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The Clinton Climate Initiative: A Business Solution to Climate Challenges

Because the Clinton Climate Initiative is taking a very practical approach to addressing climate change through building energy efficiency, it presents an opportunity for companies to learn vital lessons about implementing energy efficiency programs in their own facilities.

Energy, green and sustainability are hot topics, and as a result television programs, radio and newspapers are full of information and advice on how to go green. Unfortunately, when a wealth of information exists, there is also a wealth of misinformation. But through the noise, a program called the Clinton Climate Initiative (CCI) has emerged that focuses on a true and measurable approach to reducing energy use and making a quantifiable impact on greenhouse gas reduction.

This article will introduce the benefits of the CCI and how this program impacts us all, and then explore the ways that businesses can integrate the solid energy management principles of the CCI and realize the rewards.

Background on the Clinton Climate Initiative

The Clinton Climate Initiative (CCI) is a program through the William J. Clinton Foundation that applies a measurable, business approach to fighting climate change globally. Specifically, the CCI focuses on working with the C40 Large Cities Climate Leadership Group, a group of large cities worldwide dedicated to reducing greenhouse gas emissions. Since cities contribute about 75 percent of all heat-trapping greenhouse gases, they are critical to slowing the pace of global warming.

CCI has three goals:
  1. Create a purchasing consortium to leverage buying power and accelerate implementation of energy saving technologies in cities;
  2. Mobilize experts to provide technical assistance to cities to create energy programs; and
  3. Share best practices and tools between cities to speed implementation.
While these three goals are simple and what corporations aim to do everyday in their business, they are revolutionary in terms of large-scale, global energy management.

What are the Roadblocks, and How is the CCI Overcoming Them?

The CCI's approach is rooted in practical realities that include recognizing and addressing the roadblocks that make progress difficult.

First, the CCI has recognized that the situation in many countries today does not motivate large cities to implement energy-efficiency programs or processes. In the United States, energy is relatively inexpensive and readily available, so the return on investment for energy projects has not always been attractive. In booming economies, like China and India, energy efficiency does not top the list of challenges when compared to skyrocketing population, inflation or growth. To address this, the CCI invests in educating cities on the benefits of energy efficiency and providing them with the tools to make it a priority.

Next, the CCI recognizes that energy management requires experts, tools and constant learning. Comprehensive energy management involves more than changing light bulbs and turning down thermostats. Each existing building is different and experts are required to survey the facility, consider energy conservation opportunities, weigh the cost and benefit of each solution and present a holistic approach that maximizes energy savings and minimizes cost. Additionally, projects must be installed with long-term operational goals in mind and savings must be reported in a consistent and reputable manner. The CCI group has pre-qualified experts and vendors in this area so that each city can begin working with reputable and trusted companies immediately.

Encouraged by this methodical approach, many school districts and universities have joined the CCI through the Green Schools Program and the American College and University Presidents Climate Commitment.

The Real Reach and Impact of the CCI

The CCI helps bring into reality the goals of the Kyoto Protocol, which is an attempt to reduce greenhouse emissions through global government initiatives. The largest treaty of its kind, the Kyoto Protocol requires industrialized nations to reduce their greenhouse gases by 5.2 percent compared to 1990 (note that for each year without action, the required reduction grows). But the treaty has fallen under criticism in the United States, because developing nations, including India and China (the world's second largest emitter), do not have binding targets. The U.S., the current per capita leader in greenhouse emissions, has not ratified the Protocol.

The CCI shows signs of creating progress toward Kyoto targets and making a real difference. Already, the CCI has secured the support in developing nations of major cities such as Hong Kong, Beijing, Shanghai, Delhi and Mumbai. These cities are expected to make large strides in emission reduction and set an example for building energy efficiency in developing nations.

Most of Europe's leading cities have joined the CCI because they see it as an important tool in meeting legislative targets for the European Energy Performance of Buildings Directive (EPBD) - the E.U.'s action toward reducing emissions. The E.U. aims to reduce energy use in buildings by 28 percent, which will result in a total reduction of 11 percent in the European Union countries. Reducing energy use in major cities via the CCI will help the E.U. meet these targets.

And finally, in the United States, cities like New York, Chicago, Houston, Philadelphia and Los Angeles have signed on to the CCI, thus creating progress on a critical climate initiative that the United States has not yet addressed nationally.

The beauty of the CCI approach is that it focuses on the cities that are the largest emitters of carbon around the world, and therefore the areas where reduction would have the greatest impact. To put it into numbers: if large cities contribute only 50 percent of greenhouse gas (GHG) emissions, and they reduce energy use by 20 percent, the total GHG reduction would be 10 percent, which would be a huge step toward meeting the targets set by the Kyoto Protocol.

How the CCI Can Benefit You

By focusing on business incentives and working with the world's largest cities, the CCI is taking a practical approach to address the challenge of global warming. And because that practical approach is being adopted through energy efficiency techniques, that means businesses and buildings around the world can develop and learn vital lessons about implementing energy efficiency programs in their own facilities, manufacturing plants, buildings and offices. The CCI has already noted some very important energy management concepts that every building owner and operator should observe and integrate into their energy planning. Let's examine how the CCI approach can be applied to your business.

