IREE certification provides energy efficiency programs a pre-built technical due diligence process.
Project quality is core to any energy efficiency program. Historically, program providers have had to develop and maintain costly technical due diligence processes to ensure project quality. Investor Ready Energy Efficiency (IREE) certification eliminates this need. The certification offers program providers an alternative, market-based, due diligence through an industry-developed quality assurance process.
Developed by the Environmental Defense Fund and now administered by GBCI, IREE certification was created to bring standardization to energy-efficiency projects which have been plagued by unnecessarily high transaction costs and underwriting risk. By providing the market a uniformed project development workflow and validation process, IREE reduces the costs of developing, maintaining, and executing project due diligence. IREE certified projects must be developed using standardized protocols and reviewed by a GBCI approved third-party Quality Assurance (QA) Assessor. This quality assurance process reduces performance risk, giving investors more confidence in expected project cash flows.
“IREE gave us a process to obtain reliable energy savings estimates which are needed to size loan payments in our on-bill financing (OBF) program,” says Peter Thompson, Principal, Energy Efficiency Finance at Pacific Gas and Electric (PG&E). “This is a huge benefit. But, perhaps, more importantly, IREE certification allows this process to be led by project developers, rather than the due diligence process being managed by ourselves, meaning more projects are being realized more quickly.”
Growth in PG&E’s OBF program – Alternative Pathway (IREE certification) vs. Incentive Pathway
By opening quality assurance up to a market of QA Assessors, IREE ensures that technical due diligence does not become a bottleneck. Project developers can choose from a variety of qualified Assessors. This protects against project realization being dependent on the bandwidth of the program provider’s diligence team. The market-based approach to diligence has a built-in scaling mechanism.
In the past, PG&E’s OBF program was tied to its incentive program. Developers could only access an OBF loan if they were seeking, and approved for, an incentive. In 2020, PG&E embraced IREE certification as the due diligence process for developers to access a zero-interest OBF loan without an incentive.
“What’s been most surprising is that many of our developers prefer the use of the OBF program without the incentive,” explains Peter. “The flexibility offered by IREE certification has driven them to the option that provides less financial support. It's been a real success as it has reduced the cost of meeting our energy efficiency targets.”