President Barack Obama later this week will focus on his goal to secure America’s energy future with efforts to find new fuel sources, invest in the development of alternative energy and use our resources more efficiently. The cleanest and lowest cost way to meet our energy needs is to consume less. Strong financial paybacks are the biggest incentives for state and federal governments to raise the game by putting the right tools and policies in place to increase investment in energy efficiency, which will save money, produce jobs and reduce carbon pollution.
To raise the bar, federal and state governments should set ambitious, yet achievable, goals for energy efficiency improvements in buildings. Buildings consume approximately 40 percent of U.S. energy. It can be done. For example, at the landmark Empire State Building, built in the early 1930s, the retrofit project underway is on track to achieve a 38 percent reduction in energy consumption with a three-year payback.Additionally, governments can and should also lead by example by renovating and upgrading the energy performance of their own existing buildings and leased space, and constructing new buildings to high efficiency standards.
To provide further perspective, building energy efficiency retrofits is a nearly $280 billion dollar investment opportunity that can save building owners more than $1 trillion over 10 years, according to industry research. All of that work also means more jobs at a critical time for our economy. Raising the bar also means raising minimum building performance, consumer awareness and private investment.
In his first term, President Obama committed to invest $2 billion in federal government building renovations using energy savings performance contracting. Using this approach, energy services companies design, finance, install, and maintain new energy efficient equipment in facilities – at no upfront cost to the taxpayer. The energy savings are guaranteed by the contractor with the investment paid back over time from the money saved on utility bills. Over 260 federal government projects have been successfully completed over the past decade attracting over $2.3 billion in private sector investment.
We must also raise the level of energy efficiency by improving energy efficiency standards for new construction and during major building renovations. States should be encouraged and supported in adopting and enforcing the most recent national model building codes and appliance/equipment standards. Providing incentives, which cover a portion of the incremental cost for “above code” construction, can be a cost-effective way to capture additional efficiency opportunities.
To make inroads with improving energy efficiency, we must raise awareness of building performance and the opportunities to create positive financial returns. Cities and states should require the disclosure of building energy performance information. Why is it that we have more energy efficiency performance data about our cars and appliances than we do our longest term investments – our homes and buildings? A simple and understandable label would create awareness and market demand for more efficient buildings.
Where there is market demand, there needs to be a corresponding supply. What is certainly in short supply these days is public funding to support additional investments in energy efficiency. President Obama has proposed $200 million in funding for a Race to the Top challenge for states that implement policies to increase energy efficiency. This is a start, but we need to develop and expand private-sector financing models, like the successful performance contracting model in the public sector, and leverage the $200 million to start attracting the billions of dollars needed to tap the most cost-effective improvement opportunities.
A particularly good model is Property Assessed Clean Energy (PACE) financing which offers long-term loans, limited up-front investment requirements, and low interest rates for commercial building energy efficiency improvements. Building owners get the added benefit of being able to pass payments through to tenants and transfer the loan to new building owners at the time of sale.
There is much more work to be done, but if we raise our game with strong leadership, smart policies, increased awareness and increased private investment, we can save more money, create more jobs and help protect our environment for future generations. All of this can be accomplished and provide a strong financial return.
Myers is president of Johnson Controls Building Efficiency.
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