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The 5 Layers of Energy Efficiency Opportunities in Commercial Buildings

Whether the law mandates energy benchmarking and disclosure, or the market demands more energy efficient buildings, the result is that owners make improvements that reduce energy waste. But where do they begin? How do they know it'll work? And how do they pay for it? Denis Du Bois interviews Ash Awad, Vice President of Energy for McKinstry, a firm that designs, builds, operates and maintains commercial buildings nationwide.

This is a highlight from the Building Priorities Briefing.

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Transcript

Denis Du Bois:

An energy benchmark is not the same thing as an energy audit. Briefly, what's the difference?

Ash Awad:

An energy audit actually goes through and does a physical inspection of the building and actually starts to look at pieces of equipment and systems, and starts to make recommendations for changes in the building. Sometimes they're retrofits, sometimes they're operational changes.

Whereas an energy label is actually just taking information about the energy consumption and then creating a very simple benchmark. It actually doesn't provide a recommendation for change, it just quickly indicates how much energy consumption a building is going through based on historic utility bills.

Denis:

Have you encountered owners who want to improve their scores ahead of the disclosure deadline?

Ash:

Yes. Now that the mandates have been defined, we're getting more and more clients coming to us, getting prepared. Because once you go through and start doing the benchmarking, the last thing that you want is a benchmark that shows you to be performing so far below your peers.

And so everybody's cleaning their house before the housekeeper shows up.

Denis:

So what's the process for deciding where to clean up first -- for identifying improvements that would raise that efficiency score?

Ash:

The first step is you've really got to get a sense of how you're performing against general benchmark information that's available in the industry.

If you're performing under an optimal level, the way we think about it is in the following stages. The first thing we do is we look at just basic operational improvement. In other words, changes to the facility's operation that don't require a lot of capital investment. Usually we're just trying to make those very simple operational changes with clients.

The step after that is a first level of basic retrofits that maybe includes lights and motors. And then from there it really is about deeper retrofits that include maybe larger heating and ventilation systems, chilled water plants, boiler systems.

And then the last tranche might be working on the building envelope, which includes windows and roofs, things of that sort.

Denis:

Now credit is tight, and companies are risk-averse -- how are these projects getting paid for? Are performance contracts playing a big role?

Ash:

Performance contracting is an absolute method. What happens when a retrofit is happening in a building, the client may have some capital dollars, we would then work with the utility to maybe find some utility grant money. There is a little bit of stimulus money available to maybe offset the first costs of a project.

But even with utility money and other grants, there is still a gap between the total project cost and those grants that are available. The slack is then picked up through a loan. Now performance contracting is a mechanism that guarantees that the savings will pay back the loan, and that has essentially a risk-mitigation factor for clients that are worried about taking a loan, encumbering themselves without knowing there's going to actually be a return.

Denis:

I waited and waited for my stimulus check and it never came. Do you find certain owners are waiting around for the Recovery Act to pay for more of those retrofits?

Ash:

That's exactly what happened in 2009. The stimulus was a really good idea, it's just unfortunate that it set an expectation that everyone was sitting around and waiting for their check.

In 2010, I think the stimulus is going to have a really positive impact in retrofitting buildings.

Denis:

McKinstry's been in energy efficiency for quite a while actually. Is energy efficiency getting to be an easier sell?

Ash:

Well, it's actually interesting you put it that way. I think the answer is yes. I think, for a while there, it became too easy of a sell. And let me explain what I mean by that.

I don't mean as it relates to the end user. I mean as it relates to the policy maker. I think energy efficiency just seems like just a good idea that, in the mind's eye of a policymaker, they have skipped over energy efficiency and, for instance, went right to big renewable energy. Or they skipped over energy efficiency and went to home weatherization.

Energy efficiency in the commercial and industrial marketplace still has a significant opportunity. So is it easier to sell? Well, I think people are more cognizant of it, end users are more cognizant of the impact of energy efficiency and the benefits of making their buildings more energy efficient. Even predisclosure folks were really appreciative of the idea that you can actually do retrofits in buildings and have them pay for themselves.

The challenge is, is that policy makers have seen energy efficiency as such an easy sell that they actually skipped over funding it at the level that it needs to be funded at. Or giving it the attention it needs to be given to create the jobs that we so desperately need in America. We're actually seeing a turn on that.

In other words, we're now seeing not only end users being very excited about doing energy efficiency retrofits in their buildings, but we're also seeing policy makers truly understand and appreciate the impact of energy efficiency in the built environment. Particularly in the commercial and industrial, the opportunity to really create durable jobs in America by retrofitting almost 80 billion square feet of commercial industrial buildings.

So it's been an interesting kind of road. But I think, right now, not only is it an easy sell, but I think it's getting the attention that it deserves. We've just got to keep the focus on it.