Sunday, December 4, 2016

50 Ways to Kick the Energy Efficiency Habit

Energy Efficiency sounds good, but it makes lousy policy, because of the simple financial fact that as a strategy it produces diminishing returns. So, with the thought of Paul Simon's 50 Ways to Leave your Lover in mind, here are some thoughts on how to free ourselves from this collective insanity which is holding up the transition to increasing deployment of renewable energy and progress towards energy independence, not to mention building property values.

The motto for this list is the famous statement:
Premature optimization is the root of all evil. (Donald Knuth)
This comment from one of the world's most famous computer scientists is exactly to the point, for unless you do the capital budget and a long-term plan first, and you can see a clear timeline on what energy future you want for your property, you are operating without a plan, and capital destruction is sure to follow, as night follows day. All the "energy efficiency retrofits" suck asset values out of properties and transfer them to the financiers, instead of improving property values.

50 WAYS TO KICK THE ENERGY EFFICIENCY HABIT

  1. Hop on the bus, Gus, but by all means do proper financial planning, and see for yourself. Failing to plan is planning to fail and you'll fall prey to incentives and be stripped of your asset appreciation.
  2. Be honest about how much you've spent on energy efficiency. Shouldn't
    Leave Energy Efficiency behind
    To the tune of: 50 ways to leave your lover
    your bills be negative already? If in doubt go back to point #1
  3. You can't save yourself rich, not with money, not with energy.
  4. Successive Energy Efficiency investments exhibit diminishing returns,
  5. Therefore Energy Efficiency literally does not add up - it is NOT additive.
  6. The reason you can't save yourself rich is diminishing returns.
  7. Not only does Energy Efficiency not add up, it is not additive towards sustainability, instead it is a sure prevention of sustainability - again because of diminishing returns.
  8. Energy Efficiency is not interchangeable with renewable energy in achieving sustainability, it is of value only if it is complementary to site-derived renewable energy (SDRE).
  9. Energy Efficiency in a fossil fuel system, is like lipstick on a pig and it is mutually exclusive with renewable energy.
  10. Premature Energy Efficiency is the best prophylactic the carbon economy has to offer against renewable energy.
  11. In a proper capital budget for energy, it will be seen that 30 years of no (or very small) energy bills versus 20-30% energy savings with various energy efficiency programs often easily justifies the far larger CapEx for SDRE, but intelligent use of passive measures and efficiency will reduce the ICap (Installed capacity) for SDRE.
  12. The corollary to this is that any would-be analytical models which emphasize energy efficiency and utilize payback analysis automatically move renewables out of range.
  13. Every step into renewable energy increases building resilience, yet we offer subsidized programs to quickly convert buildings to natural gas, before anybody gets the idea of going renewable (NYC Clean Heat). OTG Conversions are public enemy number one from the point of resilience and sustainability.
  14. If you count in the cost of the consultants on NYC Clean Heat, and various building resiliency studies, we could have converted half those 10,000 buildings to renewables already.
  15. Energy Efficiency makes the problem bigger not smaller, and makes it dollar for dollar less likely we'll ever switch to renewables.
  16. With gratitude to Steve Hallett & The Efficiency Trap - energy efficiency is much ado about nothing. This book is the behavioral corollary to the financial problem of diminishing returns, providing yet another reason energy efficiency does not add up.
  17. Kudos to Steve Hallett & The Efficiency Trap again, energy efficiency expands demand. The mission is to build the alternative.
  18. With every dime you spend prematurely on increasing efficiency of your fossil fuel system, you are postponing the transition to a renewable system. This is capital destruction.
  19. Successive steps of a well engineered renewable energy transition in a property will show interdependencies, which demonstrate an engineering reason why energy efficiency and renewable energy are mutually exclusive, on top of the financial reasons, unless they are properly planned and leverage each other so as to produce profound synergies.
  20. Many if not most NYSERDA programs are for the benefit of your favorite utility company, and/or manufacturers of equipment, at the expense of optimal asset value for property owners. You want to do your own financial model first before you use their programs to see what subsidies you could qualify for. The old adage applies: great financing can make a good project better, but it can never make a bad project good. Happy shiny sales people of energy solutions violate this rule all the time, such as when they ask you if you would like to see if you qualify for "free solar panels." Hold on to your wallet.
  21. Most NYSERDA programs as well as direct utility incentives bribe property owners to do what's good for the shareholders of the utility, and necessarily not what's in the best interest of the owners of the property.
  22. Most NYSERDA programs, ConEdison's Greenteam, and other similar programs with other utilities, are customer retention programs for the utility and have little or nothing to contribute to property values, nor are they green if they only target energy efficiency.
  23. Tax incentives, and financing requirements based on Energy Star ratings of equipment, tempt property owners to specify the wrong equipment for the sake of short term gain, and they make good design harder, not easier. These incentives need to be restated on the basis of GHG emissions, and/or water use reductions.
  24. Energy efficiency and Energy Star requirements for buildings are counter productive, GHG reductions should be used instead for law makers, and regulators, while property owners should maximize NPV based on a 30 year energy plan.
  25. Green financing is falling into the efficiency trap and makes the capital blunder of financing short term measures with long term money. It will lead to instability, and it is another underwriting crisis in the making.
  26. PACE bonds have become nearly irrelevant by embracing energy efficiency instead of renewable energy.
  27. Green Finance including PACE bonds could ensure above market rate appreciation of the underlying assets ONLY by mandating renewable infrastructure, never by energy efficiency requirements.
  28. All energy efficiency programs are a greenwash, because they achieve the opposite of what they set out to do, both environmentally, as well as financially.
  29. Energy efficiency programs are a rationalization for the good feeling of sacrificing something for the common good.
  30. Energy efficiency programs are another demonstration that logic and reason are the horse the emotions ride in on. The only satisfaction is emotional, nothing is being accomplished.
  31. The use of marginal analysis in the form of payback on equipment justified by energy savings is irrelevant to property owners, and only of interest to the sellers of that equipment. Caveat emptor applies here, for most retrofits have engineering interdependencies that may lock you out of other options, and you need to understand the holistic view of a long-term plan for your property first.
  32. Net zero is not necessarily the sole objective, but a direction. Again: energy independence of your property and even partial independence from the grid, ensures you won't be left stranded.
  33. Selling back to the grid can be avoided by implementing heat pumps, particularly high efficiency GSHP (ground source heat pumps - 500% efficient!), but also ASHP (air source heat pumps - 250% efficient).
  34. In renewable energy design, energy efficiency comes back in play and should be used to optimize installed capacity (ICap) requirements. Notice that if your energy is free, you can pick your capital tradeoff, if it is cheaper to install more capacity or insulate more. The bottom line is that in deep retrofits there is no payback period for efficiency alone, but the right use of passive measures and efficiency will reduce the overall payback of a project and make it easier to finance.
  35. Implementing renewables (SDRE), means shifting energy from liability to asset.
  36. Implementing renewables also means focusing on production, not reducing consumption as the predominant strategy.
  37. The renewable strategy means playing offense, not defense with energy.
  38. Net-zero and green construction is growing like mad in new project development, so existing homes are eventually headed for demolition and abandonment if they cannot come up with a renewable strategy. Search for net-zero and energy efficient homes, and you'll see what I mean.
  39. Energy efficiency is a bottomless pit that will keep you in the poor house if you fall into it. Stop now, and make a financial plan to switch to renewables wherever possible.
  40. Energy Efficiency is the addiction that covers up our energy addiction, so again it makes the problem bigger, not smaller. Energy is like methadone for heroin addicts: it makes the addiction manageable, but it is harder to kick.
  41. If you are a renter, Energy Star appliances and other Energy Efficient Products are your best friend. For renters marginal payback of the equipment from energy savings is appropriate.
  42. Whenever renewable energy is treated as a building block in energy efficiency, it will be undervalued and implemented incorrectly.
  43. Avoid net metering whenever you can, except in emergencies. Plan your design to capture and use as much energy as possible in your property.
  44. The 90by50 report from the Green building council is full of good ideas, but once again gets lost in the weeds of energy efficiency.
  45. Manhattan is a heat sink, but renewables will mean the outer boroughs can become far more attractive places to live, while Manhattan will become the energy slum, with a small number of exceptions to prove the rule.
  46. When buying a coop or a condo find out the energy plans, it will make at least a 10-20% difference in building values within 10 years.
  47. It is time for tenants associations to work with landlords, even to the point of mixed ownership of energy plant if nothing else will work. Community solar is such an idea. It is high time to get rid of the split incentive. There is room for innovation here.
  48. Write to your politicians to support the principles of the DaBx Renewable Energy Retrofit Portfolio Standard, and focus on subsidies for achieving reductions in GHG emissions, and try to get exemptions from all rules that stand in your way. Many well intended rules hold up the show because they are counter productive on a building level.
  49. Evaluate all technology options that are suitable for your property, not just one. Solar thermal DHW and/or HVAC as well as heat pumps should top your list.  They are mature technologies, wind energy is often superior if you have the right location. Solar PV comes last unless you have space to waste. Don't forget green roofs, and other passive energy strategies either.
  50. The reason they are giving away solar PV, is because it is your worst option, unless it fits your overall design and you have the space for it - which most residential owners don't. Solar PPAs are usually a really bad deal for almost all consumers. They are only better than doing nothing. Solar thermal yields up to 7 times the amount of energy per square foot.

