10 Ways to Reduce Energy Use and Costs in Your Building

Octus participated in an energy project financing panel at this week's Sacramento Clean Tech conference, shouldered by experts from Ernst & Young, Morrison Foerster and Five Star Bank. Great conversation and content, with an underlying theme (at least from our seat on the podium): If you own or manage a commercial building, investing in energy efficiency improvements is the best investment you can make. Period. And, of course, we plugged the Octus/Five Star Building Energy Savings project financing program and other readily-available financing options.

The panel concluded with standard audience Q&A, including questions about how the economics of energy efficiency retrofits and project finance work, and how CRE professionals can sagely make it happen. We served up a handful of easy-to-consume morsels, both physical (retrofits) and behavioral. Time was short; unfortunately, we did not have an opportunity to orate, in depth, the myriad measures Octus employs to help slash utility bills.

If time allowed, we would/should have shared a top-10 list from Johnson Controls, as reported in GreenBiz.com, summarizing how you can reduce energy use and costs. Bread and butter stuff for folks in the energy- and building-efficiency space, but worthy of a recap:

1. Assess how your building consumes and wastes energy. Conduct regular energy audits to determine what condition your equipment is in and how it is performing. These audits will show where and how energy is being wasted and prioritize energy improvement measures.

2. Use more energy efficient equipment. Install new energy efficient equipment and replace or eliminate outdated, inefficient equipment. Look for Energy Star labels for equipment and appliances.

3. Match HVAC and lighting output to occupancy. Install programmable building controls that enable systems to provide light, heat and cooling to building spaces only when they are occupied.

4. Maintain equipment for maximum efficiency. Make sure that your equipment is properly serviced and maintained so that it runs as efficiently as possible. Increase operating efficiency of chillers, boilers and packaged cooling equipment through proactive service and maintenance.

5. Maximize lighting efficiency. Upgrade lighting to high efficiency bulbs and fixtures. Energy efficient lighting uses less energy and generates less heat, reducing your costs and easing the strain on your HVAC systems.

6. Measure water usage and waste. Conduct water audit in your facilities, campus, or geography to determine where water is being used and wasted. Reduce water consumption by installing low-flow equipment and fixing leaks.

7. Schedule cleaning during regular work hours. Experiment with different "day cleaning" schedules. Arrange cleaning schedules to overlap with work hours instead of having cleaning done after hours and keeping the lights, heating and air conditioning on at night. That will reduce energy consumption.

8. Insulate thoroughly. Insulate exterior walls, outlets, pipes, radiators, etc to reduce heat and cooling loss.

9. Meet LEED standards. Build, renovate, and operate your facilities according to Leadership in Energy and Environmental Design (LEED) standards. That will benefit your bottom line by lowering operating costs and increasing asset value. It will benefit the environment by conserving energy and water, reducing waste sent to landfills, creating healthier, safer occupant environments, and reducing harmful greenhouse gas emissions.

10. Make building occupants more informed. Educate and engage building occupants to promote energy conservation and reward wise energy decisions and behaviors.

Johnson Controls Paints a Promising Picture for the Future of Energy Efficiency

Johnson Controls is the world's largest provider of energy efficiency solutions for commercial buildings. While their approach -- provision of services as an ESCO (primarily for governmental organizations) and the sale of large-scale, proprietary energy management systems -- differs a bit from what we do at Octus Energy, our focus is the same: Generate sustainable energy savings through various means for commercial building owners. JCI is big brother. When they speak, people and companies and analysts take note.

At last week's CleanTech analyst day -- as summarized in an investment brief by analyst Canaccord|Genuity -- Johnson Controls shared a few interesting morsels:

The cleantech “megatrend.” Clean technology is now a “long-term global growth megatrend,” according to JCI management. Management specifically noted that buildings in North America and Europe, which together account for 40% of the world’s energy consumption and 70% of electricity usage, represent the single biggest opportunity for cleantech.

