“Fixing insulation and leaky windows isn’t as sexy as saying, ‘Look at our new solar installation,’ but for every $1 spent you will save more on energy efficiency than a solar array.” –Stanford University engineering professor Jim Sweeney

Last month, Californians passed Proposition 39, which closes a tax loophole exploited by out-of-state corporations that is expected to generate $1.1 billion for the state per year until it sunsets in 2018. For a state struggling with financial insolvency, that extra billion will help a lot, but perhaps the most significant aspect of the bill is that it requires that half of the money generated from the loophole go towards energy efficiency retrofits at government buildings and schools.

According to an article about the bill posted over at the Huffington Post, by the time the bills expires five years from now the state should experience a windfall of $550 million per year ($2.75 billion in total), earmarked specifically for those retrofits. That money will help fund installation of energy-efficient light and HVAC, along with improved building envelopes (windows, insulation) and energy management systems.

While renewable energy often gets most of the press when it comes to smarter energy use, the truth is that retrofits like those highlighted in Proposition 39 can actually give facilities managers a bigger bang for their buck. In fact, a study released last year by EPA declared that public schools could reduce energy bills by 20–40% through simple energy efficiency upgrades. Those savings translate into several thousand dollars per year.

And while the California Energy Commission has supplied $132 million in funding for public building retrofits, that money came from ARRA funds that are no longer available.

The hope is that success in the public sector could lead to even greater energy efficiency retrofit investments in the private sector: a “demonstration project” for property owners. As Tom Steyer, the San Francisco financier who bankrolled the Proposition 39 campaign, explains to the Huffington Post, “If we do this well and people see it as money well spent, as an investment that should be mimicked in the private sector, then this could be a very big deal.”

Steyer points to the Empire State Building’s energy efficiency upgrade—which we’ve covered many times in Distributed Energy—as an example of the enormous financial impact of building upgrades. The Empire State Building project cost about $13.2 million, but is calculated to cut energy costs for the building by 38%. Additionally, it’s anticipated that the project will pay for itself by 2016.

Critics worry about corruption and wasteful spending. Because Proposition 39 does not include specific details about how the money will be spent (though it does specify that the money should be spent on energy efficiency retrofits at schools, colleges, universities, and other public buildings, along with some funds for job-training programs), taxpayer organizations and lobbyists are concerned the money will not be spent effectively. 

But supporters counter that the bill includes oversight and specific implementation procedures. As Joe Caves, an environmental lobbyist who wrote the measure, explains to the Huffington Post, “It’s got to go through existing public agencies, and the projects have to be evaluated as cost effective.

“It’s not like legislators are going to be able to say, ‘I want $100,000 to go to this project or $50,000 to that one,’” continues Caves. “…they can’t make grants to private businesses. We built in a lot of controls.”

State Senator Kevin de Leon (D-Los Angeles) reiterates that commitment, telling the Huffington Post, “It’s not going to be a program of pork. We are going to go to schools of highest need, schools that don’t have the resources to move forward with energy efficiency programs, and do the work there and create jobs.”