPSC estimates that, over the ull li e o the optimiza-tion program, DTE, Consumers, and their customers will save $2.5 billion. The combined statistics or all o the states utilities are similar; a total o $133 million invested, and a return o slightly more than our-to-one. By at least one account, and by a di erent measure rom the states largest utility, the good news continued into 2011: DTE claimed in February 2012 that its customers used the utilitys EO-driven incentives andrebate programs to reduce their energy bills by about $50 million. In that year, a company press releasesays, approximately 156,000 residential and commercial customers worked with the company on savingenergy and money.

Michigan Public Service Commission

2010 EO Impact DTE and Consumers Energy

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STATE OF VERMONT: Another example, urther rom home but in a state with a somewhat similar climate,is Vermont. This national leader in energy e ciency programs regularly produces impressive e ciencygains. Thats thanks to E fciency Vermont, which describes itsel as the nations frst-ever energy e fciency utility. The non-pro t, launched in 2000, works with all utilities and utility customers in Vermont, employsa wide range o incentives, rebates, and educational programs or residential and commercial customers,and unds them via a modest, utility-bill e ciency charge. In 2010, Vermonters reduced their energy demand by a very strong 2 percent, saving $112 million on theirutility billsan excellent payback on an investment o $38 million in residential and commercial incentives,rebates, and other programs. So ar, the cumulative reduction in overall energy demand means that Vermont now meets 14 percent of its energy demand with ef ciency measures, rather than new generation.

The cost comparisons are equally persuasive: E ciency Vermont says that each kilowatt-hour o e -ciency-spawned electricity cost 4.1 cents, while the states conventionally generated electricity costs,on average, 14.4 cents. (3) (4)

Efciency Vermont

Efciency Vermont

Energy E fciency Savings as a Percentage o Vermonts Electricity Needs

E fciency Vermonts Annual MWh Savings

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STATE OF CALIFORNIA: I Vermont is an e ciency leader, Cali ornia is the nations e ciency god ather.(5) The state rst required its utilities to become more e cient in the early 1970s. Today, on a per capita basis,Cali ornians use only slightly more energy than they did 40 years ago, while nationally, per capita energyuse has almost doubled: Annually, Cali ornians used 7,500 kWhs a year in 1975, while the rest o Ameri-cans used 8,000 kWhs; in 2007, Cali ornians used 8,000 kWhs, while the rest o us used almost 14,000.

Projecting those signi cant savings across the states very large population yields enormous numbers:Utilities investments o about $4.9 billion in electricity and natural gas e ciency not only paid back thatsum, but also generated additional savings (or avoided costs) o $4.9 billionessentially doubling thecompanies initial investmentsbetween 1999 and 2009.

A UC Berkley study o the entire states e ciency gains between 1972 and 2006 (6) ound that total,cumulative, statewide savings (excluding program costs) were $56 billion and produced 1.5 million jobs,with a total payroll o $45 billion. And the cost or the electrical e ciency gains rom 2005 to 2008 waseven lower than Vermonts: slightly under 3 cents per saved kWhindicating that even a ter 40 years o aggressive utility e ciency e orts across Cali ornia, a great deal o low hanging e ciency ruit remains.

National Resources De ense Council

National Resources De ense Council

Per Capita Electricity Consumption

Economic Productivity o Electricity Use

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The outcomes measured in these snapshots o three states utility-based energy e fciency (or optimization) programs closely match other, national studies o energy e ciency. According to the American Council oran Energy E cient Economy, a survey o a number o real-world e orts indicates the cost o saving a kWho electricity ranges between 1.2 and 5.1 cents per kWh.

The same study ound that, as o 2006, annual state- and utility-led investments in e ciency o about $2billion have so ar saved about 63 billion kWhs o electricity and 135 million therms, and that the electricalsavings eliminated the need or 16 gigawatts (a gigawatt is 1,000 MW) o new generating capacityrough lythe equivalent o 16 very large coal plants which, today, likely would cost more than $32 billion to build.

Te Energy Efciency Value Chain Large or small, energy e ciency projects produce a signi cant value chain. That chain includes capital or-

mation and/or nancing, labor and materials, lowered utility bills, captured and re-circulated energy dollars,avoided utility costs, and downward pressure on utility rates. Collectively, their e ect on a local economycompares avorably with many other economic activities, particularly using new power plants to meet newenergy demand.

Capital Formation and Financing

Because investments in EE projects are typically in the thousands or hundreds o thousands o dollars, not

the hundreds o millions or billions o dollars required or building power plants, projects can more easilydraw on local capital sources instead o major, out-o -state investment rms.

