Living Cities’ Energy Efficiency Building Retrofit Lessons Learned

1. Living Cities’ Energy Efficiency Building Retrofit Lessons Learned November 19, 2010

2. Energy Efficiency System BuildingLiving Cities has been focusing on four critical elements for creating regional, scalable building energy efficiency systems

3. Key Components to Reaching Scale • Organizing Entity - An entity that will coordinate activities and organize the network of stakeholders and functions critical to moving beyond individual projects and building a durable system. • Policy Drivers – Policies, e.g., creating emission reduction goals, upgrading building codes, creating rebates and other financial incentives to help induce demand. • Financing Mechanisms –Creating financing mechanisms for residential and commercial properties that will enable affordable, deep improvements. • Workforce Development/Business Expansion – Development of a qualified workforce with the capacity to implement energy efficiency upgrades throughout a city or metro area and the increased capacity of businesses who would hire them.

4. Scaling Up Energy Efficiency Retrofit Systems • In June of 2009, Living Cities convened 16 teams of city and state officials for two days of intensive peer learning at Harvard. • The boot camp aimed at giving cities the resources to build an energy efficiency retrofit system at scale by enabling them to create a central organizing entity, establish a sustainable funding mechanism, strengthen workforce development and business expansion, and implement policies to drive demand. • Since this time, Living Cities awarded 11 grants to 10 cities to create energy retrofit systems at scale.

5. Retrofit Grant Portfolio Italics: Rockefeller Grant

6. Portfolio Analysis • Organizing Entity - Successful sites have a central organizing entity that the city helped establish. These entities improve likelihood that all components of the program are moving beyond the project level. • Financing Mechanism - Most programs are aware that grants alone cannot sustain a program, and that private capital is necessary. Most do not know how to connect with financial institutions and are have either faced delays in implementing their programs, maintain small-scale grant driven weatherization, or serve a small segment of the population that can fund work out of pocket. • Workforce Development –Most programs have not created neither a large number of jobs nor enforceable mechanisms to ensure that marginalized groups have access to good paying jobs with career ladders. In addition, current economy and the collapse of construction industry means most jobs are going to construction workers “on the bench,” so no net new jobs are created. Assistance to small business to meet possible, increased demand not common. • Policies Driving Demand- The role of policy drivers is increasingly important given the current economic constraints reducing demand for retrofits. Pursuing such policies is critical to expanding the scope of the programs, especially since it is unclear what accomplishments have been inflated due to stimulus funding that will no longer be available.

7. Portfolio Analysis (con’t) Broad variation in effectiveness and productivity Most efforts have moved much slower than anticipated Despite slow start, many sites have leveraged additional funds “System focus” is inconsistently applied Numerical targets not always at scale needed to support/drive system approach

8. Key Observations from the Field • Data Collection, Limited Lending and Financial Innovation – There is a lot of interest in retrofit lending but current credit environment and limited data supporting cost savings is limiting. Property owners can’t project what work will result in what cost savings and lenders can’t rely on those savings to underwrite loans. • Stifled Demand - Even if a city has managed to develop a sustainable financing mechanism that will produce cost savings in the future, the idea of taking out a loan remains unsettling for homeowners at this time. • Financial Literacy - Further, homeowners may not readily understand the complicated loans and financing options that are becoming available, and, given the state of the economy, they have low appetite for risk or for taking on additional debt burden. • Workforce Strain - Programs aren’t creating jobs, so some cities have stopped focusing on developing training programs because their trainees will just have to “sit on the bench.” The workforce piece, however, remains important due to contractor capacity. No one anticipated the work it takes to turn a contractor or weatherization contractor into a home performance contractor

9. Key Observations from the Field (con’t) • Heavy Lifting - The DOE's prior approach to awarding funds to cities was problematic because they basically asked cities to do financial innovation, an area that cities are not strong in and an area that is typically outside of the city's traditional system.  • Not Flexible - People have also complained about the timing and the strings attached to the EECBG, ARRA money, particularly around Davis-Bacon wage requirements.  The government should have aligned requirements and overall provided more flexible capital. • Spread too Thin - With the Better Buildings grants, DOE spread the money muchtoo thin, and could have focused on developing the strongest 8 models, rather than granting money throughout 35 states. • Competitive Grants - Slowed down the distribution of funding since it is not on a quicker formula basis. In addition, states and localities could not be as experimental, innovative, or get anything up and running quickly.

10. Opportunities • Create an Industry – Concentrated philanthropic investment together with unprecedented federal funding begs for coordination and intentional efforts to invest in creating an industry (supply, demand and an enabling environment for scaled transactions – including data collection), not just disparate parts. • Align practice and R&D - With limited resources being dedicated to this emerging market, places that are innovating (especially Better Buildings grantees) must be tied to technical assistance and R&D resources now available from DOE. It is critical that the places that are most committed and risktaking must get TA and the right applied R&D to accelerate their efforts. • Address Barriers - Identify the key barriers to doing this work (regardless of place) and apply existing resources to them. The key issues that are continually identified as barriers to system-building need to be identified and DOE's R&D partnerships should be deployed to address them. In addition, TA providers should be deployed to cities that have the best chance to address these barriers in the near term.

11. Opportunities (cont.) 4. Private Sector Incentives - Short term incentives to the private sector in the form of loan guarantees and credit enhancements would accelerate the industry. Large amounts of capital are needed to retrofit entire building stocks in cities and metro areas. 5. National Strategy - The country needs a single, coherent, national-scale building energy efficiency improvement program with clear goals, targets, and a work plan. 6. Workforce Development - There does not appear to be a coherent federal government approach to building energy retrofitting-related workforce development and job creation.  7. Messaging - A national messaging strategy, like anti- smoking, that builds understanding, comfort, and the logical turn towards energy efficiency would help develop the industry enormously.