Conclusion: renewable energy adds value

50 ways to leave energy efficiency behind, because it is a financial dead-end, the corollary to which is the phenomenon of The Efficiency Trap. Only renewable energy will offer rising property values, as well as dampen any loss of value in downturns, as was widely acknowledged by institutional investors during the downturn of 2008. Net-zero or near-zero properties are one of the best asset classes ever to own.

Thursday, December 1, 2016

What's Wrong With the Energy Retrofit Model and What To Do About It

Energy retrofitting will be a big business for the next few decades, for the simple reason that there are more old buildings than new. Granted, some buildings will be scrapped if they can't make it in the new net-zero and near-zero age, but many buildings are eminently capable of material overhauls that can eliminate 70-80% of GHG-emissions.

Premature Energy Efficiency:
The Best Prophylactic against Deep Energy Retrofits

The unfortunate fact is that the structure of various incentive programs as well as typical financing approaches have prevented deep retrofits and favored shallow programs that achieve just 20-30% GHG-reductions. A typical example was a deal sheet I recently saw from NYCEEC, effectively the New York City Green Bank: easily 80% of their projects were in the 20-30% GHG-reduction category, and just a few projects here and there were in the 70-80% GHG-reduction bracket. On their website, they focus almost entirely on marginal improvements in "energy efficiency," complete with their "Energiensee(tm)" calculator of energy savings potentential - therefore, the focus is on O&M, not on capital improvements. Yet, purely mathematically, in a state that has an objective of 50% GHG-reductions by 2030 and 80% GHG-reduction by 2050, clearly anything less than 50% GHG-reductions guarantees failure of the state's objectives, and the idea of providing incentives, including subsidized finance to do such deals is absurd on the face of it.

If you understand the economics of energy retrofits in buildings, it is clear that what is going on here is the clash between O&M (Operating and Maintenance), which tends to be on annual budgets, and Capital Budgeting. The structure of the real estate industry is that energy tends to be looked at through the lens of O&M, but there are now so many alternatives that represent structural change of building energy infrastructure, that these decisions need to be looked at as capital cases, and the investors/owners need to be involved. Long term building values are at stake. Capital improvement should be the driver for energy retrofits, and if you can't do them, you should probably get rid of the building, it's going to be scrapped.

Capital destruction results from an incremental O&M approach

Many, many, "upgrades" should not be done at all once you look at them through the lens of long term capital appreciation. That list includes:
  • Tankless Water heaters. They are mostly a mistake, for DHW (Domestic Hot Water) storage is immensely valuable for e.g. Solar thermal, or Heat Pumps, but sometimes even for Solar PV. There are some valid uses of these, as backup in renewable retrofits.
  • OTG (Oil-To-Gas) conversions, sure, you may save on your energy spending, but again, looked at from a capital budgeting standpoint, on a 30-50 year lifecycle timeline, these kinds of marginal improvements are usually pure capital destruction in the face of better alternatives such as hybrid solar thermal or heat pump solutions.
  • Condensing boilers are a liability if there is solar thermal or heat pumps in your future, because if the boilers become the backup the heat recovery systems rot out in record time due to condensation under intermittent use. In other words, incremental decision making creates massive sunk costs that undermine building values in the long run.
  • Solar PV. Especially at Northern latitudes solar PV retrofits are pure capital destruction in many if not most buildings when evaluated from a capital budgeting standpoint under a 30-50 year lifecycle assessment. Solar PV should be relegated to whatever space remains at the end of a retrofit process. It is too inefficient.

