One of my meetings was with Scott Henderson, Finance Director at the Clinton Climate Initiative. These guys try to facilitate energy efficiency improvements of commercial buildings by bringing together property investors, the latest technology, and banks. They’re the oil to smooth the process, which has for example lead to the high-profile retrofit of the Empire State Building. The latest idea is applying the residential PACE program (a program to finance energy efficiency retrofits through the local government, paying back the loan and interest via higher property taxes) to commercial real estate. Pretty interesting idea, but there are some hurdles to clear. Most important, lenders have to be convinced that a senior lien on their property is not necessarily a bad thing. On the residential side, the largest residential mortgage investors in the US, Fannie and Freddie, have protested against such liens above their mortgages. And for commercial real estate, a similar attitude can be expected, especially with more and more commercial mortgages under water or delinquent. But, the CCC is trying to convince banks that a more efficient building yields a lower risk and is ultimately easier to rent out and to dispose off. I agree: lenders that do not incorporate energy efficiency in their underwriting ignore an apparent risk that is actually fairly easy to model. Nancy Wallace and Dwight Jaffee (both UC Berkeley) are doing some interesting research in this area. I recently wrote a Dutch piece on this topic in de Vastgoedmarkt.
In the meantime, the technology to actually assess energy efficiency is diffusing at a rapid pace. The smart meters of PG&E now cover 73% of their customers. The initial outcry about privacy issues has subdued, but now the environmentalists have started a fight against the meters (and thus against themselves): the radiation from meters is potentially dangerous. FOX news is happy with this story… (Check this newspaper article.) Local governments have promised an investigation. Maybe we should consider a moratorium on TVs and mobile phones as well.