Filling the Gap: How Efficiency Standards could Save Billions in Commercial Real Estate

No one ignores an opportunity to save billions of dollars. Numbers of that size are enough to make an audience take notice, even in a business like commercial real estate, where deals in the hundreds of millions and billions are commonplace.

Each year the U.S. spends over $400 billion on energy for our buildings, many of which were constructed before modern energy codes existed and, as a result, use more energy than they should. This efficiency gap has led to the creation of a $20 billion retrofit industry, designed to help building owners and managers overcome barriers that deter them from tackling energy costs, like lack of information, misaligned financial incentives, or insufficient capital. In my hometown of Chicago alone, buildings could save up to $184 million in energy costs if they pursued more aggressive energy management – and those are just the ones reporting data.

Given the numbers, we know the opportunity to improve a building’s bottom line is huge, so why are so many still ignoring energy efficiency? For one, retrofit projects are still a heavy lift for many organizations. And, although there are quite a few reasons for this slow progress, lack of uniformity for comparison and verification of results stand out as clear obstacles. Having worked with numerous building managers and engineers on efficiency projects, I’ve seen these barriers firsthand countless times.

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Investor Ready Energy Efficiency™ opens the door for more efficient buildings

Thankfully, there is a simple answer to this conundrum: EDF’s Investor Confidence Project (ICP). ICP has developed a unique certification for Investor Ready Energy Efficiency™ projects that takes the guesswork out of energy efficiency performance metrics. The concept is fairly straightforward: If a building owner or investor wants to make improvements intended to reduce energy expenses – say, upgrades to lighting or heating systems – there should be a way to measure those energy savings over time, and ensure that the investments are paying off in the form of reduced electricity bills.

The ICP approach, which includes a rigorous set of industry-leading protocols for the design, commissioning, and evaluation of energy efficiency investments, gives owners and investors confidence the expected returns will materialize. ICP’s six protocols cover the majority of commercial energy efficiency projects and are comprised of market-tested methodologies and best practices. Following the protocols and obtaining Investor Ready Energy Efficiency™ certification for a project demonstrates a building’s commitment to transparency, and provides a recognizable standard against which success can be measured.

Standardizing the energy efficiency marketplace around Investor Ready Energy Efficiency™ will overcome one of the major barriers to scaling the $20 billion retrofit industry and capture the vast potential of energy efficiency trapped in buildings throughout the country.

ICP offers valuable, real-world tools for engineers

Coming from the world of industrial sustainability (where there are audits and protocols for everything), it was immediately clear to me why ICP offers valuable tools to the engineers on the ground, who often struggle to measure and verify the value of an energy efficiency project. The protocols give them the framework to create a simple, straightforward picture of the process and metrics involved. This allows those who know the building best to make the business case for upgrades in a way they haven’t been able to before.

For example, imagine a building engineer identifies an opportunity to upgrade the lighting in a property’s common areas, but the building manager hears the upfront cost and says it’s not worth the investment. The Investor Ready Energy Efficiency™ certification would enable the project developer to create a detailed business case that outlines the anticipated savings and builds confidence based on industry standards and third-party review. By following the process from baselining to measurement of savings once implementation is complete, the engineer could clearly demonstrate the project’s value.

The increasing number of energy benchmarking and disclosure regulations across the U.S. have already led to a growing body of tools that can help property managers and engineers identify potential energy efficiency projects. That said, the sheer breadth of technologies and providers in the marketplace can be overwhelming, and often commercial real estate professionals lack confidence that savings are real. The ICP system can help unlock the savings and revenue potential of optimizing efficiency. By translating complex engineering into a simple certification, ICP enables investors and building owners to have the confidence to underwrite efficiency investments.

This post originally appeared on Smart Energy Decisions.