Energy efficiency projects continue to be a topic of debate in the real estate industry. With large sums of money at stake for potential investment, there remains a degree of uncertainty and hesitancy surrounding efficiency project implementation. Therefore, establishing a sense of credibility is imperative. Historically, the real estate market has had trouble addressing this issue but the newly created Investor Confidence Project (ICP), is finding practical solutions and generating trustworthiness in energy efficiency projects nationwide.
Created by the Environmental Defense Fund (EDF), a non-profit environmental advocacy group founded in 1967, ICP was established to build trust—specifically, it was created as a means to confirm credibility of energy efficiency upgrade project predictions. This credibility provides confidence in investments, and in turn, creates more investments in energy efficiency upgrades.
In today’s commercial real estate market, there are variety of different standards for identifying, designing, and implementing accretive energy efficiency projects. This variety creates uncertainty among building owners, managers, and investors who seek to understand Return on Investment (ROI) of potential efficiency projects. Compounding this issue is the fact that energy projects are often too small and too unique to effectively underwrite and reflect in the valuation of the real estate as a whole. The goal of the ICP is to standardize investor-market ready projects and provide a definitive set of criteria for green projects.
The ICP screens the energy investment itself, through engineering calculations, to predetermine whether the project is investor ready. Once a project has been approved by an ICP Quality Assurance Provider, it is awarded ICP Investor Ready Energy Efficiency certification. This certification label is recognized as a sign that the project can be underwritten with a high degree of confidence.
At its core, ICP is a set of engineering and project management standards that can be applied to energy efficiency projects. The philosophical challenge ICP is tackling is the forever looming concern facing building owners during energy project implementation: what will my energy savings actually be? By adhering to rigorous engineering standards, an ICP vetted project can give building owners and investors assurance of the value in investing in green projects and remove the doubt in achieving estimated energy savings.
Adopting Global Recognition
ICP Investor Ready Energy Efficiency certification is setting a new global standard when it comes to energy efficiency projects.
Marketing, adoption, and implementation of ICP protocols are ongoing as the program is still in its infancy. As the program grows and becomes more widely adopted, the program is on the road to self-sufficiency. Jeff Milum of ICP, explains, “ICP’s direct involvement in projects will most likely take a less prominent role as the program matures. Similar to EPA’s ENERGY STAR, we are developing a platform that can be fulfilled by market providers including building owners, engineering, and investors throughout the country across all commercial building asset classes.”
Many state, utility, and municipals energy programs are in the process of adopting ICP protocol into their existing platforms. New Jersey’s Clean Energy Pay for Performance program, is the first state run program to officially incorporate ICP into the existing program structure. In addition, Pacific Gas and Electric Company (PGE), one of California’s largest utility providers, is a longtime supporter of the ICP protocol and has helped ICP gain traction in the state. PG&E is also incorporating ICP directly into programs that have been submitted to the state regulatory board.
There are currently 18 investors that form ICP’s Investor Network and ICP is expecting the number of investors to grow significantly as the program gains wider recognition. Any qualified investor who is actively financing efficiency projects can apply to be part of the Investor Network and provide building owners, developers, and others with access to capital for energy efficiency projects.
ICP has emerged as a new standard in energy efficiency project underwriting and is gaining industry recognition as an advantageous and innovative methodology. Although energy efficiency projects are still often a cause for concern in the real estate industry, the ICP protocols and certification system increase trust and confidence unlike anything previously available.