Smaller capital requirements help to keep interest costs low; even better, those interest payments can staywithin the community, rather than fowing to outstate nancial institutions. Depending on capital sourcesand interest rates, local banks and credit unions can participate in communitywide EE projects eitherindividually or in pools, lending either their own unds or administering bonds or other publicly assembled

unds. Either approach provides good business opportunities to local nancial institutions, provides localnancial-sector employment, and builds local wealth.

Labor and MaterialsBuilding new power plants to meet new energy demand involves huge amounts o labor and materials.Such projects employ a broad range o trades rom excavators and crane operators to concrete andsteel haulers and workers; to industrial electricians, plumbers, and HVAC installers; and on through highlyspecialized electronics and IT technicians and more. But because a great deal o the work is so particularto power plants, many o the most skilled, highest-paid workers usually come rom other places. During such projects, which can last three to ve years, the host community sees a massive infux o newworkers, who stimulate i not overwhelm the local residential rental market, and boost the local service

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and retail economy as they temporarily settle in or commute to the region. But that stimulus ades quicklyas construction winds down and many workers leave, taking their rent checks, spending on ood andservices, and much o their saved earnings with them. Like many o the workers, much o the materials used to construct new power plants is also imported:

Steel, pipes, ttings, wiring, industrial HVAC and lighting equipment, digital controls, and the maze o boilers, tanks, pumps, coolers, and turbines typical o coal- or gas- red power plants. In contrast, energy e ciency projects use labor skills readily available in Grand Traverse County: buildinge fciency analysts, carpenters, plumbers, HVAC installers, insulation specialists, roo ers, window installers, siding installers, even landscapers. While a well designed, communitywide energy e fciency project certainly employs ar ewer workers than a large, industrial project, those workers live in the area andtheir employment in communitywide e ciency projects lasts or many years. So the economic impacto communitywide e ciency projects shows up in steady, ongoing, long-term increments, rather thanin sharp peaks and valleys. Additionally, a much larger portion o wages paid or the projectand the

wealth those wages createstay in the community. EE projects also avoid the sudden, costly strains on residential and tourism-related housing stock, as well as the booms and busts in earnings and spending that major plant construction can cause. EE projectsalso directly stimulate some parts o the local retail economyconstruction and home improvementmaterial suppliers. While some o those materials are imported rom outstate manu acturers, many arealso made in Michigan. One study nds that strong energy e ciency e orts nationally would producemore than $2 billion in manu acturing-related economic activity in Michigan. Whether or not these e ciency products are Michigan-made, their distribution and sale can be locallybased, bringing wholesale and retail sales opportunities to area hardware, lumber, home improvement,

lighting, appliance, and heating and cooling businesses.

Lowered Utility Bills Mean LocallyRe-circulated Energy Dollars

Among the most visible results o success ul EE projects are lower utility bills, and those lower bills canhelp boost the local economy. Initially, a majority o the EE savings fows to the local lenders, a positiveeconomic activity or those institutions. Then, a ter the EE project loan is retired, the home or businessowner retains all o the saved energy dollars and enjoys a steady, long-term return on investment. Thisvirtual boost in household or business income acilitates more local spending o dollars that would mostlyleave town to pay or the ossil uels used to provide energy. In terms o business, it can lead directly toincreased investment, more sales success, and more hiring. I the money is deposited and saved locally, it strengthens local nancial institutions. I it is spent locally,it boosts the communitys retail and service businessesyet another dependable boost to local employ-ment and pro t margins, two building blocks o a prosperous local economy. Part IV o this report estimates the amount o money, on a year-by-year basis, that communitywidee ciency projects would ree up or either saving or spending by local homeowners, businesspeople,and government units.

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Avoided Costs Help DampenEnergy Rate Increases

EE projects also help ratepayers who are not directly participating in that activity themselves. That is be-cause, as utility customers become more e cient, requiring less energy, several things happen within theutility that can save all customers money.

1) EE projects ree up generating capacity that can be sold to other, new customers, or to otherutilities, without adding new capital expenses to the utilitys ledger.

2) I there is no market expansion, the utility has more ability to draw proportionally more energyrom its least expensive sources, rather than rom all o them, be they expensive or inexpensive,

to meet demand.

3) Because EE projects may also reduce a utilitys overall peak demand, the utility can purchasear less peak energy on the hottest daysby ar the most expensive kind.