$24 billion opportunity. JCI estimates the energy solutions market is a $24 billion global opportunity, growing at approximately 9%-14% per year. Key market drivers for the energy solutions market include: 1) climate legislation and energy security; 2) corporate climate commitments; 3) volatile energy costs; 4) innovative funding models (including PACE, as Octus discussed here and here); 5) deployment of smart-grid technology; and 6) energy efficiency renewable resource standards.

Feds step up. Legislation and regulation are key drivers in the energy efficiency marketplace. In the United States, there have been energy efficiency bills in both the lower and upper house (the American Energy and Security Act of 2009 in the House and the American Clean Leadership Act of 2009 in the Senate). The Senate bill has been passed out of committee and includes the following features:

• National electricity and renewable electricity standard
• Energy efficiency building retrofit program
• Energy efficiency programs for states
• Building codes incentives
• Building performance information
• New clean energy deployment administration

Meanwhile, recent events in the Gulf of Mexico are spurring interest in energy and climate bills that otherwise would not have been brought up or passed this year.

PACE financing programs gaining momentum. Property Assessed Clean Energy, or PACE, is a financing solution that enables property owners to pay for energy efficiency, renewable energy and water efficiency projects via an additional assessment on their property tax bill over a five to ten-year term. The PACE program benefits building owners by: 1) eliminating the need for large upfront cash payments; 2) offering a competitive cost of capital; 3) solving credit rating collateral issues; 4) potentially moving the projects off-balance sheet; and 5) allowing owners to pass through retrofit costs to tenants. Johnson Controls echoed our sentiment that PACE financing will be one of the keys to unlocking the huge retrofit opportunity in the commercial building sector.

IT convergence. JCI sees the “smart building” as the starting point that is needed before a “smart grid” is even possible; again, echoing Octus's energy management and building automation strategy through our Smart Energy Platform. Put simply, the “smart grid” can’t analyze much without a “smart building” providing it with real-time information. The company noted that the integration of equipment and controls coming together in one product has been a major advancement for the industry.

Energy Efficiency Investments Remain Strong

We chime often about the outstanding virtues of investing in energy efficiency: The ability to slash energy costs, increase property values, bolster occupancy and lease rates, improve workspace environments, and reduce carbon impacts. Add to this the return-on-investment generated by investing in energy efficiency improvements -- typically in the 30-to-50% range, oftentimes higher -- and it's no surprise that such investments are mushrooming.

A global survey of 2,882 companies (the Energy Efficiency Indicator) released by Johnson Controls last week validates and amplifies the emerging opportunity. "These survey results indicate the growing importance on having energy efficient buildings that are cost effective and sustainable," said Dave Myers, president, Building Efficiency, Johnson Controls. A few snippets:

• Energy price increases: More than two-thirds of companies surveyed expect energy prices to rise, and many have made or are considering efforts to cut operational costs with energy efficiency retrofits.
• Illuminating savings: Among companies that have conducted energy efficiency retrofits, 73% modified their lighting, 64% trained building superintendents to be more energy efficient, and about one-third made larger investments, including replacement of HVAC units and installing efficient glass.
• Money, money: The biggest factor in energy efficiency investment for these companies is that the investment pay for itself -- quickly -- within three years.
• Making it happen: Sixty-three percent of companies surveyed plan to make capital investments in energy efficiency and 70% plan operating budget expenditures in efficiency programs over the next 12 months. And, 85% plan to make efficiency a priority in their new construction and retrofit projects.

"Despite the recession, decision-makers have put efficiency high on their agendas for 2010, especially those in India and China," said Clay Nesler, vice president, Global Energy and Sustainability, Johnson Controls. "It's encouraging to see that the financial returns and environmental benefits of energy efficiency investments are recognized in all regions around the world."

Five barriers to energy efficiency savings: What we can learn from Google and GE

Google and General Electric know a bit about making money and creating shareholder value. It's no surprise, then, that they're sages when it comes to energy efficiency. A panel discussion at a recent Fortune Brainstorm Green session -- which included Google’s Green Energy Czar Bill Weihl and Gretchen Hancock, project manager for corporate environmental programs at GE -- germinated a list of five key roadblocks to energy efficiency. First, a panel primer from the Environmental Defense Fund's Innovation Exchange:

Here’s a business conundrum for you: energy efficiency saves serious money, cuts carbon pollution, requires low tech solutions, and is a known quotient, having been around since the 1970s. So why are so many companies still not taking the necessary steps to identify and eliminate these inefficiencies?

