Serious Energy is getting serious

Well, truth be known, the San Francisco based Serious Energy and its peripatetic  CEO Kevin Surace have been very serious about energy use in buildings for a long time.  Serious Energy is a major force in energy management solutions with a rock star executive.   SE is a very well-funded, aggressively marketed company with a broad suite of products and services.  From introducing QuietRock drywall and a $50M infusion from VC heavyweight NEA in 2007, Serious Energy has captured a number of awards  and recognition for their innovation, acquisitions, ambition and ability to attract attention.

In the near past, SE announced the launch of SeriousCapital – a solution to entice building owners to upgrade their properties needing at least $1M of energy-efficient designs and upgrades at no out-of-pocket cost.  Next came a partnership with Grubb & Ellis, a global leader in commercial real estate.  And yesterday SE announced that they have acquired energy efficiency start-up AgileWaves.

Buildings use 40% of the energy consumed in the US and studies suggest a significant percentage is lost to waste.  Commercial buildings use more energy ($400B per year) than is used in automobiles and light trucks combined.  A Next10 report from last year pegged energy waste as high as 80% in some California buildings.  About 3% of all buildings in California are newly constructed or upgraded annually.  Only 60% of new buildings meet the greenest state’s standards for energy efficiency.  Remarkably, California does not have energy standards for existing building stock!

Up till now the playbook for reducing energy consumption consisted of the easy and relatively cheap conservation measures (adjusting thermostats), window films, fixture & lighting upgrades, operating changes and behavioral changes of tenants.  It is estimated that each dollar spent on these sorts of upgrades and conservation methods brings $3 of savings.

Upgrading building stock, changing the thermal envelope or even incorporating energy efficiency measures into new buildings is an expensive undertaking.  The Next10 study found energy-efficient buildings command higher rents and improve tenant retention.  Yet, even in California, there is a significant reluctance on the part of business owners to invest due to split incentives, high hurdle rates, lack of ROI data and capital requirements.  Designers of new buildings lack incentives to add best energy efficiency practices while shoddy installation and inspection make taking the extra time and money less attractive.

SeriousCapital is an approach to improve the chances that investment in energy efficiency will pay off for building owners by removing one of the significant hurdles in upgrading building stock – the upfront capital requirements.  SeriousCapital will pay all the upfront costs of improving the building or school or hospital.  In other words, SeriousCapital is offering a no risk financing aimed at ameliorating a building’s energy consumption.  The building owner sees no impact to their balance sheet.

SeriousCapital relies on a systems approach that  reduces costs to design, implement and operate which results in an efficient building that uses less energy without operating penalties or sacrificing comfort of the tenants.  Working with the building owner, SeriousCapital evaluates requirements, identifies attractive options, organizes a team, coordinates vendors, institutes Energy Conservation Methods (ECMs) and then helps monitor and tune the systems and operations.    Details of the accounting legerdemain are available here:  An Example of Energy Financing.