Back to Work - Bill Clinton [59]
There are simple ways to solve this, though they require legislative action to do nationwide. First, the government could set up a Small Business Administration–like loan guarantee program to assure the banks they will be repaid. A $15 billion fund could guarantee $150 billion in loans and create a million jobs. Remember, this is a backup guarantee that probably won’t cost the taxpayers a penny, because the savings will have already been guaranteed by the contractor.
An even better way to do it would be to let the utilities finance the retrofits, since they get the extra energy capacity retrofits provide to sell to other customers. To do that, utilities have to be permitted to “decouple” their rates from energy usage, charging slightly more per kilowatt hour on retrofitted buildings, or houses, until the costs of the retrofits are recovered.
Today only twenty states permit decoupling of rates for electricity, natural gas, or both. Even in these states, some utilities don’t do it, because even though conservation is a cheaper way to get power than building a new power plant, plant building is something they know how to do, and the ratepayers, not their shareholders, pay for it. Sometimes politicians won’t do it for ideological reasons or because of pressure from interest groups that want to preserve the status quo. For example, Jim Rogers, the CEO of Duke Energy, America’s third-largest coal consumer, wants to finance home and large building retrofits, but lacks the authority to do so. Of course, this means the ratepayers are being shafted and lots of jobs are being left on the table, but politicians get away with it because so few people understand the economics of energy.
So, if we’re back to bank loans, the retrofits should start with the buildings sure to be in use with the same owners for five to seven years—public and private schools, federal, state, county, and local government buildings, college campuses, museums, libraries, auditoriums, hospitals, and big commercial buildings with limited indebtedness. If we just did the schools, colleges, and government buildings, we could keep a large number of construction workers busy for a couple of years.
When I first proposed this project in 2009, it met resistance in Washington from people who said it was unrealistic to quickly expand a retrofit market of $7 billion a year to $50 billion or more a year because a few big energy service companies, including Johnson Controls, Honeywell, and Siemens, have more than 90 percent of the business for big building retrofits. That’s true, but not relevant to thousands of school buildings across the country that could also get an energy-savings guarantee from a local bonded general contractor who needs the business and doesn’t want to lose skilled workers in a down economy.
The average school building is over forty years old and ripe for big savings, especially from more efficient heating and temperature controls. I’m sure you know of an old school building where on cool but not frigid days, the heat is on and the windows are open because the ventilation is poor and the temperature (and the energy use) can’t be controlled.
Some school districts have been told that they can’t borrow money to retrofit buildings because they’re already at their debt limit, with property tax revenues pledged to pay off school-construction bonds. The rating agencies should exempt retrofits when calculating debt capacity because the schools don’t take on new obligations; they just keep paying their utility bills at the same dollar amount until the costs are covered. If the savings don’t cover the costs, the contractor