According to the USDOE, over 4.2 million commercial buildings waste an average 30% of their energy, causing a cumulative estimated excess cost of $60.7 billion in 2007. Given an 8% capitalization rate, the cumulative loss of real estate value is $750 billion.
A simple example applied to an individual building (from Energy Star): A 200,000 sf office building pays $2/sf in energy. Energy reductions resulting in a 10% decrease in energy costs translates into $40,000 in additional net operating income annually. Energy Star believes that common energy recovery opportunities range from 20%-40%.
Given this opportunity to turn wasted energy into newfound income and asset value, why aren’t all property owners and managers investing in energy efficiency upgrades? A Deloitte survey, reSources 2012, found that 90% of companies surveyed had energy management goals; and over two-thirds identified reducing energy costs as their main rationale. Yet, the survey also found that few companies had actually developed and implemented significant energy efficiency improvements. Many property owners and managers have one or more of the following impressions about energy upgrades:
• Improving energy efficiency is a complex, mysterious and unreliable process.
• Investing in energy efficiency is almost always expensive.
• Pursuing energy efficiency is risky business (due to overpromise and under delivery).
Each assumption has been shown to be incorrect based on real life examples. So, how can these fears be overcome? Be organized and address the following:
1. Perform a site-specific energy assessment led by an experienced professional. Make sure that data (energy usage data, bills, information about operations and equipment) is thorough and properly collected. Data quality is of prime importance. I once prepared an energy survey for the managers of facilities to submit to obtain such data. For groups of similar facilities, I expected a bell-shaped curve; instead I got some facilities that were listed as extremely efficient and others very inefficient. I was suspicious that errors or misunderstandings occurred during data entry. When I spoke to the client manager of the need to invest time to verify the data collected from the outliers, he started yelling at me that we must accept all data as submitted. He did not understand data collection. They invested money into energy reducing strategies at facilities that did not need it! The bottom line is that good, quality information reduces the fear that some may have.
2. Focus on your highest energy activities; identify multiple solutions. To reduce the fear of risk in energy upgrade strategies, it is critical to focus on big energy consumers and determine costs, reductions, and paybacks of multiple potential solutions. Obtain multiple bids and identify the best combination of solutions based on financial analysis.
3. Put all matters in writing. It is important to be transparent in the evaluation and calculations. Prepare professional memos or reports along the way, and don’t hide any data or reasoning for decisions.
Proposing this approach will reduce the fear that many C-level executives have about performing energy assessments and investing in energy waste reduction strategies.
CCES has the technical experts to help you prepare energy evaluations and audits to maximize your energy and cost reductions and gain the greatest business benefits in a reliable, programmatic, transparent way. Contact us today at 914-584-6720 or at karell@CCESworld.com.