The Height of Folly: Tesla/SolarCity

Recently, I have been writing about Tesla and their SolarCity merger, which is the height of capital destruction. SolarCity never figured out the economic value they could provide for their retail customers, and their business model was driven by the demand of tax-equity finance and the Wall Street appetite for ABS-notes. It was clear that recent financings, starting at least from the John Hancock transaction earlier this year, meant that SolarCity was under water under those terms compared to the discounted cash flow model they sold to investors as being the "retained value" of the company, so they slipped from arguable "value creation" into "value destruction:" the installations were a loss leader for a fallacious "retained value" that is increasingly not working out, because it's only feasible by assuming lower discount rates on an equity basis than what they are actually paying on their recent deals, so that both the front end and the back end of their transactions is now under water.

This development was bad news for SolarCity shareholders, but the whole business model was bad for retail customers, for SolarCity sales people have an incentive to sell you the most solar panels they can fit on your roof, and NOT to add the most value to your property. And because their whole sales model is wrong, they are destroyers of asset values for their retail residential clients. This is the reason why they are not a Solar energy company, but a Solar panel financier (and not particularly good at it). SolarCity's unique contribution has been that they figured out a way to sell sub-prime financing to prime customers, for their sales proposal to clients rested on a foundation of stretching the payments long enough to be nominally "cash-flow positive" based on the projected energy savings, and the sales mottos were "free solar panels" and "sell'em on the payments!"

The easy test was the study from Arizona State University, and the conclusion was that:
Solar panels owned by a home seller add 4 to 6 percent to the value of a home sale, often less than the cost of the panels, according to an analysis of local home sales and reports from real-estate agents. Houses with leased solar panels actually sold for less than those with no solar. (see story on AZCentral)

However, Solar panels installed with a lease or PPA might deduct 3-8% of the value of the property at the time of sale, for it places the seller between a rock and a hard place, namely, they either have to pay off the lease, or they have to get the buyer to assume it, at which point the buyer can negotiate a discount on the property.

And again, there are deeper issues here as well, and the value of the SPV install might not be optimal if other parts of retrofitting are ignored. Typical experiences in existing homes suggest that you should most often only require 50% of the SPV capacity that sellers like SolarCity will offer, if you implement the optimal mix of passive measures, ranging from insulation, radiant heat barriers on windows, and power quality solutions. The decisions are easier if your home is all electric, but usually the payback can be 20-50% shorter if you pursue the optimal balance of passive (insulation, etc.) and active (generation).

I recapped a lot of these issues in two articles on Seeking Alpha, about the Tesla mess, here:

Energy Efficiency Versus Energy Retrofitting:
History Lessons

For good historical reasons, originally it all started with energy efficiency, squeezing more energy from systems, but gradually, structurally different solutions came into being, which enabled different financial decisions, for once you enter into retrofitting, there are lots of interdependencies within a given building, and you have to make a clear decision about what your upgrade path is going to  be since many of the technology choices are mutually exclusive with other possible solutions. Here's how it has worked:
  1. Phase one was pure O&M, lowering your bills year over year, which works initially, but in the end, you cannot save yourself rich, and this approach runs out of steam because of diminishing returns. The answer should have been capital budgeting, but instead financial slight of hand was used to "justify" further retrofits.
  2. Stretching the financing became the way to make bigger and bigger retrofit projects happen, and as a result, financiers were effectively stripping value out of buildings, and building owners did not know any better. The financiers win and property owners lose. Just watch for buildings in the Northeast with Solar PV: they were sold a bill of goods, as per the analysis above.
  3. We are now entering the capital budgeting phase, for the number of retrofit options have grown so much that a growing number of owners find out the hard way that incremental decision making produces capital destruction, and that a decision made one year ends up being undone a few years later. Typically failing to plan means planning to fail and in depth energy audits and thirty-year capital budgets must become the new normal.
The transition to the capital budgeting model will increasingly be precipitated by the emergence of more and more net-zero or near-zero buildings that go up right next door to older buildings so that economic competition will force the older buildings to either upgrade or be scrapped. 

The Key to Deep Retrofitting:
Holistic Approach and Value Creation 

Meanwhile, with my company, we are hard at work with the marketing of harmonic power filters that get rid of harmonic noise in power circuits, and while the payback is great, especially here in NY, where it's usually months, not years in most commercial applications, the real message is that in a deep energy retrofit, this technology alone can reduce the overall project payback by 20-50%. In other words, incremental "efficiency" retrofits should not be squandered by implementing them in isolation, but be viewed as part of the overall energy model, and enable building owners to undertake the retrofits that create true long-term property value. The magic is to add a sub one year payback to a project with a seven year payback, and create a project with a four year payback that's easy to finance.







Sunday, December 27, 2015

The economics of climate change, sustainablity, veganism, health and then some

"There is, however, a moral basis for the vegetarian diet for which the indeterminate value of an animal’s life takes on irrelevance. And that moral basis is a concern for the environment, a value as absolute as the value we all place on human life, since humanity will not long survive on a poisoned planet. To be an environmentalist who happens to eat meat is like being a philanthropist who doesn’t happen to give to charity."  (Mad Cowboy: Plain Truth from the Cattle Rancher Who Won't Eat Meat" by Howard F. Lyman, Glen Merzer")
Rational capital allocation is not our forte as a society. Indulging human foibles is more like it. The dialog about climate change is a case in point. If 51% of GHG-emissions is due to animal husbandry and the self-destructive habit of eating meat, and moreover the our nastiest health problems (heart disease, osteoporosis, cancer, CJD, antibiotic resistant bacteria et al.) are partially or wholly attributable to the same self-destructive habit, then why is it not on the agenda for serious discussion?

For me, there is a personal side to the story, I was raised vegetarian, as in lacto-vegetarian, and though I realized a long time ago that milk was for baby cows and not for human consumption, I loved cheese. From my late teens to my early twenties I became more of an omnivore, but after age forty, I simply noticed a tendency to vegetarianism, ever so slowly, but without any particularly strong commitment. I simply drifted towards a more vegetarian lifestyle. In the last ten years health issues made me gradually more and more interested, and I got briefly interested in the Esselstyn diet that was made famous when former President Bill Clinton switched from Mickey D's to veganism. The first time I read the Esselstyn book, I was half-hearted about it. An old friend and I were both experimenting with this diet for a while, and kept some ideas from it, without necessarily going through with it, but the drift continued, aided by the growing realization that even if I did not have any symptoms of hearth disease, why wait till I did? In the last two years all dairy was permanently phased out. For Christmas a giant apple-pie came along, and while I enjoyed it, I also informed Santa Claus that this would be my last apple-pie until after my funeral. Who needs all that white flour and sugar? Most importantly the last year especially, I found myself enjoying food more as I discovered more and more vegan recipes that I really liked.

