Jason Gregory, co-founder & CEO of EnergyRM, explains the deep energy efficiency and its importance. He discusses the long term goals of EnergyRM that include converting energy retrofits from a liability to an asset on the balance sheet of commercial buildings in order to create a new ecosystem for investment. With an impressive background in marketing, software development and energy consulting, Jason is best placed to understand the dynamics of energy usage in commercial buildings. EnergyRM’s DataMeter software technology analyzes the energy balance of commercial buildings, facilitating the release of stakeholder investment in energy efficient retrofits.

Covered in the episode:

Tell us a little bit about EnergyRM and what you’re up to in the world… [0:38]

“EnergyRM is a software company based in Portland, Oregon – we are on a mission to unlock investment in deep energy efficiency at scale. We do this in the commercial built environment. The non-residential sector, at least in the US domestically, consumes 51% of all energy consumed either directly by the buildings or through the generation and distribution of energy resources. And the commercial sector, specifically, is the largest untapped sector for energy efficiency. So we have a software platform as well as an energy efficiency transaction structure that together form the backbone to monetise energy efficiency investment.”

What is deep energy efficiency, and why is it essential for commercial buildings? [1:00]

“We have defined it at EnergyRM as a depth of energy efficiency equalling 25% reduction in energy consumption, or greater. As we look at the latest Department of Energy studies from the US DOE, as well as other market research, we know that typical buildings in the commercial building stock stand to reduce their consumption by 30 or more percent on average. One of the latest studies I read suggested that typical buildings in the US could save 43% on their energy consumption with existing technologies already in the marketplace. The challenge becomes how does one pay for those energy efficiency improvements in a way that truly unlocks the wall of capital that wants to be deployed to achieve these outcomes?”

What is the challenge in getting this into all commercial buildings? [3:26]

“This starts with owners of commercial buildings who typically don’t invest in projects for energy efficiency, primarily because all of the benefit from that investment flows to the tenants of those buildings in the form of lower energy bills. We also know that tenants don’t often improve the spaces they occupy because they don’t own the building and don’t plan to stay for particularly long periods of time, nor do they have access to some of the equipment that might need to be upgraded or improved as part of energy efficiency retrofit. We also know that tenants aren’t willing to pay, in most cases, a higher rent in exchange for lower energy bills. And then we continue these misaligned economic interests to energy service companies, who typically deliver energy efficiency projects, whose contract structures often sit on the building’s balance sheets as liabilities.”

So, how do you persuade stakeholders to understand the benefits of investing in deep energy efficiency? [5:25

“EnergyRM has software, combined with a transaction structure, that our customers use to monetise investment in energy efficiency. We see energy efficiency as an investment opportunity that, if given the opportunity to monetise that investment, to create cash flows for the business, they would take that step. Our software is a transactable software-based energy efficiency meter that we refer to as the DeltaMeter. The input data uses the utility billing data for all fuels that serve a building, so this isn’t just electricity, but can be natural gas, steam, chilled water, propane, fuel oil, really anything that’s part of the energy balance of the building. It’s important to look across all of those dimensions when planning a deep energy efficiency retrofit, as interventions or measures within buildings tend to interact with each other, and you want to look at that entire picture as a whole. And we do what’s referred to as load desegregation; we take the energy balance of the building and break it down into induced categories. We’re able to see what part of the energy balance is attributable to things like heating, cooling, baseload lighting, domestic hot water heating and so forth. And then we’re able to also give users the opportunity to prospect large building portfolios, so if you have several to many hundreds to thousands of buildings, we’re able to process that data set and look very quickly across the portfolio to identify buildings with the greatest energy efficiency opportunity, which then allows for the planning and execution of deep energy efficiency retrofits.”

How did you end up being able to identify this software as a solution to address this gap in the sustainability market for commercial buildings?[12:55]

“I don’t think I can take all of the credit for that! I’m lucky enough to work with a team of energy engineers working with the commercial building stock for many years. I devised a way to construct very robust models, physical thermodynamic models of buildings, and how they consume energy using very simple input data. And that was really the genesis of the DeltaMeter as our first product to market. We’ve been commercialising our software and our business for the last year and a half in earnest, and have been building on that core intellectual property that our customers use as a point solution to meter projects that are already engaged in, to bring independent unbiased metering in as part of the transaction; and then we have other customers who use the entirety of our software platform as well as the transaction structure to facilitate the entire process.”

So you’re able to tailor your service to different requirements so stakeholders can get what they need? [14:02]

“Yeah, that’s true. And, to build on that, I think there are so many really great energy engineers, energy service companies and other firms that really understand how buildings operate. They may have their own products and solutions, they may leverage ones that are available in the market that have been brought together by others – and we don’t see ourselves as a replacement to these folks at all. In fact, we rely on these types of partners to plan and deliver and, in some cases, maintain the energy efficiency improvements that these investments make within buildings. That’s an important differentiation – EnergyRM isn’t an energy service company. We’re not the conduit through which capital is deployed; we see ourselves as the facilitating party that works to bring all of these groups together to achieve the results. Our success as a business is going to be tied to the success of our customers and our partners and other market actors who have worked very hard for a long period of time to really build out the ecosystem required to deliver meaningful energy efficiency projects. We come as this facilitating party, to bring the groups together and unlock this investment potential that exists in a commercial building stock in a way that produces really great outcomes.”

How can we distil the concept of energy balance in a commercial building into an understanding of the energy balance in residential properties? [15:59]

“It’s one thing to replace ageing lightbulbs and light fixtures with high efficiency fixtures and LED light bulbs. It’s another thing to look at a building in its entirety and say, Okay, what are the pieces and parts that need to change and work together as a whole system, to actually get to 25% depth of energy consumption reduction or greater? And what we find is that these types of interventions, whether it’s lighting, HVAC, whether it’s controls, whether it’s things specific to the building’s shell, even including windows, they work together in concert when planned well, to optimise the energy efficiency outcomes of the whole. Our software allows users to create comparison models that are reflective of proposed or prospective changes to be made to the building. One of the demonstration instances we do is we might modify the lighting intensity on a wattage basis for the facility in one of these models, and compare the originally fit baseline model to this proposed project model. We see, as you would expect, a reduction in electricity consumption attributable to lighting; you also see a reduction in electricity consumption specific cooling load of the building, because the bulbs are putting off a lot less heat than with incandescent or fluorescent bulbs; but you’ll almost always see an increase in natural gas or other heating fuel increases as well, for the very same reason that the cooling load is reduced – the heating load is increased because the lights are not putting off nearly as much heat into the space.”

What is your long term vision for EnergyRM? Where do you want to see EnergyRM by the time we hit 2030? [24:10]

“I see EnergyRM as the standard for monetising energy efficiency investment. I think our software is used to do that, as well as the transaction structure [which] becomes an industry standard financial instrument that’s accepted very, very broadly. I think we’ve made a very material impact on the portion of that commercial building stock that we’ve identified as our target. I also think, by 2030, we’ve done a really good job of turning energy efficiency into its own asset class. And by that I mean, when we look at properties in the built environment, there’s the land that a building sits on – that is its own asset; there’s the building asset that sits on the land and can be bought and sold; and what we’re working to do is create a scenario under which the energy efficiency investment creates an energy efficiency asset that can be transacted separately from the building and separately from the land. That’s really important when we look at long-term energy efficiency projects and contracts, because it needs to be able to survive the building being bought and sold. It needs to be able to survive tenants moving in and out. But it also needs to be able to create a secondary market for the energy efficiency asset or the future energy efficiency cash flows.”