Inside Obama's $4B energy efficiency plan

The White House announced a $4 billion initiative to improve energy efficiency in hundreds of public and private buildings. And it's been accomplished -- or hopes to be -- without asking Congress for money.

The Obama Administration -- with help from former President Bill Clinton and a little used federal energy savings program -- announced $4 billion in energy efficiency upgrades to government and private sector buildings over the next two years. The effort, known as the Better Buildings Challenge, aims to create jobs and improve energy performance at least 20 percent by 2020 across 1.6 billion square feet of commercial industrial space.

And it's all been accomplished -- or hopes to be -- without asking Congress for money.

Where the money will come from

The investment includes a $2 billion commitment made via presidential memorandum to upgrade federal buildings using a little used program known as Energy Savings Performance Contracts.  The program pays the contractors who undertake the work with realized energy savings. In other words, the building upgrades are financed using long-term energy savings to pay for up-front costs -- and at no cost to taxpayers.

The other half is dependent on the private sector and local government. Sixty major companies, universities, labor unions, hospitals, cities and states have committed to invest an additional $2 billion in private capital into energy efficiency projects. The announcement builds on a previous commitment made by 14 private and local government partners at the Clinton Global Initiative America meeting in June to finance $500 million in energy efficiency projects.

Metrus Energy, a California-based startup, was among that inaugural group and announced Friday it has upped its commitment in energy efficiency projects to $75 million. The company is one of several startups that have sprung up in recent years in the burgeoning energy retrofit financing market. Metrus Energy has developed an efficiency services agreement, which is modeled after the power purchase agreements used to help finance large-scale renewable energy projects.

A number of manufacturers including Alcoa, Briggs and Stratton, Cummins Inc., Legrand and Nissan as well as retailers such as Best Buy, Kohl's Department Stores and Walgreens have committed to energy retrofits. In all, some 300 manufacturing plants will be upgraded. The total commercial industrial space that is expected to be retrofitted equals more than 500 Empire State buildings, Obama said in a speech this morning.

The Better Buildings Challenge is essentially an offshoot of the Better Buildings Initiative, a plan launched by Obama in Febraury 2011 that aims to improve energy efficiency in commercial buildings 20 percent by 2020 through legislation, private investment and action by the administration. Since Congress has failed to act on many of the proposals within the initiative, the Obama Administration moved forward on the private-public partnership component and tapped Clinton to recruit businesses.

Clinton's involvement isn't surprising. The former president has long pushed for investment in energy efficiency upgrades, calling it "not sexy," but important low-hanging fruit that will create jobs, reduce costs and save energy.

Independent estimates including one from the University of Massachusetts Amherst have said the broader Better Buildings Initiative has the potential to create up to 114,000 jobs. That is, if Congress were to approve the numerous legislative proposals. It isn't clear how many jobs could be created under the $4 billion building challenge program. Gene Sperling, director of the National Economic Council, said in a conference call Thursday that according to U.S. Chamber of Commerce estimates, the $2 billion federal piece could add some 35,000 jobs.

Photo: Flickr user jurvetson, CC 2.0


This post was originally published on