Meanwhile I am into planning the energy economics for some real-estate developments, and looking into vertical agriculture options in an urban setting, while at the same time I am listening to feedback from my community, Community Board #9 in the Bronx, where a young mother of two stated0 in a recent planning session that she did not want another fast food restaurant in our district, and a young man in the same session was polling people on the idea of establishing a food co-op in our area. But a local supermarket just lost their lease, and that neighborhood is screaming for a half-way decent supermarket to fill the vacuum.

Against that personal backdrop, I have been reading Howard Lyman's Mad Cowboy book, and watching some documentaries on YouTube, including:
  • Cowspiracy, a brilliant documentary of our collective economical and environmental and nutritional insanity from 2014, which included an appearance by Howard Lyman, the Mad Cowboy.
  • Then came Earthlings, another brilliant piece on the gruesome realities of  the animal husbandry system.
  • Next was Gary Yourovsky, who verbalizes it all brilliantly, here, including the most viewed speech in Israeli history here.
  • And finally, I had to revisit the whole Howard Lyman story, which I was only vaguely aware of when Oprah and he got sued in 1996, but now it was time to refresh that experience, and this documentary about the Mad Cowboy just his the spot.
  • Since I first wrote this post, it got even better, see the story of the Rowdy Girl Sanctuary, yet another rancher to vegan story.
And at the final end it is the economist in me who basically realizes that economics will prevail in the end, and we are well on our way to veganism. It will take a few generations, but choices are multiplying now, with more and more vegan food choices, and now even fast food restaurants, it is clear that change is on the agenda. The group of people who turn vegan and get off their meds is growing - the perfect answer to our out of control healthcare system, so not only can the planet not afford animal husbandry, we cannot afford the health consequences of eating all that meat and dairy. I had a home visit from a nurse practitioner from my health insurance provider, and the guy fell of his chair, for just the week before the doctor had taken me off all meds, or rather confirmed that I was doing great without them - not that I was taking that many but still... On top of that, I know I feel more stamina at the gym.

One of the big things I am realizing about net-zero development is that moving combustion out of residential spaces is one of the biggest things we can do for indoor air quality, and this in turn adds to real estate values. Insights like that are pretty potent if you live in the asthma capital of the world, the Bronx. So there is a straightforward connection between economics, environment and health. 

The same goes for vertical agriculture: it is now economical to grow fresh vegetables in an urban setting, and eliminate chemical agriculture, and thousands of miles of transportation, to get better, fresher, healthier vegetables, as you can see in this little video from Terrashpere

And the transition to more and more vegan living will eliminate the most obvious food safety problems, a vast array of health problems, as well as unsustainable agriculture in the service of animal husbandry. Again, economics, environment and health all go hand in hand. And the forces that drives us towards a more sustainable economy are absolutely inexorable. Veganism is a new idea today, or so it seems to many, but it is unavoidable economically. We are literally at the point of realizing that we are feeding the pigs at the expense of human beings, and wiping out the rain forests to raise cattle, which is the most insane misuse of land that ever was. It is that inexorable force of economics and sustainability, that is driving us towards a more sustainable, and therefore increasingly vegan, lifestyle.

Since I originally wrote this post, I have also started a blog on vegan living in my hood.

Saturday, March 7, 2015

Solar PV and the Metastasis of GHG-emissions

Today, solar PV is all the rage. We're at it again, jumping on a technology before we have figured out the right way to use it. Wall street is loving it, but we are getting way ahead of ourselves... just remind me, how do we spell bubble again? As a society, it seems we keep looking for a silver bullet to fix our problem, and this is not realistic.
It does not matter that solar PV is "cheaper" in terms of component pricing. Solar thermal produces about five times the amount of energy for the same square area, so unless the cost of real estate is zero, solar thermal should be the winner in that battle. Granted, solar PV tends to be easier to integrate, but there is an obvious issue here, particularly in areas large urban areas, where you don't have one square inch to waste.
To use an analogy, if one year our government provides a tax incentive to sell more two-seater vehicles, and a father of five comes home with a two-seater instead of a family car, arguing that it was so cheap, most of us would side with the wife, if she divorced him. The five kids would have to take the bus from then on. Evidently, this would be a case of false economy, for it cannot solve your problem. How come we understand the fallacy of this proposition, yet in solar PV marketing, this is what is routinely done - selling people a solution that does not fit because it is "cheap." If in doubt, refer to the tax incentives.
Just like the two-seater cannot solve the transportation problem of a family of seven, solar PV panels cannot solve the energy problems of most homes and buildings in northern climes. In the south, it may work fine if your home is all electric, and you have enough roof space to economically generate adequate electricity, but in the north your energy bills are likely to be 70% oil and 30% electric, and yet the solar companies want you to jump up and down because they can save you 10% on your electric bills. That's the assumption anyway. It does not amount to the proverbial hill of beans, because 10% of your electric bill is 3% of your overall energy bills.
It actually gets worse, because the implicit assumption is that your roof space is valueless, which is likely not the case. If nothing else, that same roof space could be used for solar thermal equipment, which produces 4 to 5 times as much energy per square foot as does solar PV. Alternatively, one or more wind-turbines might be possible, and in all of these situations, it is one or the other, so you have to figure out what gives you the most bang for the buck.

Entropy and Climate Change

One of the first few things to realize about the whole climate change conundrum is that it is not solvable. The best we may be able to do is produce less entropy, and decelerate the decline of our physical universe. But in the end it's a lost cause, or, as Keynes would have it: "In the long run, we're all dead." The case in point is the Toyota Prius, which has a lifecycle environemental impact that is worse than a Hummer. So dream on.
For those who want to get into the final nitty-gritty of the issues, there is no better introduction that Alex Marchand's new book, The Universe is Virtual. Unless and until someone comes up with a better alternative to the second law of thermodynamics, the choices are limited, but right at the moment, the process is outright irrational, and we may be able to do better than we are. Again, the only thing we can do on the physical level, is to moderate the impact we are having, the problem is not solvable in any meaningful way as long as the laws of physics hold. If you want to stick to lighter fare, Jeremy Rifkin's, Entropy, is still always a fun read, although a bit dated.

The solar PV fallacy, oh to be green and foolish

These days the FTC has taken on greenwashing, and hopefully may be curbing some of the most egregious abuses, but if they got serious, very little of environmental business or products would be left standing, and certainly solar PV in its current form would have to be heavily restricted for the deceptive claims it makes.
What needs to be understood is that if we define the problem haphazardly, we are unlikely to solve the problem that we are presumably seeking to solve, in this case, reducing green house gases (GHG-emissions). To the promoters of solar PV, the problems is how much money can we make on selling solar PV installations (very little), or on financing solar PV (maybe something more), time will tell if it can be done profitably, but the current model of solar PPAs, solar leases, or even innovative lending like SolarCity's new MyPower program, will likely not be enough to make solar PV really viable in the long run.

