Private Sector: Repay Energy Improvements with Consequent Savings

Around the New Year, I received an ambitious invitation to provide research and policy analysis to University UNITED, as they pursue a stated goal to “make University Avenue the greatest street in America.”  UNITED is a coalition of regional boosters and community organizations currently working to maximize the impact of the coming light rail investment along the most prominent street connecting St. Paul and Minneapolis, Minnesota. I have since that time been coordinating research on business improvement districts and other policy measures for UNITED.

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In addition to its advocacy of transit-oriented development and concentration of urban tax base generally, UNITED has of late become more involved in efforts to evaluate carbon emissions for University Avenue and the region, and facilitating efforts to engage private partners in reducing the local carbon footprint. 

UNITED is working with partners to fill a key role in the process of managing emissions:  With HK Climate Solutions, UNITED is aggregating warehouse and office space along University Avenue into packages exceeding one million square feet.  Together, these buildings are then inspected for energy-conserving capital improvements, which are installed by third partner Johnson Controls.  Broadly speaking, the cost of the improvements is financed by Johnson Controls and repaid from the energy savings generated.  Once the equipment is paid for – and it’s typically amortized over ten years – all of the energy savings (which range around 20-50%) flow to the building owners.

Eddie Krakhmalnikov and Executive Director Brian McMahon are running the program, dubbed the University Avenue Green Street Initiative.  Krakhmalnikov says the real estate investors involved in the retrofits know the energy improvements “have huge effects, and are good not only for their image but their bottom line as well.”

Yesterday’s Star Tribune article on municipal efforts to manage carbon emissions noted that in St. Paul’s case, only 2% of emissions are from public sources.  Anne Hunt, aide to St. Paul mayor Chris Coleman, suggested that “trying to engage the private sector is going to be a big challenge.”  The promise of the UNITED/Johnson Controls/HK Climate Solutions initiative may well prove it surmountable.

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