Why efficiency is smarter than renewables

As it happens, markets by themselves are driving some efficiency gains. Johnson Controls, which organizes the energy efficiency forum, just released a global survey called the Energy Efficiency Indicator, which delivered mostly good news on the building efficiency front. JCI’s Dave Myers reported that 83 percent of the 3,500 global respondents said they were planning to spend as much or more money this year as they did last year  to make their buildings more efficient. That’s impressive, given the sluggish global economy, and with uncertainties hanging over Europe. “Energy cost savings, and the savings in dollars, continue to be the No. 1 driver of investment,” he said. No surprise there.

The question is, how can building efficiency by driven further and faster? Sometimes, the payback from investments — in lighting, heating, cooling, windows, whatever — takes more than two or three years, or there are split incentives between building owners (who might have to invest the capital in the infrastructure) and tenants (who pay the bills). Other times, building owners can’t come up with the financing to pay for capital improvements, even if they would pay back quickly. That’s where policy, which can take the form of carrots or sticks, comes into play.

In my capacity as a senior writer at GreenBiz.com, I moderated a panel on building efficiency at the forum, where we talked about how to speed up progress. Right now, it struck me that we’re relying on carrots, and mostly non-financial carrots at that. Maria Vargas of the U.S. Department of Energy talked about the Better Buildings Challenge, which she oversees; it’s a program that offers recognition to companies that agree to cut their energy consumption by 20 percent by 2020, and dozens of big companies have signed up. Roger Platt of the nonprofit U.S. Green Building Council described the rapid growth of LEED-certified buildings, and Greg Hale of NRDC’s Center for Market innovation talked about the group’s pioneering efforts to bring building owners, tenants and energy services companies together to retrofit existing buildings, and then share what they’ve learned across the real estate industry.

All of this is laudable, but I wondered whether the efficiency industry needs either more powerful carrots or a few sticks. If we can agree, for example, that the government should provide tax credits or incentives for renewable energy, shouldn’t it do the same for efficiency? Right now, if I put solar panels on my roof, I get a 25 percent federal tax credit. I can’t get the same tax break for insulating my attic or installing windows that will save energy.

Alternatively, building codes could require contractors to meet minimal efficiency standards (such as California's innovative Title 24). “Having a minimum standard would be really good for this country,” Platt said. Or the government could provide low-cost financing, or underwrite loans for efficiency upgrades. Or, at the local level, cities or states can require building owners to disclose their energy use to potential tenants, bring transparency to a market that is often opaque; San Francisco is doing this. So-called green appraisal standards could also play a role.

Not being expert in any of this, I won’t to venture a guess as to which policy would be best. (Except to restate my preference for a revenue-neutral carbon tax.) But I do know that policy shouldn’t be guided by the fact that wind turbines and solar panels are sexier, or at least more photogenic, than insulation and HVAC.