At single family scale - Solar PV disappoints

The exception is if you live down south and you have enough roof real estate to generate close to all the electricity you really want, perhaps solar PV makes sense. But up north the problem remains that electricity is 20-30% of the energy budget, and tying up all your money and roof real estate for a project that saves you a few percentage points on your overall energy bills, and locks you out of solving the whole problem categorically is not a smart decision.
The current sales paradigm for solar PV mistakes a marginal cost savings for the basis of a capital improvement to the property, and a permanent alteration of its energy infrastructure. The result is an impairment of the physical asset (property) and the balance sheet (liability), and the simple most obvious problem is that if the next buyer does not want to assume the remaining liability, it can depress the value of a property, as reported by Bloomberg here. Typically the risks include:
  • The lease or PPA may be under water at the time of the sale.
  • Newer solar technology may be more efficient.
  • Other technological alternatives offer superior economics.
If you are still in doubt, look at alternatives that are about to hit the market, like the Archimedes wind-turbine, and the Zonbak solar thermal solution, as well as a long-since proven solution of Geothermal Heat Pumps, which allows you to do complete central HVAC, heat your pool, and put a snowmelt in your driveway, while eliminating your oil bills.
One of the issues is that solar PV is still early in its developments, while Solar Thermal (85-95% efficiency), and geothermal (3-600% efficiency) are much higher, and mature, and wind turbines, in the right locations produce more energy per square area than solar PV does. Solar PV is now going from 15-18% efficiency and jumping by about 30% to 21-24% efficincies, while new technologies in the 30% and 40% efficiency ranges are in the pipeline for commercialization in the future.
Worse yet, as net-zero construction is growing and consistently profitable already for decades, just imagine selling your home 7 years from now when there is a new development of net-zero homes going up nearby. If those new homes offer $0 energy bills, and you are saving 3 or 5, or even 10% off your 2015 bill, what do you think that will do for the value of your property? The correct answer is: it will sell at a discount. Your investment in PV under those conditions is likely to produce a liability. You will be looking for ways to take those panels down in order not to depress the price of the house, and then you have a waste disposal problem on your hands.

At societal scale - Solar PV disappoints again

New York State has an ambitious energy plan, but it sadly lacks realism. The top-line goals are 50% reductions in GHG-emissions by 2030, and 80% by 2050, but there is very little detail on how to get there. Too many line items in the plan achieve 15-25% reductions in GHG-emissions, and are financially burdensome like solar PV. To tie up a lot of capital, and assume unnecessary 20-30 year liabilities to save 3% on your energy bills, and lock yourself permanently out of better alternatives is counter productive. We are throwing good money after bad, and mostly it is consumers who are on the hook, deceived by government incentive programs.
This first round of Solar PV-madness will prove to be regressive for climate change in the long run, because it locks properties into 25% reduction of GHG-emissions, instead of pursuing the 75%, which would make a difference. So, not only are these owners locking themselves out of the real solution, the collective effect is that we are averaging down, and ensuring we will never achieve anything like 50% GHG-reductions by 2030 or 80% by 2050.
With the current approach GHG emission reduction will be limited to something in the 20-30% range with solar PV and some energy efficiency, and GHG-emissions will metastasize into an unsolvable problem, so present programs guarantee we will never make those glorious goals of 50by30 and 80by50. It sounded good while it lasted.

It's not those batteries either - thermal batteries are free

Remember the jokes about the Fisher ballpoint that could write upside down, and cost a million dollars to develop? Presumably the Russians used pencils instead. The truth is the Russians switched to Space-pens also. The point is clear however. We humans have a terrible tendency to reinvent the wheel.
In energy solutions for buildings, thermal solutions come in the form of passive design as well as active generating technologies such as solar thermal and geothermal. Batteries are cheap: it is also known as Domestic Hot Water, or depending on the application you can have some high temperature water storage. Overall, this is far cheaper and safer than the chemical batteries that are the norm for Solar PV.

Conclusion: time for method over myth

We have had the Internet bubble, and the subprime mortgage bubble, but now we have the budding distributed solar PV bubble. Some of the same people are promoting it, for the securitization machine was looking for work after the bust of subprime. Once rational analysis gains the upper hand--which may take a long time--this bubble of solar subprime will also burst, and it won't be pretty.
Having said that, there are plenty of good applications for Solar PV, but the mass market that is currently forecast will dry up sooner than later. Serious GHG emission reduction will have to wait until the Solar PV-mania gives way to a more methodical approach using Solar thermal, and other solutions, providing a whole-house solution, not a 3% savings on your bills.

Tuesday, December 9, 2014

Energy Efficiency Exposed

Blissfully, even the New York Times is starting to let some light in on one of the biggest consumer frauds in history, energy efficiency. With an opinion piece, The Problem With Energy Efficiency, by 
Energy Efficiency as it is promoted today, is a consumer fraud, it is a way of selling energy efficient products without the guilt.  The Energy Star program is the cheerleader for this misdirection, for it encourages incremental fixes, not radical solutions. There is not really any perpetrator other than the collective public delusion that energy efficiency will somehow magically bail us out, but the short-term beneficiaries are the utility industry, and the manufacturers of energy efficiency technologies, and property owners are paying the economic penalty for failing to do the economics of their energy decisions properly. The presumed benefit of energy efficiency is an unexamined assumption that seems sensible, but does not work in practice. Yet there is mathematical certainty that it cannot, because it is a limit function, which MUST produce  diminishing returns, as I have extensively documented on this blog.
The fundamental deceit which underlies the mistake is the labeling of energy efficiency as "green," and conflating it with renewable energy, and further to train clueless property owners to pursue energy efficiency on an incremental basis, as though it were additive, which it is not, because of the problem of diminishing returns, so it becomes a permanent money drain. This energy efficiency-driven approach amounts to a greenwash of carbon energy, and keeps us hooked. The result has been a massive market failure, and significant capital destruction. To this day, government is encouraging this pattern of helter-skelter spending on efficiency, which diverts resources from potentially productive investment in worthwhile projects that build value for investors. The beneficiaries of this confused guidance have been the utilities and energy companies. Current government programs are very successful if the goal were to save energy companies and utilities.

