by Richard T. Stuebi
One of the big line-items in the energy-related provisions of the American Recovery and Reinvestment Act was energy efficiency. Over $3 billion was allocated to efficiency investments, with the expectation of a 7:1 economic return, based on previous results of the DOE’s State Energy Program since its inception in the late 1970’s.
Alas, it’s becoming evident to some observers (see article) that results will not be so good this time around. Part of this is almost certainly due to declining marginal returns: the $3.1 billion in ARRA efficiency investments is fully 70 times the normal annual investment by DOE in efficiency. Thus, it should be no surprise that returns will be diluted with such a huge one-time spike in funding.
But one of the big, and highly unfortunate, impediments to good returns on these ARRA energy efficiency investments is the obsolescence of building codes around the country. As building professionals know so well, building codes tend to be difficult to change, often due to resistance from builders and trades who prefer to maintain the status quo because…well, just because they’re more comfortable with and accustomed to the status quo.
While retrofit opportunities represent a large portion of the potential energy and emissions savings afforded by increased efficiency — and many of these, as analysis by McKinsey suggests, can be done at negative societal costs — it will be important to surmount this inertia and opposition to establish new and more stringent baselines for our new building stock, if we’re going to tackle our energy and environmental challenges in a permanent fashion.
Richard T. Stuebi is a founding principal of the advanced energy initiative at NorTech, where he is on loan from The Cleveland Foundation as its Fellow of Energy and Environmental Advancement. He is also a Managing Director in charge of cleantech investment activities at Early Stage Partners, a Cleveland-based venture capital firm.