The Benefits of Building Efficiency Go Far Beyond Energy Costs

Rocky Mountain Institute

The Benefits of Building Efficiency Go Far Beyond Energy Costs

This is the third in a Rocky Mountain Institute series on the steps business leaders can take to seize the economic and competitive opportunities outlined in Reinventing Fire: Bold Business Solutions for the New Energy Era.

America's 120 million buildings consume a prodigious amount of energy -- 42 percent of the nation's primary energy, 72 percent of its electricity, and 34 percent of its directly used natural gas. They use more energy than any country except China and the United States as a whole.

The opportunities are great and the challenges daunting to achieve the massive potential energy savings in America's building stock.

To businesses faced with a flood of information, concern about costs and dizzying complexity in finding the right solution for the right buildings at the right time, the challenge may seem a bit like navigating the Internet without a search engine.

Reinventing Fire, Rocky Mountain Institute's blueprint for a 2050 U.S. economy powered by efficiency and renewables, outlines opportunities for building owners, service providers and investors to grasp the enormous potential for savings and business opportunities to be gained from transforming the nation's buildings.

Much of this can be done with today's commercially available technology and several emerging trends point toward how to crack the code. A key challenge is to dramatically accelerate these nascent trends. That will take both leadership and a leap in awareness of the potential for efficiency gains.

Businesses can start now to seize their piece of a $1.4-trillion-net opportunity, first, by starting at home and then by finding ways to expand.

Starting at Home

Improving the efficiency of buildings isn't easy. One reason: there's just too much information. Google "energy efficiency" and you'll see questions surrounding everything from building science to greenhouse gas reduction targets to green rating systems. As a leader at your organization, you can focus the efficiency efforts -- and maximize returns -- with three key tactics:

1. Know your short- and long-term goals. "I want to cut my energy use by more than 40 percent. How do I achieve that?" Setting clear goals is an important first step. Then, to develop an execution plan, you can ask engineers, consultants, utilities and other providers for:

  • An integrated package of energy efficiency measures that maximizes net present value over a number of years.
  • Implementation advice and ways to engage the operating staff and other employees at your organization to leverage the behavioral upside from energy consciousness.
  • Guidance for how to clearly communicate the plan to senior management, track progress and make it visible to employees, and enlist their knowledge, imagination and enthusiasm.

2. Understand that timing is the biggest driver of the capital cost of efficiency. If right-timed, efficiency projects often end up as only an incremental cost. Every time businesses sell buildings or tenants turn over creates an opportunity to save energy and add value.

Working in harmony and synchrony with long-term building capital investment plans provides an opportunity to grab energy benefits much more cheaply, and in fact to build them into plans and projected building value.

3. Reward best practice design. Design professionals should be paid for what they save, not what they spend. This proven way of rewarding for efficiency savings ("performance-based design fees") can greatly improve design, both new and retrofit -- and help distinguish good designers in a crowded market. Designers should offer bids that way (at least as an alternative) and educate their clients to demand performance-based bids.

Early leaders in adoption of energy efficiency span the gamut, from sustainable design firms to global corporations such as Cisco and Skanska to government agencies including the General Services Administration, Department of Defense and FDIC.

Yet they share something important -- recognition of the value of energy efficiency beyond just cutting energy costs. Whether it's brand value, employee retention, shareholder demand, compliance, mission effectiveness or just doing the right thing, these entities are motivated to look at energy efficiency based on far more than a simple payback period.

Expanding your Business

These in-house strategies for large buildings or portfolios don't make sense for smaller, leased office spaces or a single-family home. These businesses and homeowners may lack the expertise or time to develop energy strategies, hire the right contractors and oversee the work. This is where the larger opportunity for business lies: selling energy efficiency services and products to the masses, which may or may not yet understand efficiency's many rewards.

Today, improving buildings' energy efficiency is a rapidly growing industry blossoming with new business ideas and models. Here are some ways business can profit:

  • Barrier-busting via products: Imagine cheap wireless energy stickers that, when placed on a device, a pipe or a duct, will measure energy flow and report it back to a central hub where it joins other data and pops up instant diagnostics. Information technology as well as sensor, materials, software and installation advances have not yet been applied to the energy efficiency industry with as much rigor as they've been applied elsewhere.
  • High-tech surveys and analyses: Energy efficiency is most challenging in existing buildings, especially homes. Cheap, new information technologies allow companies to cut the time and cost for surveying a building. As one engineer says of previous practice: "We've made it such an art to just identify improvements, we've limited it to people who are interested in high art." Improving the speed of adoption and increasing the scale (while not losing too much accuracy or depth) of energy audits and modeling will be critical to driving down costs.
  • Energy monitoring and feedback systems: To span the huge gap between energy use and energy awareness, companies are helping homeowners and businesses learn and cut their energy use. For the average homeowner, these systems aren't cost-effective based on the merits of information alone. But there's another party clearly interested in improving building intelligence -- utilities. Integrating monitoring and feedback systems with communication systems is the next big step. This not only helps with cost (utilities will probably pay for a big chunk), but also helps ease the transition to a smarter grid.

Looking forward, new types of efficiency service providers are needed. Those companies will combine the operational efficiency of Toyota, the sales approach of Avon, the scientific approach of Google, the product design of IDEO, the social engagement within Facebook and the hassle-free transactions of Amazon to drive up demand and drive down costs. Those who figure it out are most likely to capture the largest share of the $1.4 trillion net opportunity.

[Editor's Note: Don't miss VERGE DC (March 14-16) convening senior executives and thought leaders at the intersection of technologies and services related to energy, information, buildings, and transportation.VERGE DC will showcase how companies accelerate innovation, break down organizational silos, and bring new products and services to market.]

Building photo via Shutterstock.