How Energy Star Built A Market For Energy Efficient Buildings

When it comes to promoting the use of energy efficient products and systems, few programs can claim the success that the Energy Star labeling system has had. Since its introduction in 1992, the U.S. Environmental Protection Agency’s (EPA) Energy Star system has provided research and technical information that allows consumers and businesses to choose the most energy-efficient solutions and systems available. Here at The Efficiency Buyer, we’re huge fans of the Energy Star program, not to mention the billions of dollars it saves individuals and businesses each year.

When the EPA expanded the Energy Star program in 1995 to include buildings, it was with the help of Bob Sauchelli, who had joined the agency one year prior and has recently retired from the agency. I  spent time talking with Bob (you can hear the whole interview here), and asked him about some of the major accomplishments of the Energy Star Buildings program, the challenges the initiative needed to overcome and where he sees it heading in the future. We also talked about Energy Efficiency project investment, and the ROI metrics used by various industries to measure success.

Origins of the Energy Star Buildings Program

When Bob joined Energy Star in 1994, the program was in its infancy. What he brought to Energy Star initially was a background in business, having spent the early part of his career developing operational improvements in banking. He realized that the conversation around energy needed to be refocused around the business advantages of creating more energy efficient buildings. Bob began promoting the operational aspect, or what he called the “saving money” part of energy efficiency.

“As an MBA, I had a different perspective than most of the engineers and energy policy-makers working within the Energy Star program. I understood the decision-making process for capital improvements in business, and what drives the decision to adopt energy efficiency.”

Creating a Market for Energy Efficient Buildings

Early on it was clear that if the program were to be a success it would need to stimulate market demand for energy efficient buildings and design. It wasn’t enough to promote the environmental aspect or even the direct rebate side of the story; it had to make sense from a business standpoint. Not only did energy efficiency need to be able to compete with other types of capital improvements in buildings, but it also had to be perceived as low-risk and a credible solution.

This takes advantage of the energy efficiency equation. On the one side you have market demand for energy efficient buildings, while on the other you have to have the products and the services that are credible, that are proven, and that can be implemented in cost-effective ways.  Out of the need to get the market engaged evolved the four major elements that became the cornerstone of this innovative program.

Making It Easy For Businesses To See How Their Buildings Stacked Up

First was the energy performance rating tool called Portfolio Manager, used to measure the actual energy performance of a building.  This tool allows property owners to us to enter information about their building and it will normalize the data for weather, location, building type, use and climate so that businesses could compare buildings in different areas of the country and get an apples-to-apples comparison.  “Allowing businesses to see their building performance against their peers regardless of location was a real eye opener for many companies,” said Sauchelli.  Additionally, many municipalities are now requiring commercial buildings over a certain size to complete the Portfolio Manager process and publish the results publicly.

Proof of Building Performance

One buildings have successfully completed the Portfolio Manager process, they can be presented with a Statement of Energy Performance.  This is a legal document from the E.P.A. representing the Energy Efficiency performance of a building and can be used in public records, for marketing of a building and for annual reports.

Competing to be a Star

A third pillar was the establishment of the Energy Star Certification for buildings that scored  in the top 25% amongst similar buildings across the country in energy efficiency.  “Building owners started to compete to be above the 75th percentile,” explained Sauchelli, “as having an Energy Star building was a meaningful differentiator in the market and delivered a level of credibility.”

Finding Credible Products and Services for Energy Efficiency Projects

The fourth area of focus was making sure that commercial property owners had access to a comprehensive list of products and services that could help them execute on energy efficiency initiatives.  “To increase the likelihood that businesses would succeed in their efficiency projects, we needed to connect them with service providers that could help them execute. EPA has working with, training and pulling together comprehensive lists of credible service providers for building owners to work with for years,” said Sauchelli.  And of course, don’t forget about Energy Star rated products.

How Energy Efficiency Investment Varies by Industry

Of course different businesses make decisions about energy efficiency in different ways. For example, a non-profit sees it one way, while a hotel or restaurant sees it differently, and a commercial property company sees it still another way.  Return-on-investment is a common criteria, with most energy efficiency projects delivering a 2-3 year ROI.

It’s important to look at not only what the cost of energy is for a particular location, but also the role that energy plays in that business. Some businesses are more energy-intensive than others. For example, in commercial real estate, 35 percent of the operating expenses of a building is energy costs.  
The energy efficiency costs for an industry that is highly energy-intensive are more easily financially justifiable. On the other hand, a warehouse has less opportunity to save energy due to the already low levels of consumption. Other considerations include hours of operation of the business, levels of lighting required, cooling needs,  the cost of energy in a particular region, the cost of materials and services, etc.

The Bottom Line

There’s no doubt that the Energy Star Buildings program has been a tremendous success both in reducing energy consumption and increasing the profitability of businesses. The groundwork has been laid for the continued success of Energy Star and other initiatives in energy efficiency. With the recent adoption of climate change commitments at the COP21 talks in Paris, measuring energy use is more important than ever.
“Energy Star and the EPA still play a major role in not only energy efficiency, but also in the reduction of carbon emissions. Through the Portfolio Manager tool we can measure not only the energy savings of a building, but also the emissions caused by its energy consumption.”

Our heartfelt thanks go out to Bob for not only his time and insights, but for the great work he’s done on promoting energy efficiency throughout the years.  We’ll stay in touch as he works to bring the lessons learned from Energy Star to countries around the world.

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