What do California schools need to save energy and money?

By Elinor Benami, Jeff Deason and Julia Zuckerman

California policymakers are currently considering how to allocate Proposition 39 funds — an estimated $2.75 billion over five years. Proposition 39, as passed by voters in November, requires that half of the first five years of revenue generated from closing a business tax loophole goes toward  energy efficiency and clean energy projects in California’s public buildings.

There is widespread agreement among legislators that these funds present a substantial opportunity to help California K-12 school districts save energy and money. However, one significant question under debate in the current budget negotiations is: “How can we target the money to get the most energy and bill savings possible?”

We explore this question in our recently completed study “Targeting Proposition 39 to Help California’s Schools Save Energy and Money,” which analyzes existing resources and gaps in financing energy-saving projects in K-12 school districts.

Based on this research, our short answer to the question posed above is that the best form for Proposition 39 depends on what financial and technical resources districts have available, and what they need.

We spoke with school district officials around the state and heard that they are actively looking to cut energy costs amid intense budget pressures. Interest rates are currently very low, making many energy-saving projects financially viable, and many districts can currently access private capital at low cost. These circumstances provide an opportunity to leverage Proposition 39 funds to help districts pursue projects with greater energy savings than they might otherwise.

Our analysis suggests that Proposition 39 funds can best drive energy savings in two ways.

First, provide flexible financial assistance to match the needs of the districts. Some districts have existing resources to support facility improvements; for these districts, Proposition 39 can provide “sweetener” grants to encourage them to reach further and achieve more energy savings. For districts that don’t have such resources, Proposition 39 can facilitate access to low-cost capital and provide supplemental funding to make more projects attractive. And for the most financially strapped districts, Proposition 39 may need to provide more generous support.

Financial support should account for the variation in districts’ financial resources and untapped energy savings potential, and should help districts build upon, rather than replace, existing sources of capital.

However, providing funds in and of itself is not enough.

To illustrate why, take the example of one small district we spoke with who had a solar panel installed several years ago through a utility program. The district official who dealt with that project has since retired, and the utility has not kept up regular contact. After recent budget cuts, the district is not currently doing active facilities planning; they are generally aware of the potential for cost savings through energy-saving projects, but they would need help getting started with any future projects — from identifying the opportunities to locating appropriate funding and financing options.

Many districts are interested in energy savings for the immediate budget relief they can provide, but most do not have the staff resources or time available to identify those opportunities, and access the low-cost capital required. As a result, they may be missing out on opportunities to save energy and money. Thus, a crucial role Proposition 39 funds can play is to provide technical assistance to help districts navigate their options, figure out what projects will work for them, and pull together the funding pieces. This assistance should not be limited to providing audits and advice about technology: A key role of technical assistance is to help districts identify and use appropriate and cost-effective external funding sources.

If Proposition 39 funding is allocated in a way that takes school district resources and needs into account, it can help schools start saving energy to close budget holes right now. Even better, it can help them do longer-lived projects so that the investments today can help California schools save money now and far into the future.

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Ed’s Note: Elinor Benami, Jeff Deason, and Julia Zuckerman are the authors of Targeting Proposition 39 to Help California’s Schools Save Energy and Money. Based in San Francisco, Climate Policy Initiative is a team of analysts and advisors working to improve the most important energy and land use policies around the world.