Show HN: I quit my job to help communities fund energy efficiency upgrades

For two years I ran a company called Building Hero (www.buildinghero.com) that marketed and financed LED lighting retrofits to commercial locations in New York City and San Francisco.

Here are a few things to consider when wading into energy efficiency finance:

1. Returns to energy efficiency upgrades accrue out of negative cashflow (money not spent), which means its hard/impossible to put a legal "box" around the financial returns to the project, contra solar investments, where there is a meter and it's usually possible to slice and dice who gets what.

2. Energy efficiency upgrades also pose a problem with respect to collateral. In our case, although we had the right to take back our LED lamps, the value of what we got back, even in the best case, would have been negligible. Most EE upgrades are even less inviting as collateral, like insulation or HVAC upgrades.

3. There are simpler, but more balkanized (i.e., different not only from state to state, but even utility to utility, or city to city) financial incentives for energy efficiency upgrades. This poses a challenge for finance as a differentiator for energy efficiency. Simpler incentives mean the value of a third-party financier who abstracts away these problems is less valuable; and more balkanized incentives mean that is harder in any case for a third-party to offer solutions that scale geographically. Again, contra solar, where the federal tax incentives mean that it’s almost necessary for a third-party with tax equity appetite to finance a portion of the investment, and since it’s at the federal level it scales across the US.

My advice would be to do some careful thinking about how and why your financial offerings are better than what you could do financing them on a credit card or through a normal bank loan.

In addition, I would put some serious thought into whether or not finance is the true barrier for energy efficiency projects. Again unlike solar, these things are inside the home/office/whatever, not outside, so bring up aesthetic concerns as well as comfort concerns. Other things, like HVAC systems, are usually replaced when they break.

Anyway, I hope this is useful and that you get a lot of projects done!

This seems very interesting. At my company (WegoWise) we've been working for the last 4 years to help solve some of the fundamental information problems that result in inefficient buildings. Most folks aren't aware of how drastically energy efficiency can save money for building owners and improve the built environment. It isn't unusual, for example, for one apartment building in a development to consume 4x in utilities per square foot as the other similar buildings around it, without the owner of the buildings even realizing it (despite the fact that they're paying the bills).

We've made excellent progress in this space, but better financing mechanisms for energy efficiency are still required as a next step. Even though the returns can be huge, building owners still need to get money to invest, and utility programs can't keep pace with the level of demand.

I'm excited to see how this effort progresses. Solar has been taking off in the US largely because of better financing mechanisms, and I think there's ample opportunity for the same thing to happen in the efficiency sector.

I'd love to chat with you about what you're doing at Spark, as I suspect there could be some areas for collaboration. (My contact info is in my profile.)

Do investors have to reside in the US? If so, please state this clearly on your sign-up page rather than ambiguously (by only allowing the input of US addresses).

I was just in a budget meeting for the local (Portland, OR) transportation department and asked them if they knew whether when an individual switches from a car to a bike, how much does that impact their budget? They didn't really have an answer. Maybe someone reading this does?

I feel like if you had an answer, you'd be able to use it to drive financing in much the same way this startup is. Very cool stuff, monetizing the "green dividend".

Link to paper by Joe Cortright where I got that term http://blog.oregonlive.com/commuting/2009/09/pdxgreendividen...

This is really, really cool and equally impressive. I can't imagine the amount of legwork that was involved with legislation and groundwork getting all parties involved interested.

I don't see it stated anywhere so I'm assuming you are running this as a for-profit? Are you going to disclose your take?

What kind of legal arrangements are being used here?

Does the person/company who borrows money legally owe this debt to the investors? And which government bodies regulate these transactions?

Goes hand in hand with new government requirements (in NYC, for example) to increase building efficiency!

http://www.nyc.gov/html/gbee/html/home/home.shtml

This is really fascinating and sounds kind of groundbreaking, but I don't know the space. Is crowdsourcing investment in a community's infrastructure of any sort, not just efficiency, something that has been done before to date? I can't help but think this is a powerful model for funding poor communities with roads, plumbing, telecommunications etc

How involved is spark in the spending of the funds?

Do you just give the businesses the money and say buy efficient products or are you all more hands on?

What are the kinds of projects you can invest in? How are you planning on getting competitive returns?

Whats the approximate return you expect investors to receive ?

Looks awesome! New approach to help build communities!

How can people help your new enterprise?

The link is 404'ing.

This looks really cool!