Chapter 1: Introduction

President Obama has made increasing efficiency a central element of his energy strategy. He calls energy efficiency “the cheapest, cleanest, fastest energy source.” Indeed, improving efficiency across all sectors will be key to reducing the nation’s greenhouse gas (GHG) emissions. It is also one of the few GHG reduction strategies that will bring immediate cost savings.

In 2007, the energy used by residential and commercial buildings accounted for 35% of U.S. GHG emissions.1 Office buildings alone are responsible for approximately 200 million metric tons of GHG emissions annually, the equivalent of 43 coal-fired power plants.2 California’s energy efficiency outreach campaign,“Flex Your Power,” estimates that most commercial buildings could cut energy use by 30% through investments in improved efficiency.3

Along with cutting GHG emissions, efficiency improvements could translate into major savings for the companies operating those buildings. The U.S. commercial sector spends $108 billion a year on building energy bills, with more than $20 billion spent on office building energy costs alone.4 According to Flex Your Power, a 50,000-square-foot office building of average operating efficiency can reduce costs by $40,000 per year just through no-cost and low-cost efficiency upgrades.5Energy efficiency upgrades also can bring long-term benefits for building owners, as asset value typically increases by an estimated $3 for every $1 invested in energy efficiency.6

Despite the opportunities, few companies have fully invested in cost-effective energy efficiency improvements. Even companies that have made significant progress on energy efficiency often have not explored the full potential of energy management options. A number of barriers prevent these companies from identifying or approving smart efficiency investments.

Some barriers are organizational: for example, facilities managers understandably tend to be concerned primarily with systems performance, reliability and safety and may not be willing or able to focus on opportunities to cut energy costs and reduce environmental impacts. Even when facilities managers are directly responsible for improving energy efficiency, they may lack access to financial decision makers who could approve the up-front capital expenditures required.

Other barriers are financial: efficiency improvements sometimes require a significant up-front investment, followed by years of stable and predictable savings. Lack of available cash or financing can impede this investment, or companies may impose an overly stringent hurdle rate (e.g. a two-year payback) that prevents many smart, low-risk investments from being approved. (For more detail on these problems see Chapter 5: Barriers to Energy Efficiency.)

As a result, otherwise sophisticated and cutting-edge companies are missing out on chances to cut energy use. Bottom lines are suffering unnecessarily, and cheap and easy greenhouse gas emissions reduction opportunities are being overlooked.

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