“What we learned in Econ 101 doesn’t hold true when it comes to energy efficiency – the notion of perfect markets, where information flows freely and people are maximizing their value,” notes Environmental Defense Fund’s Gwen Ruta. “Instead, it’s as if companies across the globe are walking around with a hole in their pocket with coins dribbling out nonstop.”

How is it that smart companies who are vigilant about monitoring the bottom line, stock price, customer satisfaction and much more let this wasteful “dribbling” occur? This question launched a robust discussion at a Fortune Brainstorm Green session last week titled “A Trillion Dollar Opportunity: The Hunt for Energy Efficiency.”

We posit often about how companies and property owners leave money on the table; dribbling coins (nonstop) from their pockets is a new one. What are the main barriers to energy efficiency and how can companies try to overcome them? According to Innovation Exchange's recap:

Barrier #1: Information overload and lack of focus. There’s a ton of information out there about energy efficiency – and what companies should do to reap the savings – but it’s diffuse and challenging to wade through. Companies need help focusing in on the right tools and content and prioritizing where and how to begin. GE conducts through regular energy “treasure hunts” inside a given company where selected employees come together for a jam-packed three-day working session to identify energy efficiency savings at a chosen manufacturing site. The results are impressive – each treasure hunt typically identifies opportunities to reduce energy spent by 20% – and proves that when people have the information, data and focused time to spend on this challenge, huge savings can be found.

Barrier #2: Structural limitations. This is a big one. Companies of all sizes suffer from a siloed approach to business, where business units and operational departments are managed by separate budgets, performance timelines, product cycles and more. Finding energy efficiency savings requires employees throughout the company to share information and make trade offs in order to achieve strong results. For example, there may be an increase in cost to the R&D budget around energy efficiency efforts, but balanced by a result in savings that will show up in the facilities management budget. Most likely, these two divisions communicate rarely and have little in common – including different bosses who may not communicate well among themselves, either. Why would one take on a cost for the other to reap the savings? Google takes a “total cost approach” that is geared to precisely avoid this problem. And GE’s treasure hunts bring cross-functional teams together over the three-day activity which by definition helps break down silos. According to Gretchen Hancock, the more people from different departments are involved, the better the results of these treasure hunts are.

Barrier #3: The solutions are small and diffuse, not few and mighty. There is no single “gee whiz” step that companies can take to ensure they are reaping all the benefits of energy efficiency for their organizations. It takes time for companies to unearth where and how they can save both cash and carbon through energy efficiency. Some employees may be attracted by bigger, more appealing sustainability projects or cost savings efforts that are being considered or launched by their company. To avoid this problem, the hunt for energy efficiency savings should be institutionalized throughout companies as a continuous process, not one-off events. Energy efficiency savings should be one of the metrics that business units are evaluated on, and therefore, regularly measured and reported on.

Barrier #4: Cultural resistance within companies. As Gretchen Hancock noted, some companies hear the phrase energy efficiency and think, “Didn’t we tackle this problem in the 1970s?” In companies where innovation and excellence is the expectation and the norm, executives may believe that the “low hanging fruit” of energy efficiency is either too low-tech to consider or has been dealt with decades ago. But the fact is that energy efficiencies exist where even super bright executives might not expect to find them. Aging equipment can cause inefficiencies, new technology enables new savings and employees need to be trained and retrained on efficiency issues and practices.

Barrier #5: Those super-short ROI expectations. We all know how Wall Street expects speedy ROI for corporations across the board. As a result, public companies have a strong disincentive to invest in processes, products or technologies where recouping the costs may take anywhere from 1 to 5 years. This short-term thinking leads to short-term strategies, and serious money being left on the table.