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Without question, the nearly $800 billion American Recovery and Reinvestment Act will undoubtedly accelerate adoption of next generation building technologies. Let’s see how…

According to publicly disclosed details, in the short term, we estimate roughly $100 billion in stimulus money will flow toward renewable energy and energy efficiency projects. Of this, we estimate roughly $45 billion will either directly or indirectly impact green building construction. Considering that by some estimates, green construction’s share of the total construction pie in 2008 was somewhere less than $100 billion, this looks like a massive down payment towards the industry’s future by all accounts.

Consider some of the bill’s specifics — for example, retrofitting existing building stock — $5 billion has been allocated for weatherization of low income homes, including retrofits for energy efficient windows, insulation, and doors. An additional $10 billion will be spent on retrofitting public sector buildings. Assuming some trickle-down effect, billions of dollars will result in large paydays for energy service companies (ESCOs), energy consultants, builders with retrofit services, and most importantly from our standpoint, innovative green building technologies like energy efficient windows, doors, insulation, lighting, and building management systems just to name a few.

In addition, many public-policy experts suggest that the investment could create up to 100,000+ jobs, while saving the government more than $1 billion in annual energy costs. To help put this $1 billion of annual potential savings in perspective, this could help trim by 15% the $6.5 billion in energy costs that the government annually spends. And clearly it would cut back on pollution - federal buildings account for nearly 10% of global carbon dioxide emissions, according to the DOE. (http://money.cnn.com/2009/02/13/news/economy/federal_building_stimulus/index.htm)

Beyond retrofitting buildings, our electricity grid will be primed for a “smart” overhaul, with $30 billion in stimulus money earmarked for the rollout of smart grid technologies that will better optimize our current supply base, while seeking to incentive utilities and consumers to use energy more wisely through measurement and monitoring. While many consider the $30 billion to be just the “seed capital” needed for a complete grid overhaul (estimated at $200 to $300 billion), this investment will stimulate a broader movement toward smart grid investments at the local and state levels and incentive further private investment into this sector of the economy. This means large new markets for smart meters, demand-response systems, energy storage systems, intelligent appliances and devices, and building monitoring, automation, and control systems - all exciting emerging areas for venture capital investors.

Other notable indirect features of the bill include: (i) the expansion of tax credits through 2010 for investments in energy efficient home measures, (ii) $6.3 billion in grants for businesses investing in energy efficient or renewable energy manufacturing capacity, and (iii) $2.5 billion in investment in energy efficiency and renewable energy R&D.

As mentioned earlier, $45 billion in green building spend as a percent of the total $1.4 trillion construction industry is a relatively small percentage (3.3%), but more importantly, a much larger share (32.0%) of green construction’s projected market share in 2009 — $140 billion according to McGraw Hill — (http://www.environmentalleader.com/2008/11/20/green-building-could-hit-140-billion-by-2013/).

This spending will inspire next generation green building technology companies like Serious Materials, as evidenced in this linked article, to scale up capacity by 10x in this case, (http://www.dwmmag.com/index.php/serious-ceo-talks-about-acquisitions/) to produce energy efficient windows as the demand for such products is likely to explode in the months and years ahead. Longer term, this spending will further speed up the transition of the construction industry to smarter, greener practices as builders, designers, and owners who have been reticent to change will be either pushed by government or inspired by the market to change.

In summary, green building technologies will benefit tremendously from this package both in terms of short term market creation and the longer term shift in mindset toward better building practices. The leap of faith of course is that some of this $45 billion in spending will result in purchase orders for emerging technology companies, but when were talking about this many dollars and an emerging sector with limited real competition, the odds are looking pretty good from our vantage point.

By Sari Krieger at Dow Jones

11/25/2008 - Berkeley, Calif.-based venture capital firm Navitas Capital is near to closing its first fund of between $35 million and $50 million, which will be invested in green-building technology companies worldwide, Clean Technology Insight has learned.

Navitas Managing Partner James Pettit said in an interview that he expects the fund, which has a 10-year lifespan, to close in January.

San Mateo, Calif.-based green construction company Webcor Builders Inc. has already signed up to provide some of the money, Pettit said, but he wouldn’t disclose how much. Webcor Vice President Phil Williams will join Navitas Capital’s advisory board, according to a statement.

The fund will include investments from high net-worth individuals and others.

“We think green building as a component of venture capital is going to be a very big segment,” Pettit said.

When asked why he’s launching a fund during a tough credit market, Managing Partner Travis Putnam said in an interview that he thinks some of the best companies will grow in this down market as a lot of larger, established companies are struggling to survive.

“We will be investing in early stage technology companies that have a unique innovation for the green building market and that can be anywhere from the materials that go into the building, to the systems that operate the building, to the information management side of the building,” Putnam said.

Navitas led a $2.7 million venture capital round for Los Altos, Calif.-based green concrete company Integrity Block in June. Pettit and Putnam invested some of their own money on behalf of Navitas.

Before launching a green building investment business, Pettit worked in investment banking for 12 years, part of that time as a managing director for J.P. Morgan & Co. He then spent six years working as a partner at Manhattan Beach, Calif.-based real estate investment firm Bancroft Capital.

“After being involved in a real estate investment project in Boulder, I saw better the environmental urgency as well as the growth potential of green building moving from the fringe to the mainstream,” Pettit said.

Putnam said he spent five years as an investment banker for Los Angeles-based Murphy & Associates Capital and three years as a construction industry consultant prior to starting this firm.

“Jim and I have been looking at this sector of clean tech since 2005, and in our view, green building crossed the tipping point in mid-2006,” Putnam said. “The paybacks were attractive enough where builders and developers were starting to adopt green building practices. It’s the perfect storm right now of policy-driven markets and financial returns driving the market and you have rapid acceleration of green buildings. Even in a down construction market, builders and developers are looking to differentiate themselves.”