Energy efficiency financing models for buildings could work for natural gas vehicles

Owners of large buildings who want to save money by improving energy efficiency first have to overcome a huge hurdle – the upfront costs of getting the work done. A similar hurdle exists for fleet managers considering switching to natural gas vehicles to save on fuel costs – high initial expenses for vehicles and infrastructure.

What if the same method being used to pay for more energy-efficient buildings could also be used to get cleaner alternative fuel vehicles on the road? A new report by C2ES makes the connection between a commonly used business arrangement in the building sector and its potential use in the deployment of natural gas in public and private vehicle fleets.

A proven way to increase energy efficiency in buildings, including the iconic Empire State Building, is with the help of a business known as an energy service company (ESCO). Typically, an ESCO helps arrange financing for the building upgrade and receives compensation over time as the building owner realizes the energy savings from the efficiency improvements.

An ESCO not only facilitates access to needed capital, but also helps building owners manage the risks of using new, unfamiliar technologies. ESCOs can help building owners identify opportunities and can provide performance guarantees that give building owners assurance of future energy savings.

So, what would an ESCO for natural gas vehicles and fueling infrastructure look like? A little different than an ESCO for buildings. For example, the savings for an ESCO in buildings is often measured in units of energy while an ESCO-like arrangement for a vehicle fleet would base its savings on the differential between natural gas and gasoline/diesel prices. The savings are based on fuel consumption, which fleet managers have experience predicting.

This idea is just now being explored by the natural gas and energy service industries. Our report, part of a two-year project funded by the U.S. Department of Energy’s Clean Cities Program in partnership with the National Association of State Energy Officials and others, details three case studies of ESCO-like arrangements for natural gas vehicles. These early experiences are promising, particularly for fleet managers who need turnkey solutions that can provide net savings from day one.

Among the services companies experienced with natural gas vehicles could provide to fleet managers are:

  • Identifying and evaluating project opportunities,
  • Providing performance guarantees that reduce project risk,
  • Managing the technology transition,
  • Providing alternatives to ownership of vehicles and refueling equipment,
  • Bundling vehicle projects into a broader energy project portfolio, and
  • Facilitating needed partnerships.

Applying the ESCO model to transportation projects can help break through market barriers, increase deployment of alternative fuel vehicles, and diversify the U.S. transportation fuel supply.

 

 

Eight states take a big step to advance zero-emission vehicles

States representing more than a quarter of U.S. car sales made a strong statement today that they’ll be engaged in advancing the deployment of zero emission vehicles (ZEVs).

In their “Multi-State ZEV Action Plan,” eight states — California, Connecticut, Maryland, Massachusetts, New York, Oregon, Rhode Island, and Vermont — lay out an ambitious agenda to support vehicle sales and fueling infrastructure over the next decade with the goal of putting 3.3 million ZEVs on the roads by 2025. These vehicles, which include cars fueled by electricity and hydrogen, are a key part of our efforts to reduce the emissions contributing to climate change.

The transition to a low-carbon transportation system will take decades and cost billions. As C2ES has noted in our work in this area, government is unlikely to make significant new investments in the near term, but it can play a critical role in encouraging private sector investment in ZEVs and their infrastructure.

Save fuel and look good doing it

A quick glance around this week’s Washington Auto Show might make you wonder if you’ve stepped into the past, with large trucks, SUVs, and sports cars getting all the attention. But look under the hood and you can see the auto industry’s more climate-friendly future.

The cars and trucks of 2014 are lighter, more aerodynamic, and powered by increasingly efficient engines. A key impetus for these improvements is tougher federal fuel economy and greenhouse gas emission standards. The auto show provides evidence that the industry is working to meet these ambitious standards, and that we can significantly reduce emissions without compromising consumer choice.

One way to improve fuel economy is to make the vehicle lighter. That’s exactly what Ford Motor Company did to the best-selling vehicle in the United States: the F-150. All 2015 Ford F-150s will have an aluminum body and truck bed – shedding 700 pounds while still being able to tow and haul more than the previous generation. That could boost its gas mileage from 20 mpg on the highway for the 2014 model to 30 mpg.

Automakers have increasingly substituted strong, lightweight aluminum for steel in hoods, wheels and other components. The F-150 and Tesla’s aluminum-body Model S show they’re going beyond that.

Another way to increase gas mileage is to improve an engine’s ability to convert fuel (potential energy) to work (kinetic energy). General Motors is making the Corvette Sting Ray for the first time 1976, and the new version is beautiful and efficient. The 2015 Sting Ray is the quickest, most powerful, and most efficient Corvette ever made. The 7-speed V-8 Sting Ray gets up to 29 mpg on the highway. That’s about twice the fuel economy of the ’67 Sting Ray my dad drove when I was a kid.

Private finance can break down barriers in AFV market

Private finance is playing a critical role in accelerating the deployment of clean energy technologies that will reduce the impacts of our energy use on the global climate. Can some of these innovative financing tools – or new tools – also help spur alternative fuel vehicles (AFVs) and fueling infrastructure?

That’s a question we have set out to answer in a new initiative with the National Association of State Energy Officials. As a first step, we’ve explored some of the key barriers in the AFV market that private investment could help address.

States will need coordination, creativity to meet electric vehicle goal

Eight states have given a big boost to zero emission vehicles by agreeing to support putting 3.3 million on the road by 2025. California, Connecticut, Maryland, Massachusetts, New York, Oregon, Rhode Island, and Vermont together account for about a quarter of the auto market, so their commitment is significant. 

To reach their goal, these states will need to learn what policies and actions are most effective at driving sales of zero emission vehicles (ZEVs), starting with electric cars.

Two early lessons are evident from our ongoing work in this area: Stakeholder coordination is critical, and creative policy solutions are needed. The memorandum of understanding the governors signed last week will foster an environment for both.