UrbanLand Magazine recently turned out a thoughtful analysis, Energy Efficiency Markets Evolve Globally, of The 2011 Energy Efficiency Indicator (EEI) , the fifth time a global survey of real estate decision makers has been conducted by Johnson Controls. For the first time, ULI got into the research fracas with Johnson Controls, to analyze and release the results. The Building Advisor touched on the EEI a couple weeks back in Summer HVAC Wrap + BetterBricks Video, but nobody does serious data like ULI.
If you’re not familiar, the EEI is the last word, the “state of the union,” if you will, gauging the hearts and minds of of global executives and building owners responsible for energy management and investment decisions in commercial and public sector buildings. This year, the EEI surveyed 4,000 respondents in 13 countries on six continents and was conducted in eight languages. That’s a lot of bubbles to fill in completely with a #2 pencil!
‘Extremely’ or ‘Very’: Energy Efficiency Makes the Big Time
What you probably already know: as many as seven in ten executives globally say energy management is extremely important or very important to their organizations. Execs have pursued an average of nine different energy efficiency measures in the past year.
And what’s motivating them? Simply put, the rising cost of energy. We all know energy costs will keep on rising. It’s sort of like gravity – you can pretty much count on it. Up significantly in importance from 2010, however, is government incentives. With over half the states offering some kind of financial incentive for efficiency measures, execs are now listening. It’s sort of like getting cash back at the grocery store on a big ticket item: why not? Third biggest motivator was to enhance the branding of a building.
In fact, interest in certified green buildings doubled from 2010 and for the first time, certification efforts are more prevalent for existing buildings than new ones. Lower on the motivational list: reduction of greenhouse gas emissions, domestic energy security, and other government policies.
Now, the challenges: while the graphic to the left shows that 67% of executives surveyed report that they have allocated capital from their operating budget to energy efficiency in the last year, (yay!) significant market barriers to pursuing further investment (boo).
These barriers come in all colors and flavors, depending on market sector. From the report:
The five key barriers to energy efficiency investments reported in the survey are:
- lack of awareness of opportunities for energy savings;
- lack of technical expertise to design and complete projects;
- lack of certainty that promised savings will be achieved;
- inability of projects to meet the organization’s financial payback criteria; and
- lack of available capital for investment in projects.
For the contractor serving small to midsize buildings, it is interesting to note that respondents with control over more square footage in larger facilities report having implemented more energy projects than those with smaller facilities. But trickledown is sure to follow.
Four is the Magic Number
According to the EEI Survey, real estate organizations sharing the following four key strategic practices are most likely to get on the energy efficiency bandwagon, and implemented four times as many energy efficiency improvement measures as those that did not:
- goals established for reduced energy use or carbon emissions;
- energy use data measured and analyzed at least monthly;
- added resources dedicated to improving energy efficiency through the hiring or retraining of staff, or the hiring of external service providers; and
- external financing sources used for projects.
The Building Advisor can’t help making a couple of points here. For energy use data measured and analyzed at lease monthly, our Verify product for ongoing, continuous monitoring is the solutions. I mean, have you read what it did for J.E. Shekell in Smart Solutions (J.E. Shekell Uses Building Advice to Slash Energy Bills in Half ) or the NEWS (Facility Energy Audit Leads to Huge Savings)?
And in the second place, BuildingAdvice is like adding a team of expert management, sales, and engineering personnel acting as an extension of an HVAC Contractor’s current team to drive the development and ongoing execution of an energy services business. ‘Nuff said.
And Speaking of Incentives Changing the World
The Gray Lady’s Energy & Environment section reported on a $650 million private sector investment in energy efficiency for existing buildings in this week’s article, Tax Plan to Turn Old Buildings ‘Green’ Finds Favor.
It’s getting around that a retrofit can typically cut a building’s energy use so much that the project pays for itself in as little as five years. A new tax arrangement in Miami and Sacramento allows property owners to upgrade their buildings at no upfront cost, typically cutting their energy use and their utility bills by a third.
Lockheed Martin, Barclays Bank and some other big boys, headed up by Ygrene Energy Fund of Santa Rosa, Calif., have formed a consortium that will invest $650 million in such upgrades over the next few years.
The article called waste in older buildings “one of the nation’s biggest energy problems” and cited energy as a sector that could eventually be worth billions.
The meat of the plan is pretty genius: the constortium is kind of like a strip mall serving all of your energy efficiency needs in one stop. Ygrene and its partners gain exclusive rights for five years to offer this type of energy upgrade to businesses in a particular community. Lockheed Martin does the engineering work. Short-term loans come from Barclays Capital to pay for the upgrades. Then, “Contractors will offer a warranty that the utility savings they have promised will actually materialize,” the article states. Insurance underwriter, Energi, of Peabody, Mass., backs up that warranty. It goes on from there.
Best of all, owners pay no upfront cost for energy efficient upgrades. Instead, a surcharge is attached to subsequent property tax bills for five to 20 years. However, as the surcharges are less than the savings, the upgrades pay for themselves. Really. The new approach could garner substantial private capital for many midsize and smaller businesses to get on the energy efficiency bus.
In the past three years, half the states have passed legislation permitting energy retrofits financed by property-tax surcharges, and hundreds of cities and counties are considering such programs. The new financing approach is called Property Assessed Clean Energy, or PACE financing. PACE saw some serious backlash last year when an arm of the federal government that oversees the mortgage market took a hostile stance toward such projects on residential property, on the grounds that they add risk to mortgages. But, the article notes, “So far, it appears that PACE programs for commercial properties pose fewer legal complications.”
The consortium was put together by the Carbon War Room, a nonprofit environmental group based in Washington set up by Richard Branson, the British entrepreneur and billionaire, to tackle the world’s climate and energy problems in cost-saving ways.
Git Along, Little Doggie
“Perhaps the most serious risk,” the article notes, “is that fly-by-night contractors will be drawn to the new pot of money, pushing energy retrofits that are too costly or work poorly.
‘Contractors are cowboys,’ said Dennis Hunter, chairman of Ygrene. He promised close scrutiny of the ones selected for the Miami and Sacramento programs.”
What say ye to that, boys?
Ride ‘em, cowboy!