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Posted on January 20, 2011

Energy Misers Reap Rewards

The biggest electric power hogs in California aren’t oil refineries, data centers or home air conditioners. They’re the state’s commercial buildings, which consume 38 percent of California’s power and a quarter of its natural gas.

Building owners and tenants across the United States could save big money by getting smarter about how they use energy. Energy accounts for nearly a third of all operating expenses in office buildings, representing the “largest and most manageable expense” in that sector.

Last summer, Pike Research reported that construction upgrades and energy-efficient retrofits of existing commercial buildings could save $41 billion dollars a year in energy bills, for an investment of less than $23 billion a year for 10 years.

Thinking even bigger, the California Public Utilities Commission joined more than 150 other stakeholders last September to announce a “big, bold goal” of eliminating all net energy consumption from every new office building by 2030. “Zero Net Energy” buildings would generate their own power to meet their radically diminished needs.

The good news is that the percentage of “green” office buildings (certified “EnergyStar” or “LEED”), while still small, has been soaring of late. From 2007 to 2009, the percentage in the San Francisco-East Bay core jumped from 1.8 to 4.0 percent. In Santa Clara County, the percentage more than doubled from 0.8 to 1.8 percent.

Since many of these are large buildings, they reflect a significant share of all office space. In fact, ”about thirty percent of all commercial office space in the 48 largest metropolitan areas was certified for energy efficiency by Energy Star” last year, according to an unpublished new study by Nils Kok at Maastricht University in the Netherlands and Marquise McGraw and John Quigley at UC Berkeley.

But most owners and lenders are still understandably reluctant to invest in more sustainable buildings without stronger evidence that they could recoup their investment through higher rents.

A new working paper on “The Economics of Green Building” from the UC Center for Energy and Environmental Economics should lay some of their concerns to rest. In a nutshell, it finds:

  • Green buildings sell for 13 percent more than other buildings of comparable quality, reflecting their higher-than-market occupany rates and rents;
  • Buildings with LEED registration enjoy average rent premiums of about 8 percent;
  • Every dollar saved in energy costs per square foot is associated with a 5 percent higher market valuation; and
  • Large increases in the supply of green office buildings haven’t significantly hurt their rents or occupancy rates relative to other properties of similar quality.

Their striking conclusion:

These results suggest that more aggressive policies – in the U.S. and elsewhere – of certifying, rating, and publicizing buildings along these dimensions . . . can have a large payoff in affecting energy use and maybe the course of global warming.

PG&E offers businesses a wealth of tools to help them use energy more efficiently, including energy audits, rebates on energy-efficient products and systems, and, through the Pacific Energy Center, educational programs and design tools to create more energy efficient buildings and comfortable indoor environments

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