4) Less energy demand puts downward pressure on overall uel prices, lessens maintenancecosts, and postpones the need or new investments in generating and transmission equipment.Over time, these avoided costs put downward pressure on the utilitys regulated rates.

For emphasis, it should be noted again that building new power plants to meet capacity has exactly theopposite e ectpushing up generating costs because new plant construction is expensive, incurringheavy long-term debt and maintaining or increasing upward pressure on the price o the uel that runsthe plant.

Financing: Efciencys Final Frontier

It is easy to nd homeowners, businesspeople, or governments that want to save money by saving energy.But it can be di cult to nd homeowners, businesses, or governments that actually make the investmentsnecessary to produce signi cant results. That is true even though e ciency investments are less risky thanmany other investments and their rates o return are o ten signi cantly higher than many other traditional

nancial investment instruments. Although a lack o knowledge about how to make homes more e cientor predict uture energy savings are obstacles, the largest obstacle is usually a lack o access to a ordable, up ront investment capital. Here we look at ve tested approaches that can nance e ciency projects without straining business,institutional, or household budgets: PACE, ESCO, On-Meter Financing, Sustainable Energy Utilities, andEnergy E ciency Mortgages. All ve methods described below are summaries o ndings rom the recentreport, Energy Ef ciency Financing Models and Strategies , published in March 2012 by Capital E or

The Energy Foundation. The complete report is online: http://www.raabassociates.org/Articles/Energy%20 E fciency%20Financing-Models %20and%20Strategies.pd

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E fciency Financing or Commercial Buildings:PACE and ESCO

Commercial building owners in Michigan currently have two nancing options i they lack their own capitalor e fciency upgrades. One, called PACE, is now embedded in Michigan law, and is already being deploy-

ed in Ann Arbor, a longtime state leader in e ciency e orts. The other is provided by Energy ServicesCompanies, or ESCOs, and usually applies to large buildings. PACE stands or property-assessed clean energy. A local government, DDA , or other fduciary establishes a undthrough a municipal bond or other public sources with very low interest rates. The building ownerborrows rom the und at avorable terms, installs the e ciency (i.e., clean energy) measures, and thenuses a good portion o the energy savings to repay the loan via the buildings property tax bill. Once theproject is paid o , the owner retains the ull savings or as long as he owns the building. One crucial key:No matter who owns the building in the uture, the debt stays with that building until the loan is retired,since the new owner would also enjoy the bene ts o the e ciency project.

Ann Arbors PACE program is just getting underway. It allows loans o between $10,000 and $350,000to businesses in the city, which are paid back through special assessments on the businesses propertytax or up to 10 years. A May 10, 2012 article at AnnArbor.com indicates that more than $700,000 in PACEloan applications are already in the works; the programs administrator says that, o the 30 businessesshes contacted so ar, 85 percent said they are very interested in using the program. The businesses caninvest in energy analyses, insulation, lighting, HVAC, doors and windows, and cool (heat-refective) roo s.Once a buildings e fciency is maximized, loans can also be used or solar electricity or heating, geothermal, combined heat and power, and biomass thermal systems. Ironically, PACE could also work very well where it is needed mostprivately owned homes, whose own-

ers o ten view e ciency investments as too expensive in comparison to actual paybacks, which are real,but also more gradual. However, ederal home loan guarantors Fannie Mae and Freddie Mac are blockingresidential PACE due to concerns that, since loan repayments are treated as property taxes, the localgovernment has rst lien on that loan repayment in case o mortgage or property tax de ault. At thiswriting, e orts continue to change Fannies and Freddies policies. ESCOs employ a proven, longtime, but still somewhat arcane business model. ESCOs o er turnkey services that, like PACE, typically require little or no up ront cash rom the customers, which usually are governments and companies with sizeable buildings. The ESCO analyzes the building, chooses the e ciency measures,and installs them, combining utility incentives and rebates with its own raised capital to nance the project.

Then, the ESCO essentially takes over the utility bill. The customer pays a monthly ee to the ESCO thatis somewhat smaller than his past, average utility bills, guaranteeing immediate savings. The ESCO keepsthe di erence between that ee and the much smaller payout it now makes to the utilities. Once the ESCOhas collected its agreed-upon payback, all uture savings to go the building owner. New ESCOs are now orming quickly across the country, to join the ranks o established e ciency rmslike Johnson Controls, a 125-year-old, global company with a strong presence in Michigan. The companyclaims on its web site that it has saved its customers $7.5 billion in energy costs since 2000. Traverse Cityboasts at least one ESCO, Keen Technical Solutions LLC. ESCOs big drawback is that they mostly workwith large buildingsusually 500,000 sq. t., or morebut Keen also works on smaller sized buildings.

