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Stop skimming & bundle bigger energy projects!

This is a long, but important article on why we’re not achieving deep energy efficiency reductions in buildings. There are many reasons, but Auden Schendler (Vice President of Sustainability at Aspen Skiing Company) digs into the idea that grabbing low-hanging fruit (quick payback projects) prevents us from ever reaching the bigger-ticket items that save more energy. I’ll provide the notes version of the argument here:

  • There are a lot of no-brainer energy efficiency projects out there. Especially when utility incentives are factored in, they are dirt cheap.
  • Not surprising, building owners set basic ROI thresholds and do the easy stuff. They agree to dip their toe into the water, and say they’ll come back later and jump in for the big splash. I’ll do the lighting retrofit now and overhaul my HVAC system later. It does happen, but it’s rare.
  • Problem is, the big jump requires long payback periods and with those short payback projects already off the table, the program dies on the vine.
  • The ROI metric is flawed … a) in the case of energy efficiency, it usually only counts installation and equipment costs and the subsequent energy savings. Maintenance costs, asset value, tenant/employee attraction and retention, health and productivity benefits, energy cost volatility and more should be incorporated into the equation. There’s also the  potential of being forced to replace equipment as time goes on, although this is admittedly a challenge to model … and b) ROI thresholds are just too darn low in light of market investment alternatives.

Building on this, Schendler suggests a few ways to improve our situation…again, the highlights:

  1. Bundle bigger. Combine long and short payback projects from the get-go.
  2. Accurately assess ROI and revisit ROI thresholds.
  3. Lobby for better policy. Cheap energy sends the wrong price signals. A carbon tax would level the energy playing field.
  4. Utilize creative financing mechanisms like MESA and PACE. Moving capital investments to operating expenses can help. And tying improvements to a property rather than a mortgage is smart.
  5. Switch incentives to help encourage longer-payback items … we don’t really need help with the cheap stuff.
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