From New York to Los Angeles, a growing number of the largest U.S. cities are recognizing that tackling building efficiency translates into progress toward climate resilience. The underlying assumption is that better information leads to action. As these cities compile baselines on commercial building energy use and educate the public on the cost-effective opportunities for energy reductions, the next question that arises is whether building owners will take action.
New York State of Mind
New York City was the first to launch a comprehensive strategy to tackle energy waste in commercial buildings through four local laws under the Greener, Greater Buildings Plan. The complementary laws not only mandate energy benchmarking, but also require performance upgrades to meet local energy codes for citywide renovations, major retrofits in buildings over 50,000 SF to meet lighting efficiency standards, and the installation of submeters by 2025. Mayor Bill de Blasio has continued the commitment to improving the city’s climate readiness and, in September, announced a new goal for a citywide 80% reduction in greenhouse gas emissions by 2050. According to a recent article in The New York Times, the mayor’s office estimates that the energy efficiency advances in buildings deliver tremendous economic benefits. According to the director of the Mayor’s Office of Recovery and Resiliency, the city spends $800 million a year to run its facilities, and energy efficiency retrofits could generate $180 million in annual savings by 2025.
The City Energy Project (CEP), a national initiative directed by the Institute for Market Transformation (IMT) and the Natural Resources Defense Council (NRDC), aims to help 10 cities design energy efficiency plans and share best practices for promoting change in their largest commercial buildings. Atlanta, Boston, Chicago, Denver, Houston, Kansas City (Missouri), Los Angeles, Orlando, Philadelphia, and Salt Lake City have each joined the project, according to the CEP fact sheet. As outlined on the CEP website, in 3 to 5 years, the initiative will create transparency on building energy use and create financial vehicles for investment in energy efficiency.
New financing channels are a critical element in the mission to tackle commercial building energy efficiency. While many of the most attainable energy efficiency improvements can be low-cost or no-cost improvements through scheduling and procedures, transformational changes require capital investment. The challenge is how to engage building owners with financing mechanisms that enable those investments.
Opening the Purse
At the 2014 World Energy Engineering Conference, held in October in Washington, D.C., several sessions honed in on the challenge of financing energy efficiency. The market recognizes the opportunity and benefits associated with energy efficiency, but the reality is that capital budgets are tight. Former President Bill Clinton, the keynote speaker, declared, “Financing is holding back the energy revolution.”
In Navigant Research’s view, the challenge is two-fold. On one hand, there is the opportunity to adjust perspectives on energy efficiency investment. Advocacy efforts, such as the CEP, could help building owners broaden their views from a focus on payback to a longer-term view of how energy efficiency and intelligent building investments enhance the value of their facilities. On the other hand, our research suggests that a change is underway in the performance contracting and shared savings models that have helped fuel investment in energy efficiency historically. Watch for a new report on energy service companies and the transformation of intelligent buildings financing in 2015 as a part of our Building Innovations Service.
Tags: Building Innovations, Conferences & Events, Energy Efficiency, Policy & Regulation, Smart Cities
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