On a recent afternoon, two energy auditors were poking around West Phillie Produce, checking out the lights and taking pictures of all the appliances in the store.
They were paying special attention to the three refrigerators and four freezers that run 24/7.
The owner, Arnett Woodall, opened this community grocery store in 2009 because there were few places to buy fresh fruit and vegetables in his West Philadelphia neighborhood.
But “one of the most challenging aspects of having a fruit and produce business in the community is the electric bill,” Woodall said, “‘Cause when they’re coming in at commercial rates, these refrigerators — it’s a killer.”
He said his electric bill is about $1,000 a month.
Woodall was getting this audit for free as part of a pilot program for The Philadelphia Energy Campaign — City Council President Darrell Clarke’s massive plan to invest $1 billion into energy-efficiency projects in all city buildings and public schools, as well as 25,000 low- to moderate-income homes and 2,500 small businesses.
Clarke, who announced the plan last February in the Mayor’s Reception Room at City Hall, promised the $1 billion investment would result in 10,000 “green jobs” over the course of 10 years.
At the time, he admitted he didn’t know exactly how it would work, how the city would lure private investors into getting in on the plan, or how much public money would be spent.
“The devil is in the details and we are currently working with the devil to get the details of some of those programs,” Clarke said, as laughter filled the high-ceilinged room.
‘Energy is a vehicle like no other’One year later, the plan is slowly taking shape as it enters the pilot phase.
Last week, Clarke and schools superintendent William Hite announced a plan to chip away at $4.5 billion in outstanding repairs and cut the district’s energy bills in half. The district plans to enter into an energy services performance contract with a company that will guarantee it can save 50 percent by making upgrades to lighting, windows, boiler and HVAC systems and other retrofits.
Pilots are also underway at more than 30 small businesses and four multifamily buildings.
Emily Schapira is executive director of the Philadelphia Energy Authority, or PEA, the city agency carrying out Clarke’s vision.
She said high utility bills are a challenge for many small-business owners and low-income people, especially in a city like Philadelphia where more than one-quarter of its residents live in poverty and in some of the nation’s oldest housing stock. And, she pointed out, government-backed home-repair programs have long waiting lists and limited funding.
“Energy is a vehicle like no other,” Schapira said.
“We talk about healthy homes and the need to address asthma and lead paint in homes … and those things do not pay for themselves,” she said. “If you incorporate energy into this, all of a sudden, now you have a return on investment that you can use to pay for those things.”
That’s where the city has its work cut out for it, said Christina Simeone, an analyst at the University of Pennsylvania’s Kleinman Center for Energy Policy.
Simeone said private investors tend to be more attracted to projects in large, institutional buildings, such as schools, because they use a lot of energy and have larger systems to upgrade, so the potential return on their investment is higher. Also, the risk of default is much lower.
When it comes to lower-income housing and small businesses, “some of the results are going to be uncertain,” Simeone said.
“I think, because of that, it’s going to be very hard to attract the private sector to serve these projects,” she added. “So I think if you’re talking about leveraging public dollars by bringing in the private sector, that’s going to be a challenge — maybe not impossible, but it’s going to take a lot of creativity.”
Schapira said PEA and several partners are testing various models through the pilot programs.
For example, in a few months, PEA will hand business owners like Arnett Woodall proposals that could cut their electric bills. The goal is to save them 30 percent, doing things like replacing those energy-sucking refrigerators and freezers with new, more efficient ones.
Schapira said most of the costs will be covered by grants from the state Department of Environmental Protection and rebates offered by utilities PECO and PGW.
Woodall will have to take out a loan for the rest, which he’ll pay back over time with savings on his electric bills.
“It’s all designed to have positive cash flow,” Schapira said. “So your savings will be more than your monthly payment on any loan you’d take out.”
Once the project is running at full scale, the hope is that as Woodall and other participants are saving money, others will be getting jobs doing energy audits and installing new boilers, lighting, refrigeration and HVAC systems.
Do these projects pay off?Catherine Wolfram, an energy economist at the University of California Berkeley, and some of her colleagues set out to answer the question of whether these programs pay off a few years ago. They studied what happened when the federal government paid for energy-efficiency upgrades in thousands of low-income homes in Michigan. The project was part of President Barack Obama’s economic stimulus plan, which put roughly $5 billion toward the Weatherization Assistance Program.
“We saw the federal government was spending about $5,000 to deliver savings of about $2,500, so that’s not a good return,” she said.
Wolfram is seeing similar results in a study she’s currently conducting in California schools, where she said energy-efficiency projects are realizing only 60 to 70 percent of the projected savings.
Energy savings are difficult to measure because it’s hard to figure out how much energy building owners would be using if they had not made any upgrades.
So Wolfram said savings are often based on engineering projections that overstate how much a program will help.
“If you’re the bureaucrat in the federal government who runs the program, you want to make it look good. You want to demonstrate that it’s saved a lot of energy,” she said. “And since it’s hard to come up with the baseline, you can come up with a lot of ways to estimate the energy that’s saved and why don’t you come up with the one that makes it look the best?”
As Philadelphia embarks on this ambitious plan, Wolfram said, the city should be careful to measures its results accurately and hire a third-party evaluator.
Schapira said while most of these projects are in the pilot phase, PEA is measuring savings in-house by collecting building owners’ utility bills before and after upgrades are made.
It could be another year before the pilots start to show significant results.
In the meantime, the agency is looking to other cities that have claimed success in retrofitting homes and small businesses.
One of them is BlocPower, a New York City-based startup that bundles four or more buildings, such as churches, homes and grocery stores, into portfolios that will provide investors with a larger payback.
CEO Donnel Baird said the company has done projects in about 500 buildings and cut their energy bills by an average of 38 percent. He agrees that accurately measuring the savings is key and argues there’s technology readily available to do that.
“Ten years ago, if you wanted to green 1,000 buildings, hard to do,” Baird said. “Now, there’s smartphones, there’s low-cost sensors that can collect a ton of granular data on those buildings. That stream of data gives investors much more confidence in the ability their capital will be accurately leveraged and that the returns will actually be there.”
Otherwise, Philadelphia won’t be able to attract the private investors it needs to pull off this $1 billion plan.