How Financial Innovation Is Giving Cities Jobs, Wealth, and Health | Big Think

[Music] So, so aging infrastructure is a huge contributor to high cost and actually poor public health in urban areas. The way that works is the utility companies, they have these power plants normally in kind of rural areas, a little bit further away from the cities, and then they have these huge transmission lines that they use to transmit the electricity to an urban center.

You actually produce a ton of electricity and kind of lose a pretty significant percentage of it as it moves. And so, there's already some costs that everyone is paying for through kind of older, inefficient infrastructure because of the inefficiency of the transmission lines. The actual age and inefficiency of the buildings themselves are also pretty expensive because they waste energy.

Right, so they're inefficient; they over-consume electricity per square foot. And so, that's how aging infrastructure really contributes to wasted electricity, and wasted electricity is expensive electricity. I mean, we're learning that when you green a building, when you do energy efficiency in a building, you're actually lowering the amount of indoor air pollution that gets trapped inside the building.

So, we're actually reducing asthma rates as we green each building, and lots of inner-city communities have lots of pollution. The pollution gets trapped inside the buildings; it drives high asthma rates. There are lots of families going into the emergency room with chronic asthma, so it's this huge public health crisis—it's a huge cost.

We know that there's all these benefits to greening buildings. You know, President Jimmy Carter put solar panels on the White House, I think in like the 70s, before I was even born, and started a green buildings program called the Weatherization Assistance Program, I think in like 1976. From then to now, from a policy perspective, we've been trying to figure out how to unlock the benefits of energy efficiency across America for decades, right?

Because we know that energy efficiency reduces energy costs for building owners; it's going to create local jobs, it's gonna reduce our dependence and reliance on foreign oil, and you know, it's just gonna be awesome all around for the environment. The challenge to greening the buildings is that each building is unique; it's custom, it has its own profile, its own history, its own performance.

You may have two buildings that were built at the exact same time, but the history of maintenance is totally different. The owners have been totally different, and the ways that the buildings are used are totally different. So, you have to learn about the profile of each building before you can make an energy efficiency intervention.

The cost of learning the profile of each building is prohibitive; it's too expensive. The cost of analyzing these buildings can be anywhere from five thousand dollars to five hundred thousand dollars, depending on the size of the building. It's a difficult thing to ask a building owner to pay that amount of money to kind of figure out what's possible to do in terms of sustainability.

So, that's problem number one. Problem number two is that banks are not comfortable providing capital to many of these buildings. As part of thinking through our CGI commitment, we had to come up with a range of solutions for the engineering problem and the financial problem to help green buildings in American cities.

So, what we've had to do at Block Power, as we worked with Goldman Sachs and Berkeley, is to develop a structured financial product. Its only reason for existence is to figure out how to analyze buildings and borrow money in aggregate and a large enough pool so that we can finance the green building interventions that we've made.

At Block Power, we've developed a set of technology, working with data scientists and the Internet of Things, that allow us to lower the building analysis cost by about 95%. We install sensors, we use cloud computing; we have an algorithm, a building science algorithm that we've built internally at Block Power that takes all of the real-time data that we're collecting from the sensors that we install in the building.

We analyze that real-time data and we're able to make recommendations as to what mix of solar panels, high-efficiency heating systems, and what ways we can kind of alter and optimize the performance of that building's energy system so that it saves money and reduces greenhouse gas.

We're able to hire locally to have local contractors come in and install solar panels, install new heating systems and boilers. So, the project's going really well. What's so interesting about these buildings is that they're really profitable investments, right?

So, if you can figure it out, you know, you can make investments in some of these buildings that have a 60% financial return. They pay for themselves within one year, and within two years, you start to make a financial return. In five years, you've made a 50% return; I mean, that's better than buying stocks, right?

There's just a lot of industry barriers in terms of engineering analysis, financial analysis, and construction implementation that stand in the way of getting green building projects off the ground. So, when we think, you know, five years from now, ten years from now, about how green technology can really increase efficiency, improve infrastructure, and lower costs, instead of burning fossil fuels at a power plant, you know, 50 miles away from New York City or from Boston, we can now have local solar panels, solar PV.

We can have local electric batteries that store electricity that's generated by those panels inside the city of Boston or inside the city of New York. The electricity is produced locally, it's transmitted locally, it's used locally. We're gonna save a ton of money; it's gonna be awesome for the environment. [Music]