Energy Efficiency Market Study for Greater Cincinnati

OKI Regional Planning Forum

February 24, 2012

Agenda
Energy Alliance Overview The Market Study Where Are We Now? Call to Action
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ENERGY ALLIANCE OVERVIEW

About Us
Non-profit

501c3 organization Private Public partnership Energy Efficiency/Renewable Energy Services

 Education/Outreach  Project

Management  Financing
Market

Focus
Commercial
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 Residential  Non-profit

Mission Statement
The Energy Alliances mission is to facilitate investment in energy efficiency for homeowners, non-profit organizations, and commercial buildings owners through outreach and education, project management, and financing solutions.

Why Energy Efficiency?

The First Fuel Job creation/retention Cost savings Self-financing/ROI Reduce dependence on foreign oil Increased comfort Preservation of building stock Greenhouse gas emission reduction Improved air quality
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Public/Private Partnership
Greater Cincinnati Foundation Energy Efficiency & Conservation Block Grant
Hamilton County, OH City of Cincinnati, OH Kenton County, KY Boone County, KY Campbell County, KY City of Covington, KY City of Florence, KY

Department of Energy Better Buildings Neighborhood Program

1 of 41 recipients nationwide $17m, 3-yr grant
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DOE Better Buildings Neighborhood Program

Residential Program Design

Home Performance with Energy Star Program
Customer Engagement
Energy Alliance marketing Contractor marketing

Request assessment through web portal

$50 energy assessment ($400 value)

Audit delivered, entered into Compass Customer invests in home energy upgrade
35% retrofit cash incentive 6.99% unsecured, 10-year loan, up to $20,000
(3.99% in N. KY)

Quality assurance Payment to contractor & customer

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Residential Case Study

Type of Improvements Air Sealing, Duct Sealing, Floor Above Unconditioned Space $5,005 Energy Alliance Incentives Total Energy Reduction Annual Savings Total Savings Estimated Payback 1751.75 $3,253 30% $651 $13,000 5 years Job Cost

20 year life

With a 10 year loan, customer would pay $38/month totaling $453 for the year vs. projected annual utility savings of $651 = $198 cash positive each year!

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Residential Production
Energy Assessments: over 1,200 Retrofits: 500 Average retrofit cost: $8,400 Project financing: over $300,000 approved Economic impact: $4.5m
The audit was very educational (and eye opening). My primary interest in doing the upgrades were for comfort and energy/cost savings. Also as a green business owner, I felt it necessary to "walk the talk. ~ Heather Curless

Customer, Heather Curless Cincinnati Resident and Owner of Greener Stock

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Commercial Program Design

Market Focus
Smaller non-profits Private schools/churches Public schools Municipal buildings 50% cost match for energy assessments 15% cash incentives for retrofits Design-build & performance contracting Low-interest extended term loan (Jan. 2012)
St Antoninus, Cincinnati
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Program Design

$673K projects completed, $7m pipeline

Case Study: Mt. Washington United Methodist Church Project

Mount Washington Methodist Church was the first organization that benefitted from the Energy Alliances building assessment expertise and received funding to support their $40,200 total improvement project. Replaced: 125 light fixtures with more T-8 fluorescent bulbs 12 year old boiler with 96% efficient new boiler Exchanged outdated air conditioner equipment Reduced: Annual lighting electricity usage by 35% Annual heating use by 25% Annual cooling use by 25% Mount Washington UMC will save an average of $8,000 per year over the life of the installed equipment.

Children playing at Mount Washington Methodist Church, December 15, 2010

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THE MARKET STUDY

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Efficiency is the Cheapest Energy Resource

20 18 16 Range of Levelized Costs (cents per kWh) 14 12 10 8 6 4 2 0 Energy Efficiency Wind Biomass Natural Gas Pulverized Combined Coal* Cycle Nuclear Coal IGCC Solar PV

*Notes: All data from Lazard 2009. High-end range of advanced pulverized coal includes 90% carbon capture and compression.

All data from Lazard (2009)

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Efficiency is Low Risk & High Return

Because efficiency is cheap, a switch to it from generation sources produces a high return Building sciences and technologies are advanced, as a result energy savings can be predicted reliably

Source: Ehrhardt-Martinez and Laitner 2008

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Four-County Market Characterization

Residential market = 140,000 households
Single-family detached, owner-occupied, income > 200% of poverty, in four-county area 20% or greater energy savings from weatherization alone

Non-profit market = 470 buildings

Over 25,000 square feet, Occupied or owned by non-profits
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Loan terms analyzed

6.99% unsecured loan, 7 year term
$400 in incentives from Duke Energy for residential participants

For 2012 and 2013 only

Direct measure incentive payment of 15% from Energy Alliance & 10% from federal tax credits (res. only) Incentive of $150 for residential and 50% for non-profit toward energy assessment costs
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Residential Program
Average Household $4,350 in energy improvements Annual payments $500$800 (depending on incentive level) Positive cash flow in first year of loan Average annual positive cash flow of $500 over 18 years.
Average Annual Net Change in Cash Flow
1,000 900 800 700 2009 Dollars 600 500 400 300 200 100 0 -100 Year 2012 Participant 2015 Participant 2020 Participant