Environmental and Economical Fraud: Energy Efficiency

Fortunately, there are a growing number of critical voices who have taken to uncovering the misleading claims of energy efficiency, and hopefully to put us on the track to productive investment.
  1.  First there is Steve Hallet's excellent book, The Efficiency Trap, which argues the case on a parallel to over specialization in nature. Clearly if the problem is over-dependence on carbon-based energy systems, it is not merely like the Jevons paradox, that there is blowback, in the sense that increased efficiency reduces the cost of energy and thus raises demand. There is a deeper effect of throwing good money after bad, which is ridiculous at a time when renewable technologies are becoming easily cost competitive on the margin.
  2. Then there is David Owen's The Conundrum,  which deconstructs all our thinking about energy, and debunking solutions which make the problems worse.  It exposes the fallacies of energy efficiency and alternative energy on a deeper level.
These two books here are eye-opening, and will make sure that you never look at energy efficiency or even some of the renewable energy discussions the same way. This is the place to start to sort out the chaff from the wheat and learn to think for yourself about energy solutions.

Energy Investment, not Energy Savings

My focus continues to be on the viewpoint of the individual property owner, in terms of how to create maximum value from renewable energy retrofits. The only meaningful way to evaluate the issue is to look at your property value, and how you can increase it by going renewable. There are people who want to live net zero out of social responsibility, or religious conviction, but that is not interesting to me. It is interesting to me only when it is done on the basis of sound economics.
The trap we are falling into as a society is that typical programs we now have benefit either the utilities, the energy companies, or the manufacturers of e.g. solar panels. No program is looking at it from the standpoint of the economics of the property owner, and that is the only possibly meaningful way of approaching the issue. And, in many cases you will find that, with the right analysis, there is a hell of a lot that can be done, for energy is a big part of your running cost in a house.

Energy Efficiency done right

The right energy efficiency definition would make it clear that you first need to decide what your energy system should be, or you risk throwing good money after bad, and making your bad system more efficient, which is what happens a lot today. In other words, if it is done right, you would first implement renewable energy wherever it is economical and make the whole system as efficient as possible.
If you're spending $1,000/mo on energy, and you can eliminate 75% of that bill with a renewable energy retrofit that is $9,000 annualy in cash available to finance your conversion. And when you do make the changeover, you now have a permanent hedge against energy price increases, and mostly renewable technology has lower maintenance costs than fossil fuel burning equipment does. Most importantly, as part of your life-cycle planning for your property, you would consider ALL renewable energy technologies and prioritize them according to the highest yield, which today looks approximately as follows:
  1. Solar Thermal energy 85-95% efficiency.
  2. Geothermal 400% efficiency (it consumes electricity to run, but you might be able to generate your own.)
  3. Wind energy gives more bang for the buck in the right location than does solar PV, certainly when considering the footprint, so per square foot of space the yield is much greater than Solar PV.
  4. Solar PV, with efficiencies currently going from the high teens to the low 20s.
  5. Various passive thermal measures, insulation, glazing, thermal storage, and so on will complement the picture.
The currently prevailing paradigm is one of incremental "energy savings," and as a result people never treat these decisions as investments, but they serially fritter away the money, and the more 'efficient' they get, the more the power company is ensured of retaining their business. This is one good reason why power companies are happy to finance these efficiency programs.
We need to shift our focus to investing in energy, not merely saving energy, and for that we need always to have a 30 year energy plan, which includes life-cycle planning for all major componentry, such as boilers, and a/c plant. We need to realize that thermal technologies, both active and passive, are often not as easy on a retrofit basis, but if you can do it, they give the most bang for the buck.
Under the incremental approach, people buy e.g. solar panels and they save 10% on 30% of their energy usage, so they lowered their bills by 3%. The same amount of roof space, if it were used for a solar thermal system, could eliminate 70, 80, or even 90% of the energy bills, particularly if it is combined with passive thermal solutions.

Conclusion

Energy Efficiency and energy savings sounds good but they are the wrong approach for long term asset values, especially when they are done on an incremental basis, and without a plan. They are a greenwash of carbon-energy.
Investment in permanent energy infrastructure to improve asset values is focused on creating the maximal increase in your property value with a renewable energy retrofit and energy efficiency, instead of a greenwash of carbon-energy with energy efficiency alone.

Saturday, July 26, 2014

EPA Energy Star Home Energy Yardstick: a dangerous toy

Recently I explored the EPA's Energy Star Home Energy Yardstick to see if it could help some people get a handle on their home energy problems, and the conclusion is it offers a few useful features, but mostly it is detrimental to your financial health. In some ways it really is worse than useless, for financially it will with certainty steer people completely wrong.
Home Energy Yardstick will give you some useful information, by showing you where your home is on a relative scale of energy efficiency, and therefore the potential for improvement. It might give you some ideas of what to look for, but it does nothing to help you sort through the economic priorities of how to create an optimal energy retrofit for your property. That failure sets people up to go about upgrading their property in totally helter-skelter fashion, and lose tons of money in the process.
One of the periodic criticisms of the Energy Star® program has been that it's being abused by vendors, by misreporting the performance of products in order to get the qualification. That is bad enough, but the Home Energy Yardstick program systematically steers people the wrong way, and lacks critically important features that could make it useful, specifically:
  • It focuses on energy efficiency, which tends to lead to a decision path of least cost incremental energy savings, which produces diminishing returns and is a financial death trap.
  • It focuses on widgets, not on plans, and it focuses on costs, not value.
  • It does not capture the holistic, "systems" view of the problem and the potential solutions. The problem and the solution are 4-dimensional, not three. It should be mandatory first to create a 30 year NPV calculation to analyze the value of various energy improvements from an investment standpoint.
The unintended consequence of the model that this program effectively  fosters an unwitting collusion of equipment vendors, energy companies and finance companies, all using this information against property owners, and in the process they are stripping equity from property owners, by ensuring completely suboptimal outcomes from an energy and environmental standpoint. If guaranteed failure were the mission, this would be the way to do it.
Energy Star is a sort of "Good Housekeeping" seal of approval for a sales program of any number of energy efficiency products and services that provide partial "solutions" but never add up to a solution for the real problem, except they'll keep the property owner paying forever, and allow politicians to always claim progress, while they can rest comfortably in the knowledge that we'll never get there, so next year they can still claim the same thing, ad infinitum, while consumer spend themselves silly on "Energy Star" products. Energy efficiency is one of those feel good ideas that is accepted without further examination, but falls apart if you ever take a serious look at it, for it makes the problem worse, not better.