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Homes/Businesses:On-Meter, Sustainable Energy Utility, EE Mortgages

Two variations o PACE unding are suitable or both businesses and homesutility-based on meternancing and the newly emerging sustainable energy utilities model. Meanwhile, energy e ciency

mortgages have been available or 20 years, but remain relatively undiscovered by the wider marketplace. ON-METER FINANCING, which has a mixed track record, allows customers to borrow rom a rotatingmunicipal bond or directly rom their utility, which uses its own cash on hand, a special und nanced bya monthly e ciency ee or, as it would when building a new power plant, conventional nancing.

As with PACE programs, the savings rom the e ciency project are used to slightly lower the customersmonthly bill and to pay back the loan to the utility. The loan remains attached to that buildings utility bill,and is taken over by a new owner, who bene ts rom the savings the building is achieving.

There are big advantages to this approach. Since capital requirements or e ciency projects are a small

raction o those or building a typical, multi-billion-dollar power plant, the utilitys borrowing costs are arlower. Combined with the low cost o producing saved kilowatt-hours, on-meter nancing saves moneyor all: The utility avoids higher generating, uel, capital, and construction costs; participating ratepayers

immediately see slightly lower bills that drop dramatically a ter loan payo ; and non-participating rate-payers bene t rom the downward pressure the utilitys avoided costs exert on rates. SUSTAINABLE ENERGY UTILITIES o er another approach that somewhat resembles an ESCO andon-meter nancing. Although it does not identi y itsel as such, E ciency Vermont (see Part I) is an early,somewhat limited variation o this approach, known as an SEU.

The SEU is a stand-alone non-pro t, and is unded by a bond and/or a small, passed-through e ciencycharge on local utility bills. The SEU administers the und, provides technical expertise, guidance onconventional utilities fnancial incentives, project fnancing, energy savings verifcation, and, in some cases, loan guarantees or outside, third-party investors. The SEU then shares in the customers energy savingsuntil nancing is repaid.

The combination o steady income rom loan repayments and the e ciency charge can, over time, expandthe und. In 2007, the State o Delaware passed legislation establishing a SEU that, in addition to energye ciency, also addresses distributed renewable energy generation, such as solar panels, as well as trans-portation. The non-pro t is currently undergoing its rst rigorous evaluation o investments and resultingsavings to ratepayers. ENERGY EFFICIENCY MORTGAGES can acilitate signi cant investments in new buildings e ciency, aswell as extensive e ciency retro ts in old ones during either their re- nancing or sale. Lenders increasinglyview more-e fcient buildings as less risky properties than conventional buildings because owners operating costs are lower due to lowered utility bills. This can enable the lender to charge a lower interest rate, whichin itsel urther reduces loan risk.

The Federal Housing Administration requires evaluation o the proposed project via the Home EnergyRating System, and capital or the e ciency project cannot exceed ve percent o the home value. With

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typical mortgage terms o 10, 15, or 30 years, repayments can be kept relatively low, allowing the e ciencywork to produce a net positive return on a monthly basis. FHA also has launched a new program that extends up to $25,000 to borrowers and backs 90 percent o an e ciency loan with ederal mortgage insurance; Energy Star Mortgage programs in several states also

inject capital into these mortgage products to urther buy down interest rates, which are typically between3 and 9 percent. Utility incentives and state and ederal programs can be used to urther reduce the cost o the project, andthere ore the mortgage principal. While many appraisers still need convincing about the low-risk nature o EEMs, some lenders, state agencies, and other organizations continue to move orward with these loansand to see success.

LEEP-C: An Economic Modeling Programor Efciency Projects

Introducing ACEEE

This report uses an economic modeling spreadsheet, called LEEP-C, developed by the AmericanCouncil or an Energy E cient Economy. Founded in 1980, ACEEE conducts in-depth technical and policy

assessments, advises policymakers and program managers, and works collaboratively with a variety o business and civic groups and organizations. Speci cally, the 50 sta members o ACEEE team up on projects and initiatives with ederal and stateagencies, utilities, research institutions, businesses, and public interest groups.

ACEEE also organizes con erences and workshops; publishes books, con erence proceedings, andreports; and educates consumers and businesses.

The non-pro t receives nancial support rom oundations, governmental organizations, research institu-tions, utilities, and corporations.

