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Maximizing the Retrofit MarketSan Francisco's existing buildings and a new way to look at efficiency financing
Kirsten Nelson-Johnson San Francisco is a city that has largely been developed and constructed. The potential of existing building retrofits, however, is enormous. Existing buildings are among the greatest historical and cultural resources in the city; and conserving the existing cityscape and meeting the long term needs of the city are a balance that must be struck. The amount of square footage that has been LEED certified has more than quadrupled in the first 9 months of 2009, with many more projects in the works. More than 80% of LEED certified space in San Francisco is in existing buildings – either in recognition for operational best practices or tenant improvements. These figures not only tell us of the vast improvements already made, but of the potential of the retrofit market in any developed metropolis. One of the city's latest example is the newly retrofitted Transamerica Pyramid, which received a LEED EB Gold certification . The Transamerica Pyramid achieved a LEED rating ahead of two other iconic buildings that are currently seeking LEED ratings: the Empire State Building and Chicago's Willis Tower. The LEED Gold certification is a result of a number of improvements including a 50% water usage reduction in the past year, a high-efficiency co-generation plant, the purchase of renewable energy credits, recycling and composting to reduce the building's waste-stream, and the use of green cleaning products. However, many are arguing that the retrofit market itself is not exactly the high point of efficiency. The retrofit market involves thousands and thousands of small, scattered transactions, usually involving small-scale buyers and small-scale providers. Investments in building efficiency are extraordinarily secure, stable, and, over time, will surely be profitable. The problem is the amount of time it often takes to see a return on investment (ROI) as well as the amount of upfront costs to be absorbed. Upfront costs tend to be higher in 'green' building when compared to traditional construction, and lending institutions don’t have much experience with financing efficiency projects, so they tend to be more reluctant to impart funds. One solution that looks promising is a loan model originating in Berkeley, California. Property Assessed Clean Energy loans or PACE loans for short, are targeted toward small-scale renewable projects and efficiency retrofits. Under the PACE program, loans to building owners are paid back out of property taxes. That advantage of a PACE loan comes when the property is sold and the loan goes with it solving two problems at once. First, it virtually eliminates upfront costs. Second, it addresses the fear of building owners that they’ll pay all the costs to improve efficiency but will not stay long enough to reap the benefits. New York state has also adopted a PACE bill recently, and there are indications the program may begin to go national through the recently unveiled 'Recovery Through Retrofits' program. PACE is perhaps one of the most overlooked stories of 2009 and will emerge as a key clean-energy driver in the next few years.
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