1. Take a holistic building approach

First, the CCI stresses the importance of taking a comprehensive building approach when beginning an energy management plan. You should begin by completing a return on investment analysis with a lifecycle cost view. While this sounds complicated, it only involves understanding the energy savings that are possible in your facility, along with the costs required to achieve those savings. You can use any financial criteria, including return on investment, internal rate of return or net present value. It is important to understand your company's acceptable return on energy projects. Don't be afraid to ask the question "Can we change that allowable return requirement based on the fact that we are improving the environment, reducing our emissions and contributing to the public good?"

Next, be sure to take a lifecycle view of the facility. The initial construction of a building is only about 11 percent of the lifetime cost of that building. Focusing too much on first, or installed, cost can result in skyrocketing annual operating costs, which make up 75 percent of the life cycle cost.

Lastly, a holistic building approach can balance the interaction of various energy conservation measures. A simple example is a lighting retrofit. By replacing all of the lighting in a building with energy efficient bulbs and ballasts, an organization can reduce the heat added to the building. In a cold climate, this heat will need to be replaced by the heating system. That begs the question, "Will you actually reduce your energy bill each year?" An experienced energy professional can review the impact of all energy conservation opportunities and help calculate the net annual energy savings.

2. Don't pick all of the low-hanging fruit

As business people, we are prone to "cherry picking" key opportunities with excellent payback. However, energy management is one area where selecting these ripe prospects can be detrimental to the building and the bottom line.

It is very common for building owners and managers to quickly select energy conservation projects with a simple payback of one to three years. These projects include lighting or basic automation which generate savings with a relatively high ROI. While short payback and high return projects are attractive to all of us, this approach may also encourage a building owner to delay investment on the systems that are using up to 70 percent of the energy.

For example, aging air conditioning equipment requires annual maintenance and possibly constant repair. Replacing the equipment may provide a simple payback of five to seven years, which looks unattractive on the surface. But that investment also decreases repair costs AND increases the comfort of the occupants, while providing overburdened maintenance staff the time needed for proactive maintenance on the entire buildings. The net gain can be significant. The lesson? By balancing the short-term payback projects (lighting and controls) with larger infrastructure (equipment) upgrades, you can reap an attractive return while increasing the value of your property and the satisfaction of your occupants.

3. Use a trusted partner

It may go against your business instinct to hand over many activities to a single vendor, but energy efficiency is one area where committing to a trusted partner will help guarantee an ROI. The process of implementing an energy management program usually begins with a series of energy audits, a proposal, implementation and sustained performance. A single vender can survey the total facility, and propose and implement a project designed with lasting performance and energy savings in mind. Breaking the process into multiple vendors will distribute the responsibility and accountability and dilute the desired performance results. Additionally, "bidding" out the implementation of energy efficiency will only drive the cost down and not deliver the lasting value and energy savings you are really looking to achieve.

If multiple proposals are required, it may be possible to solicit qualifications, conduct interviews, review past projects and talk to a vendor's existing customers. This process may take more time at the beginning of the journey, but will save headaches and lost dollars over time. Keep in mind that driving up energy savings will improve the return and your company's impact on the environment. Driving down cost can only decrease the potential for lasting energy reduction.

4. Finance or pay out of pocket? That is another question.

The CCI has chosen performance contracting to implement energy savings projects in the C40 cities. In this process, projects are financed over 10 to 15 years, and savings are financially guaranteed by the vendor implementing the project. This process works amazingly well in facilities that do not have a budget for capital improvements (or only a small budget). Examples include schools, universities and municipalities. The interest on the bank loan, and cost of the measurement and monitoring required to receive the financial guarantee, are acceptable because end users are long term tenants and can implement 10 to 15 year projects.

Businesses and short term tenants (less than seven years) may want to weigh the options and consider paying for the project up front. If the cost of capital is less than the interest rate on the loan, it may be more advantageous to invest in a facility with cash.

Additionally, financial guarantees on projects require extended service contracts and strict measurement and operational guidelines. This can increase the cost (and the payback) beyond your company's financial criteria. While everyone likes a financial guarantee, you might achieve a better payback by implementing a service contract that includes quarterly monitoring and continual suggestions for energy improvement.

Financing projects and paying out of pocket are both acceptable practices for energy projects. It is important to consider the situation of the facility, the length of occupation of the building, the willingness to spend on energy or "green" projects, and the trustworthiness of an energy management partner.

The CCI and you

While it may be many years before we begin seeing the measurable impacts of the CCI, the program is already beginning in 16 cities around the world. In the interim, we can watch the program and learn from its shortfalls and successes. We can use these important lessons to reduce the energy in every facility, while decreasing greenhouse gas emissions. This will have a positive impact on the environment and deliver a satisfying return on the investment.

Whether your concern is financial ROI or climate responsibility, there's no better time to begin than now.

Brandi McManus is the energy services manager at TAC, a supplier of integrated building management systems. Prior to TAC, McManus worked for Conoco as an environmental engineer where she gained experience in energy procurement, refining and distribution focusing heavily on the environmental impact of natural gas production.

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