Editor's Note: This is part 1 of a two-part series.
There are many tends in today's marketplace causing a spotlight to shine on energy, such as tight energy supplies, high energy prices, air-emissions regulation, social responsibility, climate change, and the green buildings market. Leading businesses and institutions are looking to gain a competitive advantage by taking proactive steps to address these issues through effective energy management. And there is a lot of energy that can be saved. EPA estimates American businesses can reduce, on average, 30 percent of their energy use by targeting energy that is used unnecessarily or inefficiently.
To achieve significant environmental and financial benefits, energy management needs to be a cornerstone corporate program, not an optional strategy.
For example, when building and operating green buildings, top energy performance should be a prerequisite because much of the financial justification for green buildings is directly or indirectly attributed to savings from reducing energy consumption.
Energy management has typically focused on technologies, individual projects, or high-profile buildings designed to surpass the energy codes. These efforts are to be commended, but the EPA has found that if typical energy-management programs move beyond this, i.e., to the enterprise level, they can achieve twice the savings. Direct savings, however, are only part of the business case.
The EPA estimates that a commercial-building owner can generate $2 to $3 of incremental asset value for every $1 invested in energy-efficiency improvements. The USAA Real Estate Co. recently sold a property in California that garnered $5 million in additional value because it had earned an Energy Star rating.
Similar benefits can be realized in retail markets, too. For example, a retail grocer can realize the equivalent of an $85 sales increase by reducing annual energy costs by $1. Food Lion, an Energy Star award-winning partner, has demonstrated significant reductions in its energy use even while increasing square footage. Its energy savings are equivalent to roughly $50 million in sales.
Studies conducted by Innovest Strategic Value Advisors found that leaders in corporate-energy management are strong environmental performers, and outperform competitors by 20 to 30 percent on Wall Street.
Making a strong financial case is necessary to elevate energy as a priority among building and business owners. The EPA provides financial analysis software to help make these links. At the building level, software can be used to allocate costs and benefits of energy-efficiency upgrades between owners and tenants and show how lower operating costs can reduce vacancy rates and increase net-operating income and asset value.
The EPA also makes available a financial-value calculator that translates portfolio-energy reductions to increases in net-operating income and earnings per share. A cash-flow calculator was developed to estimate how much new energy-efficiency equipment can be purchased from anticipated energy savings, the implications of different financing options, and the cost of delaying investment.
Translating energy savings into financial value can mean the difference between strategies sitting on a shelf and real results. Toward that end, the EPA's Energy Star program is a good place to start to assess the current strength of an organization's energy-management plan, whether it's your own plan or one of a clients.
Because the EPA has distilled the practices of leading organizations into guidance, Energy Star provides market-tested solutions to building owners and service providers as a straight-forward approach to energy management. To date, more than 13,000 organizations of all sizes have participated in Energy Star, resulting in more than 45.7 billion kwh in savings.
Next month, the key elements of successful energy-mangement programs that EPA has instilled in Energy Star will be discussed, as well as the Energy Star information and software resources available www.energystar.gov.
Jean Lupinacci is the director of the U.S. EPA Energy Star program. For more information about Energy Star, to enroll in the program, or access Energy Star reports, case studies, and software, visit www.energystar.gov.
Read more Engineering Green Buildings columns.