WALL STREET RETROFITS FOR FORWARD CAPACITY

Why Wall Street Will Pay You To Renovate Your House; Don’t worry. This time, the home-as-financial-instrument story will have a different ending.
Michael Kanellos, February 10, 2010 (Greentech Media)

"…Maybe what's good for Wall Street will be good for Main Street once again…[A] combination of circumstances could come together that would effectively prompt financial institutions to cover part or all the cost of new insulation and water heaters …[and] homeowners will be able to extract penalties out of retrofitters whose repairs don't live up to expectations…

"The operative concept at play here is forward capacity. Forward capacity, also known as permanent load shifting (PLS), is effectively a more static and predictable version of the demand response services now [in use that] curtail heaters and pool pumps to curb peak power consumption…In forward capacity or PLS, energy efficiency repairs shift or eliminate peak demand permanently, or at least until someone removes the repairs…"

From George (Freeman, Sullivan), on Demand Response resources. Note ice storage air conditioning is a primary form of permanent load shifting. (click to enlarge)

"While PLS can save homeowners money, the banks come in with the advent of carbon markets. Banks, conceivably, could package the energy savings from various projects and convert it into a security…[T]he energy savings from an entire subdivision, or 1,500 homes [totalling perhaps 10 megawatts] in a geographic region, would add up…To convert retrofits into a security, of course, the banks would have to pay homeowners either directly or indirectly through the retrofitter…[With federal and state credits…total up-front cost for a major retrofit dwindles…[and] could be further reduced by amortizing it over 20-year periods as a property tax supplement."

Ice Bear is a kind of ice storage air conditioning. It makes ice during off peak hours at night and uses it (instead of electric a/c) to cool buildings during the heat of the day. (click to enlarge)

"Expect more federal and state stimulus, too. A wide-ranging coalition…[is] trying to get Congress to divert $9.6 billion from the TARP program to…underwrite retrofits and create construction jobs…Homes and efficiency retrofits are more appealing in many ways as a basis for bundling securities…[T]he energy savings and carbon abatement of a retrofit will likely be relatively easy to measure and monitor…[with new software tools]…With ongoing monitoring, anyone buying or selling carbon credits based around retrofits will, ideally, be able to more accurately value a credit's price…[C]onsumers would be able to obtain refunds or discounts under service-level agreements…[so] ongoing monitoring is transformed from being an invasion of privacy…to a way to eke more discounts…"

Using ice storage air conditioning is a powerful form of permanent load shifting. (click to enlarge)

"…[C]arbon traders actually understand and like carbon abatement projects…[And] add a "Buy American" angle…Although national unemployment has dropped below the ten percent mark, unemployment in construction rose from 18.7 percent last October to 24.7 percent in recent months…Another added jobs bonus: the vast majority of building materials consumed in the construction industry are produced domestically, so retrofits would boost factory jobs…

"…[But first,] some form of carbon taxation would have to pass. Second, utilities will have to deploy smart meters for better monitoring…Third, more accurate data will be required. Energy-efficiency retrofits have only really started taking off in the last few years. The savings from retrofits right now are largely extrapolated from computerized simulations…[M]odels from the National Renewable Energy Labs, for instance, tend to be more accurate when it comes to estimating the gains from retrofits in cold states like New York than retrofits in temperate California, where forgetting about thermostat settings is more common…"