Residential energy efficiency is one of the most effective - and cheapest — tools available to combat climate change. It can also be a great investment. By financing the upfront costs of weatherization and appliance upgrades, investors can earn steady rates of return based on the energy saved.

But expanding the market for home energy efficiency at the massive scale needed to meet pressing carbon emission reduction deadlines will require a whole series of alignments between contractors, installers, equipment vendors, utilities, government regulators and sources of public and private capital.

And that, efficiency companies and experts say, will take a new approach to enlisting households in the endeavor — starting with making sure that the energy efficiency they’re getting is just a side effect of their home improvements.

Take the example of New York–based startup Sealed, which just raised $16 million. The company arranges and finances home efficiency retrofits centered around weatherization and all-electric heat pumps, requiring no money down from homeowners and then sharing the energy savings. The new round — led by real estate tech investor Fifth Wall and joined by Robert Downey Jr.’s FootPrint Coalition Ventures and previous investors Cyrus Capital and CityRock Ventures — brings the company’s total funding to $33 million and will allow it to expand from New York into Connecticut and New Jersey.

Sealed doubled its revenue in 2020 and has doubled it again in the past six months, CEO Lauren Salz said, by earning a share of the savings from the average 25 percent reduction in energy use a typical customer achieves.

Those savings can be twice as much for customers who switch from older fossil-fueled heaters to the latest heat-pump-based heating, ventilation and air conditioning technologies.

But these savings don’t get top billing in the Sealed sales pitch. ​“If you focus on energy and environmental issues, you end up missing out on a large segment of the population,” Salz said. ​“We’re not focused on energy savings. We’re focused on delivering a better standard of living for people [and] homes that are more comfortable, healthier and cleaner for the environment.”

Energy-efficiency retrofits that do more than just save energy

But the addressable market for these investments is much larger, ​“anywhere from $100 billion to $500 billion,” said Cullen Kasunic, BlocPower’s energy efficiency and renewable energy finance leader.

The smaller number is a conservative estimate of the value of energy wasted every year that could be reduced by the kind of retrofit work that BlocPower performs. The larger number encompasses the market for work that could use energy savings to leverage investment in heating, ventilation and air conditioning (HVAC) and appliance upgrades that improve health and safety by replacing fossil-fired heating and cooking with all-electric systems, or environmental abatement like asbestos and lead removal, he said.

Other add-on benefits include bringing Wi-Fi to multifamily buildings. BlocPower uses the Wi-Fi to monitor the performance of its HVAC systems, but then the company can also offer free internet to tenants, Kasunic said.

“Energy efficiency is about more than savings,” he said. ​“It provides increased comfort, increased control of your heating. You get the health benefits of not having fossil fuels burned in your neighborhood.”

BlocPower’s 12- to 15-year lease structures earn back upfront costs through monthly payments from building owners, based on a mutually agreed-upon calculation of the value these combined improvements bring, he said. While the startup doesn’t guarantee or share the energy savings from its projects, as Sealed does, ​“what we do guarantee is that the systems will work.”

The Biden-Harris administration has proposed a national green bank, dubbed the Clean Energy and Sustainability Accelerator, that could bring from $27 billion to $100 billion in similar financial backing to projects nationwide. (Credit: Projectary.md) 

Much of the emphasis at the policy level has focused on expanding the pool of capital available for energy-efficiency projects. That’s the impetus of efforts being undertaken by green banks in New York, Connecticut and 19 other states, which have directed about $5 billion toward clean energy and efficiency in underserved communities over the past decade. The Biden-Harris administration has proposed a national green bank, dubbed the Clean Energy and Sustainability Accelerator, that could bring from $27 billion to $100 billion in similar financial backing to projects nationwide.

Salz agreed that green bank financing served as an important early step for Sealed, as was securing an energy savings insurance program with Munich Re in 2017. But as the company looks to its next steps, ​“the main thing that’s going to drive down the cost of capital is scale. The market has less of a cost-of-capital problem and more of a demand problem. That’s what Sealed is going after.”

According to Canary Media