Understanding LEEP-C

LEEP-C, the ACEEE modeling spreadsheet used here, is shorthand or Local Energy E ciency PolicyCalculator. The model, released in November 2011, draws rom ACEEEs decades o research on themeasured costs and benefts o real-li e energy e fciency projects that have been implemented orbusiness, homes, and governments around the United States.

According to the LEEP-C users guide, the calculator is intended or use by policymakers and stakeholders interested in advancing the adoption o energy e ciency in their communities.

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Currently, LEEP-C analyzes the impacts o seven di erent sets o policies rom two economic sectors:residential housing and public buildings. The seven policiesor strategies or saving energy include:

1) Capital-intensive, comprehensive e ciency retro ts or existing public buildings2) Lower-cost tune ups or existing public buildings

3) Rating and labeling existing public buildings e ciency4) Whole Home e ciency analysis and improvements, including Energy Star5) Rating and labeling existing homes systems e ciency6) Residential e ciency code upgrades when a home is sold7) Assistance to multi- amily a ordable housing

LEEP-C estimates the e ect speci c project strategies have on energy savings, cost savings, pollution,

jobs, and other metrics. LEEP-C is primarily designed to in orm local, rather than regional, state or nationalprograms. To that end, LEEP-C allows customization o a number o actors used or its economic andenergy projections. For our project, those actors include:

1) Grand Traverse County population2) Years over which project is implemented3) Years over which project is evaluated4) Total square ootage o public buildings in the county5) Number o residential units, sorted by building type (single, multi, mobile)6) Total annual building energy consumption in the county7) Annual energy use growth rate8) Communitys energy-related priorities9) Financing terms or e ciency investments

LEEP-C allows users to try out di erent goals, such as modest vs. deep building retrofts; quick vs. gradual implementation; high vs. low interest rates; emphasis on creating jobs vs. emphasis on quick return oninvestment; and more. Each change renders a di erent set o outcomes, allowing a community to makedecisions about proposed e ciency investments based on what it wants to accomplish.

Limitations

LEEP-C does not directly address costs and savings associated with investments in commercial buildingenergy e ciency. That is because modeling or such buildings is di cult: Many commercial buildings use

large amounts o energy in many di erent ways rom o ce equipment to display lighting to large HVACsystems to re rigeration. So predicting their energy use and potential savings is risky, except on a sector-by-sector basis.

Yet commercial buildings and the activities that they support are at least as energy-intensive as publicbuildings and the activities they support. We suggest, there ore, that the savings and prosperity-buildingopportunities or commercial buildings are at least as signi cant as they are or public buildings. In act, as noted in Part I, businesses o ten fnd that investments in e fciency measures provide excellent returns. While we do not provide Grand Traverse County numbers or this assertion, success stories

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rom elsewhere and ACEEEs continuing work on the question indicate that including commercial buildingretro ts in a long-term, communitywide energy e ciency project can typically provide a 23 percent annualenergy saving or each building, a signi cant contribution to increasing local prosperity. We extend our thanks to ACEEE or its modeling work and the care the organization took to allow the use

o local, rather than national statistics to estimate the economic potential o energy saved by residentialand public buildings in Grand Traverse County. This localized approach is the most accurate and credibleway to proceed, and distinguishes our LEEP-C projections as a rst or county residents, local govern-ments, and, by extension, local businesses.

LEEP-C Projections or Grand raverse County Overview o Results

We applied the LEEP-C model to two sectorspublic buildings and residencesusing seven di erentstrategies, listed below. Our work indicates that the most cost e ective energy e ciency programs orGrand Traverse County are those that target public buildingscity, village, township and county municipalbuildings, public libraries, and public schools.

Speci cally, comprehensive energy e ciency retro commissioning ( acility tune-ups) and retro ts o pub-lic acilities can be implemented relatively quickly, provide signi cant energy savings and high returns on

investment, and generate several jobs. LEEP-C suggests that accomplishing substantial long-term savings and job creation requires investmentin residential and commercial energy e ciency. Although LEEP C does not currently evaluate investmentsin commercial building e ciency, data being compiled by the National Renewable Energy Laboratory andby ACEEE suggest similar programs aimed at the commercial sector would o er the best o both worldsextraordinary energy savings and return on investments, plus signi cant long-term job creation.

The Impact o Interest Rates

Because deeper energy e ciency gains o ten require an initial investment o capital, nancing terms canhave a dramatic e ect on the cost e ectiveness o energy e ciency investments. We compare all resultsusing two interest rate scenarios to demonstrate this e ect and highlight the strongly positive economice ects o developing a low-interest fnancing program in tandem with strategic energy policies and programs. LEEP-Cs de ault interest rate is 6 percent, a reasonable one or energy e ciency investments or privateor individual public sector energy e ciency projects. We also evaluated the e ect o a 4 percent interestrate, which may be possible through a comprehensive e ort to reduce project- nancing costs through oneor more municipal bonds, such as the PACE program discussed in Section III, or access to other private,

oundation, or public unds dedicated to improving energy e ciency.

