Reducing Cost Barriers to Improve Public Buildings

Challenge:

More than 30 years ago, the energy services company (ESCO) model was designed to finance and implement energy efficiency projects for large institutional buildings. It removed barriers to achieving deep energy savings—specifically, a lack of upfront capital and energy expertise—by providing technical assistance, savings guarantees, and access to financing. The ESCO model has been widely successful in four major markets—municipal, university, school, and hospital—but such projects generally involve $1 million or more in capital expense, leaving smaller buildings behind.

While a growing number of energy services companies have been recognizing and extending their services to smaller-scale projects, their needs were largely going unmet.

Solution:

In 2013, with support from the High Meadows Fund, the Kresge Foundation, and the MacArthur Foundation, VEIC developed an innovative, mission-based business model: the public-purpose energy services company (PPESCO). By leveraging funding from patient capital sources willing to receive a lower and slower return on investment in exchange for positive social and environmental results, the PPESCO model is specifically designed to deliver deep energy efficiency work to small-to-medium sized buildings that serve a public purpose.

VEIC then made the model publicly accessible through www.ppescohowto.org, in an effort to spur growth in these previously underserved markets. In 2014, VEIC actualized the PPESCO model by creating Commons Energy, the first PPESCO.

The PPESCO model:

  • Achieves deep energy savings—up to a 30% reduction in energy use right away.
  • Provides reasonable returns to investors looking for environmental and social impact, plus the opportunity to support organizations that provide vital services to communities.
  • Addresses multiple barriers for underserved markets by providing technical assistance, access to financing, construction, and an energy performance guarantee.
  • Gives clients transparency in pricing and neutrality with respect to technology, manufacturer, and energy source.