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Nonprofit Program
Average Building $29,000 in energy improvements ~$1,000 positive cash flow in first year Average annual positive cash flow of $3,000 or more over 17 years.
Average Annual Net Change in Cash Flow
14,000 12,000 10,000 2009 Dollars 8,000 6,000 4,000 2,000 0 2012 Participant 2015 Participant 2020 Participant

Year

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Impacts Over 20 Years

Participants
69,000 households 460 non-profit buildings

In 2030 alone: $59.6 million in bill savings, $37.2 million in net consumer savings
Investments (thousands 2009$) New efficiency investments Energy Savings Electricity (MWh) As % of forecasted sales Natural Gas (MMBtu) As % of forecasted sales Cost Savings (thousands 2009$) Electricity Natural Gas Total Payments (thousands 2009$) Loan Payments 2010 2015 2020 2025 2030 $ 529 $ 14,270 $ 16,724 $ 19,716 $ 23,053 179 0.00% 835 0.00% $ $ $ $ 16 $ 173 $ 189 $ - $ 49,667 117,591 195,078 267,913 0.49% 1.19% 2.00% 2.77% 253,482 597,559 1,013,009 1,426,814 1.33% 3.04% 5.02% 6.89% 5,566 $ 14,291 $ 25,241 $ 37,181 3,317 $ 7,896 $ 14,702 $ 22,423 8,882 $ 22,187 $ 39,944 $ 59,604 5,081 $ 15,091 $ 18,612 $ 22,375

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Employment Impacts
Net Increases in Jobs and Wages

Four-county impacts in 2030

~315 net additional job person-years $13 million in additional wages
Employment

400 350 300 250 200 150 100 50 0 2010 2015 2020 2025 2030

16 14 12 10 8 6 4 2 0

Includes direct, indirect and induced Construction/ manufacturing: 100+ net additional jobs for 20 years.

Jobs

Income

Job Impacts by Sector

Sector Categories Extractive and Energy Sectors Construction and Manufacturing Trade and Services Net Total Jobs 2012 -3 122 33 151 2015 -14 105 36 127 2020 -30 111 85 166 2025 -46 119 166 238 2030 -59 126 251 317

Source: DEEPER modeling system

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Income ($MM)

Other Impacts
Environmental
Annual avoided emissions (metric tons) Carbon Dioxide Nitrogen Oxides Sulfur Dioxide 2010 172 0.100 0.002 2015 46,660 64 306 2020 110,473 151 725 2025 183,270 250 1,203 2030 249,817 341 1,640

In 2030 alone, pollution reduction equivalent to energy use of 21,700 homes or 49,000 cars.

Property values
Residential: although poorly considered in appraisals, homes with efficiency improvements can have higher property values and improve value of neighboring homes Nonprofit commercial: correlation well established, lower operating costs can result in better financing, lower premiums, higher occupancy rates, and lower turnover
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Targeted Marketing
Energy Savings Potential Participation Potential

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Contractor Partnerships
Reactive space conditioning and water heating replacement is large market Skilled contracting firms may help to convert these transactions into investments in more comprehensive energy improvements
Four-county Appliance Replacement Rates
Appliance Gas Furnaces Central air conditioners Heat pumps Hot water heater - electric Hot water heater - gas Average lifetime 1 (years) 23.68 19.01 16.24 13 13 Regional Appliance 2 saturation 70% 75% 10% 38% 59% Estimated annual 3 purchases 14,731 19,661 3,069 14,567 22,617

1. Based on DOE 2010 and DOE 2011a. 2. Based on Duke Energy Ohio 2009 and Duke Energy Kentucky 2009 3. Based on estimate of 498,342 households for the four-county region from SimplyMap and the 2005-9 American Community Survey

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Related Policy Opportunities

Local energy use disclosure requirements
In place in Austin, TX and other cities

State savings targets & expanded utility investment

OH EE standard: 22% by 2025, utility programs KY some utility programs in place, considering additional EE policy options

Federal proposed SAVE Act

Energy efficiency considered in property value assessment DOE Home Energy Score
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WHERE ARE WE NOW?

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What does it take to transform this market?

Access to capital Market, educate, and demonstrate Skilled workforce Technological innovation Grow & develop local business Supportive regulatory & policy infrastructure
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What is our market doing now?

New financing programs with private sector investment Multi-pronged branding & marketing strategy Cincinnati St. partnership Investment in web-based tools Equipment financing, business loans Data collection & reporting
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Call to Action
Openness to rethinking this industry Attract more private capital Expand business model to engage more contractors Collaborate for stronger policy Increased statewide market activity Tell your neighbors, friends, and colleagues to sign-up!
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Contact Info
Andy Holzhauser, CPA
Executive Director Greater Cincinnati Energy Alliance 200 W. 4th St., Suite 600 Cincinnati, OH 45202 W: 513.621.GCEA (4232) M: 513.309.7081 www.greatercea.org facebook.com/greatercea twitter.com/greatercea