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Scenario Summary

In the ollowing charts, public building strategies are completed within two to ve years and residentialstrategies in 15 years, with a goal o a ~25 percent reduction in building energy use, and a 30-year evaluation period. For public buildings, Policy costs include management, labor, materials, and interest. For residential, costs include Administrative costs, Incentives ( or strategies that include them) and Participant costs,including labor, materials, and owners interest costs. Simple payback period is total capital costs dividedby gross, rst-year annual savings. Total investment costs are gross costs to the community or costs paidby all parties involved, including administrators and participants. Total energy saved includes gas andelectricity. Net savings are gross savings minus owners capital and interest costs. Net Present Valuerefects the time value o money, in that cash fows in the uture are worth less presently than cash onhand, and is a best indicator o total value to the community. Average annual jobs is the average jobscreated per year over 30 years. Annual jobs during the peak o policy implementation are much higher.Bene t - Cost Ratio compares Net Present Bene ts to Net Present Costs; values larger than 1.0 meana net return on investment.

Grand Traverse Countys public buildings encompass 3.24 million square eet and, in 2011, used 37.2million kWhrs o electricity at 11.3 cents/kWh, and 1.93 million therms o natural gas at 77 cents/therm.

Annual energy use grew by 2.79 percent. The countys 35,272 residences (74.4 percent single amily,17.1 percent multi- amily; 8.4 percent mobile) used 171 million kWhrs at 11.23 cents/kWhr and 37.7million therms o natural gas/propane/ uel oil at 80.3 cents/therm. Energy use grew 0.8 percent.

PUBLIC SECTOR

LEEP-C evaluated three strategies or policies aimed at publicly owned buildings in Grand Traverse County.Each represents an important step in the Energy Star guide to improving energy management or buildings.

Strategy 1:Public Building Benchmarking and Disclosure

One o the rst steps in energy management is to establish a baseline o energy use or a acility and thenbenchmark or compare it to the per ormance o similar acilities nationally. The simple act o documentingand then disclosing the buildings energy use and costs, critical energy losses, and opportunities or costsavings can then drive action toward e ciency in public sector operations. In other words, this step provides a gateway to well-thought-out, strategically selected and designedenergy saving projects. I we require 100 percent o public acilities within Grand Traverse County tobenchmark their energy use over the next two years it would, without much urther action, produce smallbehavior and purchasing changes leadings to modest energy savings o approximately 1 percent annually,with only a small administrative cost.

This strategy or policys more important e ect is that it lays down a strong, credible oundation or takingthe next, more substantial steps: retro commissioning and retro tting. In act, benchmarking helps uschoose which buildings to tune-up and which to comprehensively retro t.

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Strategy 2:Public Building Retro Commissioning

An o ten-overlooked step in energy e ciency management is one o the most cost e ective: retro com-missioning. This involves a acility sta and a building energy specialist critically reviewing the per ormanceo the existing energy systems to nd literal and operational energy leaks resulting rom poor design, instal-lation, changes in use, and wear and tear.

By tuning-up existing equipment, making minor repairs, and adjusting controls to meet current operat-ing conditions, retro commissioning achieves substantial energy savings with very little capital investment,resulting in quick paybacks. A study by the Lawrence Berkley National Laboratory evaluated the results o 163 retro-commissioning projects and ound a median energy savings o 16 percent, with a median cost

o $0.30/sq. t. and 1.1 years as the median payback.(7)

Retro commissioning is most commonly applied to large acilities (100,000 sq. t and larger), but the LBNLstudy ound it to be cost-e ective or smaller buildings as well. Tuning-up all public acilities sized at50,000 sq. t. or larger represents 50 percent o the countys public acilities. This strategy represents thesingle most cost e ective approach within the LEEP-C quiver.

Public Building Benchmarking: 1st Year Annual PolicyCosts and Benefts (per 10,000 SF o public acilities)

Total Policy Costs and Benefts (over 30 years w/ two fnancing rates)

First Year Annual Policy Costs and Benefts Public Retro-commission(per 10,000 SF o acility participating)


Policy Cost Electric Savings Natural GasSavings

SimplePayback(years)

$1,300 $175 $23 6.6

Scenario: TotalInvestmentCost

Total EnergySaved (MMBtu)

Net Savings Net PresentValue

Avg. Annual Jobs Created

Benefit /Cost Ratio

Interest6% 53,700 $675,600 $459,400


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Such a policy could also improve or be integrated with other incentive-based e ciency programs.Please note: Due to its overlap with Strategy Five, this strategy is not included in the Summary Total.

