Seeking to Expand Innovative ‘MEETS’ Model, Seattle Approves Pilot Program for up to 30 Commercial Buildings

On April 11, 2018, Seattle Mayor Jenny Durkan signed legislation authorizing Seattle City Light to enter into long-term energy conservation contracts for up to 30 commercial buildings using the innovative Metered Energy Efficiency Transaction Structure (“MEETS”).  The new legislation will allow commercial building owners to profit from deep energy efficiency retrofits undertaken in their buildings, while at the same time advancing Seattle’s long commitment to energy conservation and providing new opportunities for financiers and energy management companies.

MEETS, pioneered at Seattle’s ground-breaking Bullitt Center, addresses one of the most pernicious barriers to energy conservation – the “split incentive” between commercial building owners and tenants, in which news072413light.jpgtenants benefit from conservation measures but building owners pay for them.  Despite the Northwest’s otherwise enviable record of energy conservation, the “split incentive problem” has bedeviled energy conservation efforts for decades, leaving the commercial building sector lagging the region’s substantial conservation achievements over the last four decades.

MEETS (referred to as “Energy As A Service” in the council legislation) overcomes the split incentive problem by providing a precise measurement of how much energy has been saved by conservation retrofits, an advancement made possible by the innovative metering technology that measures both energy actually used and energy savings.  Those savings are then monetized, creating a payment stream that can be used to repay long-term financing to support deep energy efficiency retrofits.  The long-term financing makes possible energy conservation measures that are uneconomic using standard utility energy incentive programs, which generally require a pay-back time of two years or less.  Deeper conservation measures produce substantially greater long-term conservation benefits.

MEETS also creates a stream of payments to the commercial building owners who participate in the program by treating energy conservation potential as a resource that can be monetized and sold.  As a result, building owners can now enjoy revenues from a source that has remained largely or entirely untapped in the past.  At the same time, by treating conservation as the equivalent of new energy generation, MEETS eliminates the perverse incentive for utilities to discourage conservation in order to maintain the sales volume.  The innovative transaction structure also creates new opportunities for energy management firms, conservation contractors, and financial institutions interested in investing in a repeatable transaction that can produce steady and predictable profits.

CH& is proud to have helped develop the model MEETS contracts and to be a sponsoring member of the MEETS Accelerator Coalition, which played a key role in advancing the Seattle legislation.