Widgets over systems

By focusing on widgets over systems and plans, the illusion is created that you can just "buy" energy efficiency on an incremental basis,  as an add-on, without any plan. You give daddy an Energy Star rated shaver for Xmas, and ma gets an energy star rated hair dryer, and soon all will be well, except it does not work that way.
As in any crime, you look for means, opportunity and motive, and in this case, various vendors of energy efficiency related products and services need a gullible public that keeps on buying their bunkum. Energy companies use incentives to retain customers in order to serve their shareholders well. Finance companies live from commissions on the loans they write, so more sales is better, never mind if it makes financial sense for the property owners. Meanwhile, mathematically energy efficiency is a death trap because of diminishing returns.
The only thing that makes sense from an investment point of view, and needs to have priority in any retrofit plan is maximal Site Derived Renewable Energy (SDRE). SDRE alone materially reduces GHG-emissions, and adds value if it can be financed from energy savings well within its economic life, so that the property owner (investor) enjoys the benefit of a long tail of no energy bills.

Your Energy Star credit card

Various supposedly "green" finance programs make things worse. They propose typically "self-liquidating" financing, preferably with "no money down," to lure you in. The vendors of efficiency equipment have refined their marketing pitches to a fine art, to focus on sales that are easy and frictionless, and can be justified by "energy savings,"
so they pick high value projects first. "Self-liquidating" and "zero money down," are the catch phrases, which should warn you of incoming torpedoes.
PACE financing is still in some sort of limbo, and it should be as long as it is abused for the purpose of financing energy efficiency, if far more valuable SDRE projects are available.

Your energy company to the rescue

It is in the nature of energy companies that they make money by selling more energy, To them "energy efficiency" is something that helps them retain customers, moreover our society seems to tolerate a "greenwash," as if "energy efficiency" of a fossil fuel system is "green," even though the opposite is true. Where is the FTC when you need them? Many if not most energy companies have programs to help their customers become more energy-efficient, and energy providers are happy to offer you financial incentives, in order to retain you as a customer longer.
One of the more hopeful initiatives is the enabling of co-investments of energy companies with customers, which could help with SDRE projects. When done wisely, energy companies can make a return two ways: in financial terms, and in improved utilization of their assets. In NY the public service commission is now looking into this under the REV initiative. That double payoff should facilitate a reasonable deal being offered to consumers.

Where's the plan?

A building, a home, any property is a system, and moreover it is a four-dimensional system - it lives for decades. It contains mechanical systems that may need replacing at several points during its life span. Roofs may need to be replaced, windows added, and siding replaced, insulation added, etc.
Only renewable energy (SDRE) will materially reduce GHG-emissions, but it will also replace energy bills... it will move energy from liabilities to assets, and in many, many cases you will end up with a capital improvement that is paid for in under 10 years, but eliminates a big portion of your energy bills for 30 years (or more).
Thus there are two dimensions to an energy plan for a property:
  • one is about the source of the energy, which is a make or buy decision, i.e. generate your own energy with SDRE, or buy your energy (electric, gas, oil).
  • the second part is about passive measures, and energy efficiency. It should be noted that many decisions in this area will be different if you use more SDRE vs. fossil fuels. The fossil fuel path and the SDRE path are not interchangeable, which makes it imperative to plan ahead, lest you design yourself into a corner.
In short, a long-term energy plan is needed for two reasons, one because there are engineering interdependencies, that will impact on your decisions, and two is to truly understand the economic value you are creating on a life-cycle basis. These decisions have an effect for sometimes 20-30 years, and ultimately the life of the property. That tankless hot water heater may be a great idea if your only option is heating with oil, but if you can do geothermal or solar thermal, you need a domestic hot water store to harvest energy, and that same tankless hot water heater would be a horrible waste of money.

The emperor's new clothes, energy efficiency?

The pursuit of "energy efficiency" means that you do not think about the long-term energy strategy for your property, but you plunge in and start making what you already have more efficient, which means you may be throwing good money after bad, if in fact there were economical options of switching a good part of your energy requirements to renewable on-site generation.
In principle, if this approach were valid, you would proceed in the way of least cost/most benefit, and simply do the highest return projects first. This fails because of diminishing returns, and it fails again, because you may be designing yourself into a corner if you lock yourself out of some of the most valuable projects, but don't realize it, because you started from the wrong premise and without a plan.

Whole house, holistic energy planning

When you start looking at your property as a system, and start looking at the long-term issue of energy, your first stop should be a financial model of the situation, for the default model should be that you want to switch to renewables as much as possible, while financing it with the energy costs you displace, and helped with any applicable incentives, tax abatements, etc.
A good energy audit will give you your options, and the Home Energy Yard Stick may give you a hint for where to look. However, you don't want to fall prey to the vendors who will all pitch you on their systems, and never do you want to get yourself locked in to any vendor just because they do a "free" energy audit.
The basic framework becomes how to add the most value to your property. This is very different from the lowest cost approach of energy efficiency. The long-term value of your property should guide your decisions.

Conclusion: SDRE should come first

Energy Efficiency does not exist in isolation, but only in the context of the chosen generating technology: fossil fuels or on-site renewable energy, and the Home Energy Yardstick does not help sorting this out, which can lead to costly mistakes.
SDRE is first priority when we pursue property value adding strategies, energy efficiency is only complementary, and the Energy Star rating system detract the attention to components instead of the whole property.

Tuesday, May 20, 2014

What Energy Efficiency Said to Renewable Energy

The tortoise of energy efficiency (EE) always makes sure that we never get more than half-way there, and tries to convince Achilles that by the time he catches up, the tortoise will be ahead again, and he'll never win, when in fact the reverse is the case. Renewable energy (RE) in the broadest sense is Achilles, who only by fallacious logic could fail to outrun the tortoise of energy efficiency. The truth is, only renewable energy can reduce GHG-emissions in a permanent way, EE creates at best a temporary reduction, at the cost of extending the use, thereby ensuring an overall increase, wherever renewable energy would have been an option. Notice how politicians like to claim we're half-way there towards some climate change objective, and at the same time they endorse policies (energy efficiency), which positively guarantee that "half-way there" is as far as we will ever get.
As noted in my comments on the Draft 2014 NYS energy plan,  if we want to achieve 50% GHG-reductions by 2030, let alone 80% reductions by 2050, we cannot afford to do a single project that does not at least get us a 50% GHG reduction. To continue doing "energy efficiency" projects will allow the tortoise of energy efficiency to waste Achilles' time with his logical conundrums. Projects that reduce GHGs by 15-25% are the norm in energy efficiency land and won't cut it. Every single project has to produce over 50% GHG-reduction, and that means that aside from the analytical problems of energy efficiency as an end in itself, we are now entering a time when we simply cannot afford to bother with it anymore, and serious investment in renewable energy should begin.

Lewis Carroll and Energy Efficiency

In short, it's very much like Lewis Carroll's story, What the Tortoise said to Achilles, the only way for the tortoise to win against Achilles is by keeping him wrapped around the axle with philosophical paradoxes, going all the way back to Zeno's paradox. The tortoise argues Achilles can never catch up. The same logic drives the adoption of energy efficiency as policy. It makes no sense, but everyone believes we'll always be halfway there before renewable energy catches up. Except we'll never get beyond halfway there.