Strategy 5:Residential Energy Upgrade Requirement

A more direct approach than disclosure is requiring a minimum standard o energy per ormance or homesand rental units that must be achieved at the point o sale or rental. In this way it is very similar to requiringa building be up to code be ore it can be sold. In most cases such ordinances target easy energy e fciencyimprovements with quick paybacks and a cost cap to prevent the policy rom becoming overly burdensome

to property owners. This is a controversial policy, but it raises the quality o the communitys housing stockgradually over time, boosts the real value o each home as it is sold, eliminates local government adminis-trative costs, and results in the largest net nancial savings to the community as whole.

First Year Annual Policy Costs and Benefts Residential Labeling(per participating household)


First Year Annual Policy Costs and Benefts Residential Sale Upgrade(per participating household)


Admin Cost ParticipantCost Electric Savings Natural GasSavings Simple Payback(years)

$42 $613 $86 $23 6.0



HouseholdNet CostSavings

Community NetPresent Value


Benefit /Cost Ratio

Interest6% $22,286,000 1,696,000 $13,987,000 $7,379,400 6 1.5

4% $19,427,000 1,696,000 $18,045,600 $10,380,100 6 1.7

Admin Cost ParticipantCost

Electric Savings Natural GasSavings

Simple Payback(years)

$0 $938 $71 $117 5.0






Benefit /Cost Ratio

Interest6% $42,495,000 5,262,400 $8,623,000 $5,170,500 8 1.24% $37,062,000 5,262,400 $27,127,000 $18,351,100 12 1.7

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Strategy 6:Home Per ormance with Energy Star

Much like the retro ts or public sector acilities, home energy retro ts based on a comprehensive homeenergy assessment o er the largest energy e ciency gains. Some Traverse City residents are actuallyalready amiliar with this program: Home Per ormance with Energy Star is very similar to the TC Savesprogram initiated in several neighborhoods last year. In other words, participating home owners receivea standardized assessment o their energy use, energy losses, and opportunities or savings and are thenconnected with quali ed energy contractors, e ciency incentives, and attractive nancing options. Invest-ments are voluntary, but the program provides in orma tion to homeowners in a way that helps them makefnancially sound energy improvements with confdence.

Around the country these programs have averaged 20 percent gains in e fciency. Some individual programs have made greater gains, such as Austins program, which has documented a 28 percent average improve-ment among participating homes.

I 100 percent o the countys 26,000 single amily homes participated in such an assessment and improve-ment process over the next 15 years the resulting energy savings would exceed that o all o the otherpolicies evaluated by the LEEP C model combined.

Strategy 7:

Assistance to A ordable Housing A similar retro tting program could also be applied to a ordable housing. This policy looks speci cally atproviding technical assistance and nancial incentives or tune-ups and upgrades to multi- amily a ordablehousing units.

Although multi- amily a ordable housing represents only a small percentage o residential units in thecounty, this strategy helps people who would bene t signi cantly rom energy e ciency investmentsthose with the ability to pay utility costs but who have less control o their ability to make cost-e ectinvestments in their homes.

First Year Annual Policy Costs and Benefts o Home Retrotft(per 10,000 SF o acility participating)


Admin Cost EnergyIncentives

Participant Cost ElectricSavings

Natural GasSavings


$637 $841 $3,830 $153 $245 13.3

Scenario: Total Total Energy Household Net Community Avg. Annual Benefit /Interest Efficiency Goal

Attained

InvestmentCost

Saved(MMBtu)

Cost Savings

Net PresentValue

JobsCreated

Cost Ratio

6% 21% $160,088,000 15,636,700 $83,920,200 $9,009,100 26 1.14% 25% $191,218,000 18,615,100 $99,430,500 $9,904,000 34 1.1

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COMMERCIAL SECTOR

LEEP C does not currently include models or the commercial sector.

However, the models authors do suggest that the success o the comprehensive retro t policy or publicsector acilities is likely achievable or commercial properties. An inventory o energy use and greenhousegas emissions completed by SEEDS or the county in 2008 indicated that commercial energy use amountsto 50 percent o the countys electricity consumption and 34 percent o the countys natural gas consump-tion. Assuming that 26 percent average e ciency is similarly achievable across at least 50 percent o thecommercial building stock, the resulting $6.6 million gross in annual energy savings to county businesseswould ar exceed the annual savings o any other policy considered.

