Energy Efficiency — More Profitable than Investing in Google

I recently attended the West Coast Green conference in San Francisco and came out enthused and confused.

I was enthused about the progress the green building industry is making. That over 14,000 people from all over the country came to learn about the new innovations in green building is huge for an industry, which in many ways, is in its infancy.

I listened to speakers from all sides of the business, real estate experts, government officials, green building consultants, and contractors to list only a few. They all provided interesting insights on where the industry was and should be going and a bit about it how it was going to get there.

There were also more numbers thrown around than a mathematician could handle. The amount of the money that was being directed to the industry from the stimulus bill, CO2 reduction goals, energy efficiency performance goals, and more and more goals.

One thing I didn’t hear enough of was specific ways to connect money to goals. People were so excited to learn that the government was finally sending money their way they forgot to ask how it would actually be implemented and with what oversight.

After the opening remarks I decided to spend the next three days focusing on one thing, how to get actual changes implemented. I decided to break down this task into two areas. First, I would focus on how conferences like this could teach and encourage people to start changing the built environment to stop negatively effecting the natural environment. Secondly, I wanted to know how to get money to these newly educated people to carry out the ideas they learned.

Interview with an Environmental Consultant

To figure out how conferences like West Coast Green affect change I decided to talk to a presenter who led a session at the conference. Matt Macko is a principal at the San Francisco based green building consulting firm Environmental Building Strategies. He led a session titled Deep Retrofits of Commercial Buildings along with Jose Guevara, Property Manager at Cushman & Wakefield of California, Inc.

CleanTechies: What was your talk focused on?

Matt: I discussed the potential to flip the current green building conversation from its current state, littered with defensive reactionary discussions mostly focused only on conservation, to one where we work on the offensive to create demand in the marketplace around sustainable decision making. I targeted some economic and financial evaluations that a handful of firms are providing their clients as highlights of the quality work being done in the sustainability industry.

CleanTechies: What were the three most important things you think people got out of your talk?

Matt: People walked away with an understanding that demand must be created to tip the marketplace in order to meet our GHG goals. They also left with a better understanding of the financial value that can be derived through intelligent sustainable decision making. Lastly, they should have walked away understanding that investing in energy efficiency is as at least as lucrative if not more profitable than investing in Google.

CleanTechies: How do you think people will use the information you gave them to improve the green building industry?

Matt: I hope to generate more intelligent conversations around how we value “green.” If I had one main objective to relay it would be that we have the tools to prove the value of sustainability but we are just not doing a good enough job to date. I hope from there people will find ways to carry the message along and encourage others to join the movement.

CleanTechies: What is the focus of your firm’s work and how are you trying to change the conversation?

Matt: My firm focuses on making the business case for sustainability. We are a consultancy that uses tools such as discounted cash flow and energy models to prove the value of energy efficient decisions to our clients. Many of our clients come to us looking for efficiency through the LEED process. Our development of the LEED EDGE tool has helped several firms realize significant efficiency gains through making the LEED Certification process easy and virtually paperless.

Why I was confused?

Throughout the three days, and from almost every person I talked to, people had an encouraging outlook on the future of green building. They cited the mass amounts of money headed its way and they mentioned the new standards mandated by the government as proof that green building is here to stay.

One of the most exciting talks I heard was Panama Bartholomy’s talk on “Greening Existing Buildings: The Biggest Piece of the Low Carbon Puzzle.”

In it he mentioned the importance of the existing building retrofit market on reaching all of the carbon emissions goals being sent down from the politicos in Washington and Sacramento. He also outlined where some of the stimulus money was headed, but very little about how exactly it was going to be used or who was in charge of oversight.

I wouldn’t call it lack of foresight but clearly the infrastructure is not ready for all the money flowing in, though there are signs of life. Panama mentioned one specific financing optioned that would encourage homeowners to improve their home’s energy performance. PACE districts allow homeowners to implement energy efficient measures with no upfront cost to them. They pay for the measures with increased property taxes, which should be more than offset by the resulting energy savings.

Some recent success.

Joe Biden recently announced his contribution to the movement. He asked the Council Of Environmental Quality, earlier this year, to come up with a study on how the government could guide the development of a home energy efficiency retrofit market. They produced the “Recovery Through Retrofit” report. It offered several recommendations: more access to information for homeowners, more transparent and accessible financing, and a plan for worker training.

All these things are necessary and important but this report fails in going far enough in its scope. It doesn’t hash out any programs or concrete plans on how to bring all of its recommendations to fruition.

The “Retrofit Ramp-Up”, a program recently drawn up to fund retrofit programs, has started receiving applications for qualified projects to receive funding but this program also has its flaws. It helps facilitate funding but only for those who go looking for it and have the knowledge and expertise to get it.

Compare this approach to the one the government has taken with auto industry. The government does not offer funding to improve average MPG of automakers’ fleets to meet more stringent standards; instead they mandate the new standards. Why couldn’t the government take more of a hard-line approach, similar to this example, with the existing home and building retrofit market? I like the idea of money going to the right people but couple that with some mandated standards that have teeth, then everyone will be forced to see what they sometimes are too stubborn to realize, that green building can save them money.

My solution.

California already has a leg up on most states and could act as an example for the nation to follow. State government officials could begin by using the power of AB 1103 to get  ENERGY STAR scores for all commercial buildings in the State.

The “Recovery Through Retrofit” report also called for an ENERGY STAR program for homes to be created, which could provide later structure to update this solution.

After compiling all of the ENERGY STAR scores, the government could mandate and directly fund the retrofit of the worst buildings, possibly the lowest 10% of ENERGY STAR scores. These buildings would then go through an energy audit where the best energy conservation measures could be identified.

Payback could be formulated in either of two ways. Either the government could get paid back with the energy savings resulting from the increased efficiency or they could increase property taxes and have the building owner get the energy savings, similar to PACE districts. In both cases retrofits would be mandated, but the key is that these changes would not cost a dime in the end.

Energy savings in these wasteful buildings would be very high and would easily pay for the retrofits within a couple of years. The government could then use the projects as an example of the potential of the industry, further enticing interest and generating new projects. These projects would also create numerous jobs. Connected to the program would have to be a mandated education curriculum to get contractors up to speed on how to implement the upgrades. This education would further improve the future of the retrofit industry by increasing the stock of qualified workers.

[photos: Environmental Building Strategies, ENERGY STAR, E>mar]