George Orwell and Energy Efficiency

It gets truly Orwellian when we get to newspeak like "the Fifth Fuel" (Amory Lovins), and "Negawatts," and to top it all off the  energy efficiency "Ministry of Truth" is the EDF's "Investor Confidence Project." Their masthead says: "Enabling Markets for Energy Efficiency Investment," and a little further on they claim they want to deliver "investor ready energy efficiency projects," a complete non-sequitur. Like any other confidence man, it all starts with some variation of: "I'll be very honest with you." And nobody seems to notice that the only reason for all these extra assurances about proper "energy efficiency" projects, is the fact that it is not at all an investable asset, for the simple reason of diminishing returns. So never mind how many bells and whistles you add in order to provide "investor confidence," anyone who understands the basic financial/economic reasons for diminishing returns on investments in "energy efficiency" would run for the hills.
Obviously, if you own the plant or the building, you want to run it as efficiently as possible, regardless if it runs on fossil fuels or on renewable energy, but that is an operational savings, not a capital investment, unless it is part of the original installation. Energy efficiency, in spite of popular myth and various rationalizations, does not generate electricity, and it is not--in its own right--an investable asset, in spite of all rationalizations to the contrary. Yet a whole industry has grown up around this fallacy. This is the sub-prime sector of the environmental business.

Incrementalism and energy efficiency

Along with the thinking of "energy savings" comes the financial fallacy of the payback period of the equipment based on marginal energy savings, which is a meaningless approach since the only thing that matters is how the equipment adds value to your building, which may be quite a different issue if you take all factors into account. This whole mistaken logic is reinforced by programs like Energy Star, and widget-level incentives.
The incremental approach of energy efficiency and "energy savings" is a paradise for the sellers of widgets, for property owners end up spending money like drunken sailors and the model guarantees they'll never get there. This is not investment, this is squandering money on a losing proposition in the strictest mathematical sense: diminishing returns. Energy efficiency spending always starts out with some window caulking, and some screwy light bulbs, and progresses to bigger and bigger projects, until finally it culminates in the latest absurdity, the solar PPA.
In the end, the energy efficiency approach leads to a dead-end and then property owners become desperate enough to try some solar PV and "save" a bit on electricity. It seems to be the lowest cost renewable option. Here in the North East, the proportions of electricity to heat & hot water might be in the range of 30% versus 70%, and property owners are now backed into a corner where saving 10% on those 30%, which is their electrical bill, seems like a good deal. In short, they will pay good money to lower their energy bills by 3%. If they do get a PPA, they'll be paying for it for 20 years, and not only that they will give up most of their usable roof space, without realizing that if they had done a proper plan, they might have gotten a solar thermal installation instead, which could have wiped out most of their heating/cooling and hot water, and reduced their electrical bills at the same time. Solar thermal gives you 5 to 8 times more energy per square area than solar PV.

"Green Finance," wolf in sheep's clothing

If the business of finance is: Who has equity that we can steal today? Then "green finance" is a winner. It delivers extortionate finance solutions under the beneficent guise of  being "green." Currently, what goes for "green" finance is Asset Backed Lending on the basis of marginal energy savings, and therefore it drives least cost quick payback equipment sales. The commercial pressure is for solutions that can be offered on this basis as "self-liquidating" propositions.
The net result of this is cherry picking of the clean energy retrofit potential of a property. If you were to look at a whole property, the process of converting to renewable energy is only profitable if it is undertaken as a comprehensive retrofit plan. If the property has been cannibalized by various partial "energy efficiency" solutions, this will undermine a renewable energy retrofit in several ways. It will undermine liquidity, and financial carrying capacity of the property, and from an engineering point of view, ill-conceived partial solutions are likely to get in the way of a more profound clean energy retrofit. Write-offs will result, and this is how the tortoise would win against Achilles. The incrementalism of energy efficiency derails the real solutions of renewable energy.

Profitable Renewable Energy Retrofits

Once you look at properties as an energy investment, it is immediately clear that on-site clean energy generation moves energy from liabilities to assets. Furthermore, if you can integrate multiple technologies in a property, very often legitimate synergies can be accomplished which offer compound returns. In terms of payback, it may mean that two components which by themselves have 7 and 8 year paybacks, suddenly combine to offer a 6 year payback. For example, geothermal heat pumps offer 400% efficiency because they extract free BTUs from the subsoil by heat exchange, but they require some electricity to run. But if you can generate your own electricity with wind, sun or water, you suddenly have a virtuous circle, including storage in the form of pre-heated hot water. These compound returns with renewable energy make it a proper investment, as opposed to the diminishing returns of energy efficiency.

Regressive non-profits in renewable energy

Sadly, the non-profit sector which should be leading the way, is mostly regressive, with NRDC and EDF completely buying into the usurpation of the green objectives by energy efficiency, and oblivious to the fact that they have made themselves into a customer retention program for the fossil fuel industry. The Sierra club is only marginally better, hawking solar leases or PPAs, which are soon to be the sub-prime scandal of the green business.
And then there's always Property Assessed Clean Energy (PACE), which is a smart way to finance the big capital bulge of renewable energy conversions, but the movement has been completely hi-jacked by the energy efficiency cult. This results in the classical problem of financing short term fixes with long term money, but it gets worse, because in its confrontation with the GSEs the PACE camp, barely snatched defeat from the jaws of victory, by hitching their case to energy efficiency, which misses the central point of PACE, namely that with an on-site clean energy retrofit, you are moving energy from liabilities to assets, and therefore this type of an investment permanently raises property values. And of course you'll do it as efficiently as possible, but that's entirely secondary. The decision is always between fossil fuels and renewables.

Renewable energy retrofits and Green Underwriting 2.0

Only renewable energy can permanently displace fossil fuels, and energy efficiency is a stalling tactic. For evident reasons, we must shift towards more renewable energy retrofits. That's where the great GHG-reductions are, and that's also where asset appreciation is, thus the economic justification, and the legitimate finance opportunity in which the asset appreciation accrues to its owners, instead of being ripped off by the financiers, as in the case of energy efficiency "investments," which benefits widget manufacturers and energy companies, not property owners. Green finance needs to grow up.
What will tie it all together is a proper green underwriting standard, which incorporates a target of at least 50% GHG-reduction, along with the correct economic analysis of a whole property from the standpoint of make-or-buy (energy), and focused on asset appreciation by generating as much onsite renewable energy as possible, energy efficiency should bring up the rear.