Thirty-Year Summary(Assume 4 percent interest)

Average # Net SavingsPolicy o Jobs (millions $) Public Benchmarking 1 .8Public Retro Commissioning 1 1.9

Public Retro t 2 3.6Residential Sales Upgrade 12 27.1Residential Energy Star 34 99.4Residential A ordable 1 6.7Commercial 25 72.5 Totals 76 212.0

Over 30 years these strategies pay or themselves, add $212 million in spendable income to the localeconomy, and annually employ an average o 76 people.

First Year Annual Policy Costs and Benefts Residential A ordable Assistance(per participating household)


Admin Cost EnergyIncentives

Participant Cost ElectricSavings

Natural GasSavings


$200 $527 $641 $50 $62 12.2






Benefit :Cost Ratio

Interest6% $7,106,000 696,300 $6,225,800 $680,800 1 1.14% $6,198,000 696,300 $6,651,400 $1,335,200 1 1.3

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Five Suggestions or a More ProsperousGrand Traverse County

Applying the LEEP-C model to Grand Traverse Countys building stock leads to three important conclusions, and those conclusions strongly suggest ve next steps that our communitys leaders can take. CONCLUSIONS

First, public investment in all municipal buildings in Grand Traverse County will quickly begin saving localtax dollars. Second, investment o bonded or private, interest-subsidized unds in residential e ciency in Grand

Traverse County will pay back homeowners over the medium and long term. This immediately createsa signi cant number o ongoing, good-paying, local jobs in nance, contracting, construction trades,engineering, and retail, and the release o millions o saved energy dollars into local pocketbooks. Third, our public building modeling results indicate that e ciency programs or local businesses couldquickly cut their energy costs without burdening their cash fow. Since there are ar more business thanpublic buildings in the county, most with large energy-saving opportunities, the program would createmany long-term, good-paying, local jobs in nance, contracting, construction trades, engineering, andretail, and ree up millions o energy dollars or other business uses.

POSSIBLE NEXT STEPS

We believe county residents, governments, and business would greatly bene t rom urther explorationo the nancing mechanisms necessary to unlock the economic bene ts o energy e ciency. We thinkthe ollowing ideas are worth urther research and discussion:

1) A countywide e ciency und with a very low interest rate.

2) Using a portion o the und to nance e ciency retro ts or at least hal o the publicbuildings in Grand Traverse County, with loan terms that immediately produce costreductions rom saved energy.

3) Using most o the und to nance a PACE program or businesses.

4) A local, public/private consortium providing low-interest loans or residential customersin Grand Traverse County.

5) Using a small portion o the unds or a position that coordinates outreach, marketing,

expertise, incentives, and nancing or a countywide e ciency campaign that providesa gradual, increasingly power ul, lasting local economic stimulus and a model orthe region.

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REFERENCES

(1) Saving Energy Cost-E ectively: A National Review o the Cost o Energy Saved Through Utility-Sector Energy E fciency Programs (ACEEE) http://www.aceee.org/research-report/u092

(2) 2011 Report on the Implementation o P.A. 295 Utility Energy Optimization Programs (Michigan Public Service Commission) http://www.michigan.gov/ documents/mpsc/eo_legislature_report2011_369985_7.pd

(3) Annual Report 2010 (E fciency Vermont) http://www.e ciencyvermont.com/ docs/about_e ciency_vermont/annual_reports/2010_Annual_Report.pd

(4) Success Stories and Per ormance 2010 (E fciency Vermont) http://www.e ciencyvermont.com/docs/about_e ciency_vermont/ annual_summaries/2010_results_summary.pd

(5) Cali ornia Restores Its Energy E fciency Leadership (National Resource

De ense Council) http://docs.nrdc.org/energy/ les/ene_10030901a.pd

(6) Energy E fciency, Innovation and Job Creation in Cali ornia (University o Cali ornia at Berkeley) http://are.berkeley.edu/~dwrh/CERES_Web/Docs/UCB%20Energy%20Innovation%20and%20Job%20Creation%2010-20-08.pd

(7) Building Commissioning: A Golden Opportunity or Reducing Energy Costs and Greenhouse Gas Emissions (Lawrence Berkeley National Laboratory) http//cx.lbl.gov/2009-assessment.html


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231-941-6584

energy efficiency and economic opportunity in grand traverse county

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