Municipal Zero-Net Energy Financing

May Great Story by Benjamin Silverman, Bay Area South Fellow 

In the month of May, one of my chief ongoing tasks was working on the USDN financial scan factsheets. This was related to a program the Urban Sustainability Directors Network is coordinating of attempting to connect municipalities with financial institutions to help fund local sustainability programs. These factsheets would help to provide potential investors with information on the nature of these projects, the estimated costs, and the anticipated returns of investment.

The factsheets I prepared for a proposed electric vehicle charging station project in multi-unit residential buildings was relatively straightforward, though requiring a lot of refinement. The factsheet for what became a zero-net energy retrofitting for municipal buildings program proved far more difficult. Initially, the idea was to prepare a factsheet on our proposed benchmarking and retro-commissioning ordinances that I have been working on in parallel. Costs and environmental impacts for these Oakland ordinances were all prepared, but it was uncertain what investors would actually be financing. The City is pursuing the City Energy Project to pay for a necessary staff position to manage these programs, so there is not a need for either outside investors or any clear way in which they could be paid back.

I decided to add in a fully hypothetical revolving fund financing program for zero-net energy retrofits for commercial buildings as a component of the benchmarking ordinance, in order to give investors something to partner with the city with. Very large assumptions were needed to be made on what the expected cost of zero-net energy retrofits for commercial buildings as well as their payback periods would be. But an analysis was crafted by me for this purely hypothetical program that would have worked in lock step as an incentive for compliance with the benchmarking ordinance.

Upon presenting of this draft factsheet to USDN, it became clear to our surprise that they were quite interested in partnering with us on this hypothetical zero-net energy program. Reacting to this interest and realizing that the zero-net energy retrofitting program was the most important aspect of this factsheet, the benchmarking components were removed entirely to focus on ZNE. But the previous assessment of ZNE retrofitting costs and impact was based on highly abstract and large assumptions, more reliable information would be needed. Seeing as such detailed building stock information is not available for Oakland’s commercial building, the ZNE retrofit program was reoriented towards the 117 major municipal buildings as there is far more reliable data available from them. A far deeper analysis on costs and benefits was carried out looking at each of the 117 municipal buildings, the potential costs of capital and labor for doing full lighting retrofits, performing retrocommissioning, switching out natural gas consuming equipment, installing solar, and their respective payback periods. This deeper, though still not deep enough, assessment was crafted into a new ZNE retrofit factsheet for presentation to USDN and its associated investors.