Nearly 70 people joined Senator Al Franken and CERTs at Minnesota West Community and Technical College in Worthington on April 2, 2012 to learn about financing tools and opportunities that are currently available to local governments and business leaders, and connect with one another.
Kicking off the event, Senator Franken emphasized the importance of retrofitting public buildings for creating local clean energy jobs and saving energy: “[Retrofitting] is about creating incredibly comfortable work environments, improving quality of life, putting people back to work, lowering our carbon footprint, having economic choice, and adding to our bottom line.” “It’s a win, win, win, win, and maybe some wind in there,” joked Senator Franken.
Utility providers also benefit from these programs as the participants help utilities meet their energy efficiency requirements of 20% energy reduction in Minnesota by the year 2020.
State of Minnesota Programs:
Peter Berger and Eric Rehm of Minnesota Department of Commerce, Division of Energy Resources then presented a “Public Sector Toolbox” including three opportunities.
- First, Berger outlined the State’s Guaranteed Energy Savings Program (GESP), which was created to help both the public and private sector make energy efficiency improvements to their facilities. GESP is appropriate for older buildings, system replacements, deep energy efficiency retrofits, and addresses deferred maintenance and infrastructure to improve existing systems.
- Second, he outlined Public Building Enhanced Energy Efficiency Program (PBEEEP—think Road Runner!). PBEEEP can help which was created to help state agencies, local units of government, and school districts with building tune-ups and newer building commissioning lighting.
- Rehm presented the third tool: Buildings, Benchmarks, and Beyond (B3), a database tool that helps public facilities track and manage their energy use. B3 allows local governments to compare other similar public buildings, while identifying energy savings potential and showing trends in energy consumption. B3 is required for PBEEEP.
Working with Energy Service Companies:
Ben Glynn of Johnson Controls and Madonna Rykken of Honeywell Inc—both with the Energy Services Coalition, Minnesota Chapter—then presented opportunities for public and private sectors with Energy Savings Performance Contracting with Energy Service Companies (ESCOs).
Benefits derived from these programs include guaranteed energy savings, reduced energy consumption, infrastructure renewal, job creation and reduced greenhouse gas emissions. Glynn explained that these benefits can be achieved on a budget neutral basis, with financing to complete the project coming from grants and rebates. “Reallocate the money you spend, by changing the way you spend it,” he said.
Rykken compared traditional Bid/Spec purchasing and Performance Based financing. By working with the local contractors to implement target savings goals, projects are funded by existing costs/savings. This comprehensive approach allows a maximum 20 year payback, no upfront fees, and guaranteed savings: based on projects and weather.
Property-Assessed Clean Energy:
After questions and discussion from attendees, and then a break including cookies, coffee, and much networking, Lynn Hinkle with Minnesota Solar Energy Industries Association (MnSEIA) gave a presentation on Property-Assessed Clean Energy, or PACE, a financing tool that cities and businesses can use to promote job retention and creation, save energy costs for businesses, and improve the tax base of the community. Using the PACE program, business owners are able to invest in deeper energy efficiency and renewable energy improvements for their business, without taking on debt or up-front costs by financing the investments with the energy saved/generated with those improvements as a property tax—special assessment, and make repayment to the local government (the PACE Program Administrator) over the duration of the repayment period.
Commercial-sector PACE is attractive to lenders and to building owners because there are no upfront costs, it improves cash-flow, and has savings-only repayment, while creating jobs in the private sector. The key provisions of PACE include property secured financing, senior lien status of financing, transferability of lien (payments of taxes that have gone delinquent), opt in voluntarily, authorizes local units of governments to issue revenue bonds. Hinkle also explained that PACE doesn’t require a single owner: multiple projects can be aggregated to provide improvement financing.
Local government acts as a conduit for funding bonds to financers and property owners, explained Hinkle. Hinkle outlined 3 phases of market-driven PACE:
- Organize up to $1 million of local retrofit projects
- Owner contractor arranges project financing as a privately placed revenue bond
- The municipality markets and administers the program, and aggregates PACE projects for revenue bonds issued for public good
PACE allows support for lenders through improved cashflow for owners to pay mortgage. And it improves the marketability of the mortgagee’s asset as the first lien on financing is imminent.
Challenges may include:
- Legal and administrative set up costs are relatively fixed
- May not be appropriate for cities or single projects as scale is needed to reduce transaction costs
- Mortgage lenders question their second place on mortgage in the event of a foreclosure.
In Minnesota, Region 5 in the central region of the state, Hibbing and other cities on the Iron Range, and St. Cloud, are all considering PACE, added Katherine Blauvelt, Field Director of Senator Franken’s office. Jay Trusty, Executive Director of the Southwest Regional Development Commission, responded to a question saying, “There is a need for a market for bonds. So it’s essential that the public and private sectors work together.”
Utility Perspectives:
After the discussion on PACE, Scott Hain of Worthington Public Utilities and Jake Selseth of Great River Energy (GRE) presented some of the resources that local utilities offer for retrofits. GRE offers Custom Energy Grants and opportunities for agriculture-based businesses. GRE also offers rebates for lighting retrofits and new construction. Referencing utilities’ Conservation Improvement Plans, Selseth noted, “Energy efficiency is the first energy fuel: it’s easier to save energy than it is to generate energy.” Hain explained how Worthington Public Utilities’ programs assist public/private sector customers to retrofit existing buildings to become more energy efficient. Previous projects have included local schools, Minnesota West, with $150K for largest project, as well as supporting ESCOs working with customers.
Examples of previous projects include lighting retrofits and incentives for new construction, such as: HyVee grocery, YMCA Heating/cooling systems, local motels changing out cooling systems, variable frequency pumps, air compressors leak detection surveys, night control for exposed coolers, food service support, targeted audits for schools and city owned buildings at 50% cost share, for projects implemented within 2 years cover second 50% of audit cost. Worthington Public Utilities offers rebates for residential users on energy efficient washing machines and dishwashers with decreased water consumption rates. Missouri River has similar programs and rebates to Worthington Public Utilities.
Key Take-Aways:
Annette “Netty” Bair, Southwest CERT Coordinator and SRDC Physical Development Director, wrapped up the event, reminding attendees of resources and available opportunities with the following “Take Aways”:
- GESP: Building retrofits, where there is deferred maintenance. Both Public and Private. Benchmarking is recommended. Public could use B3. ESCO’s could do the benchmarking to provide the baseline as a tool to select opportunities.
- PBEEEP: Building tune-ups for ublic entities (City, County, Public school districts and State Agencies), B3 Required.
- B3: Benchmarking to understand energy use in public buildings. Resources to assist local governments in entering data into B3 could include:
- Sarah Steinman, Minnesota GreenCorps Member, is available to help cities enter their data into the B3 database
- Retired Engineer Technical Assistance Program, or RE-TAP
- Volunteers/Community Service projects: RSVP, students, YES! Teams, and Scouts
- PACE: Requires both the demand from the business / commercial sector and the willingness of the Public sector. Need to work together to determine if there is a demand to develop a PACE Program.
- How can these programs be successful? Reallocate the money you spend by changing the way you spend it.
Download presentations from the event:
- Minnesota Local Government Building Retrofit Programs – Peter Berger and Eric Rehm, Div. of Energy Resources
- Energy Savings Performance Contracting – Madonna Rykken and Ben Glynn, Energy Services Coalition, MN Chapter
- Property-Assessed Clean Energy – Lynn Hinkle, Minnesota Solar Energy Industry Association
- Opportunities for Energy Efficiency – Jacob Selseth, Great River Energy
See more photos from the event in the slideshow below.
