Energy efficiency upgrades are often at the bottom of building owner or manager’s list of priorities, particularly for smaller buildings, defined as under 25,000 square feet, which comprises nearly 90% of US commercial building stock. According a 2015 report published by National Institute of Building Sciences (NIBS), entitled “Financing Small Commercial Building Energy Performance Upgrades: Challenges and Opportunities”, owners face several challenges in terms of financing such projects. NIBS recommends that government and other organizations make it easier to obtain credible financing.

Barriers to Energy Efficiency for Small Commercial Building Owners

According to the document, the main barriers are skepticism that energy retrofit projects will actually deliver the financial benefits calculated, financing, and technologies favoring larger buildings. Delivering benefits leads to three discussions.

Building owners, like most business people, crave certainty. While the engineer can explain the likelihood of the success of the retrofit, the owner – not knowledgeable about technology – is naturally skeptical about things they don’t personally know. Also, management usually does not have experienced staff who can review and oversee specific design and building performance vis-à-vis energy efficiency.

Second, management tends to focus first on urgent repairs and delay long-term upgrades. There are not many periods when there is not something crucial pending. Management culture, therefore, is more day-to-day rather than long-term. What then often happens is that management is forced to implement an upgrade because of failing equipment, putting the team under pressure, costing more money, and limiting options.

Third, building management tend to look at investments in the short-term if, for no other reason, their salaries/bonuses/promotions are based on short-term profit.

Another issue is financing which is potentially troublesome for many building owners who often borrow for other types of projects and may have checkered histories.

Finally, most strategies to improve commercial energy efficiency are more financially beneficial for larger buildings than small ones. Since there is a base price for a technology, building it larger or being more comprehensive does not add a lot to the cost, but could be more effective in reducing energy use. Smaller buildings do not get the potential benefit a larger building with more tenants and activities do.

Overcoming These Obstacles

One way to overcome the skepticism is to have the energy specialist come in with turnkey solutions. The company will develop the opportunity, bring in the proper vendors to design, build, and install the technology, and test it to ensure that minimum standards are met. One company that the building owner trusts oversees all aspects gives that owner more confidence that the implementation will be proper and goals obtained.

The NIBS report recommends that government, and, particularly, the federal government, link existing loan and other programs to assist small businesses. Existing Small Business Administration loan programs do not address energy or environmental upgrades. Working with the Dept of Energy, such programs focused on realistic energy savings and upgrades can be successful.

Property-assessed clean energy (PACE) and on-bill financing are options the report recommends. PACE loans are repaid through property tax assessments bills and are administered by government and considered higher-priority than mortgages. On-bill financing programs fund retrofits via utility bill savings over time.

Loans specific to upgraded equipment loans, managed energy service agreements, and real estate investment trusts (REITs) may also encourage more energy upgrade projects. In managed energy service agreements, customers pay an energy firm a set straight energy fee. The firm pays the utility what is actually used and makes money from the difference, which occurs by making the building more energy efficient. The firm takes the risk and the owner pays a set fee.

Understanding the building owner/manager’s culture and pressures will make it easier for energy professionals to propose energy upgrade projects which don’t just make technical and financial sense, but also makes the owner comfortable about success and minimizes risk.

CCES has the experts to evaluate any type of building and develop and project manage energy saving projects with a robust payback and to improve productivity at the same time. We can see projects from initial design and calculation to final. Contact us today at karell@CCESworld.com or at 914-584-6720.