Consumer confidence

Perceived building costs prevent conservation

Canadian business survey shows ambivalence to energy-saving investments
Tuesday, June 17, 2014
By Barbara Carss

A recent survey reveals that Canadian business leaders generally undervalue the return on investment from building energy efficiency. This gives survey sponsors with the Canadian Energy Efficiency Alliance (CEEA) clearer direction to make the case for the long-term paybacks of conservation and energy-saving workplace practices.

“We’ve got to stop talking like energy geeks,” advises Elizabeth McDonald, the CEEA’s president and chief executive officer. “The energy geeks are going to have to learn how to turn their expertise and message into language that is digestible by the average Canadian business and the average Canadian consumer.”

A total of 661 Canadian businesses were surveyed earlier this spring with responses separated into two subsets: the building sector, encompassing architecture, construction, real estate management and development; and a larger selection of pursuits in the broader business category.

Results from the general business sample reveal that nearly two-thirds of respondents place a high priority on improving energy efficiency, but only 38 per cent have set energy-saving targets and more than half claim little knowledge of incentive programs to subsidize energy performance improvements. More than 80 per cent of respondents reported that they have implemented some energy-saving measures, but only 27 per cent attest to doing everything possible and 14 per cent admit they’ve done nothing.

There is also evidence that the stick, rather than the carrot, is a key driver, particularly within the subset of 186 respondents from the building sector. A majority (57 per cent) agreed they would be unlikely to design or build more energy-efficient space unless building codes compel them to do so.

Although perhaps counterintuitive, energy efficiency proponents interpret this reluctance as an encouraging symptom that can be easily rectified through regulation. McDonald links it to economic uncertainty and market obstacles, not intransigence.

“Canadian builders are expecting to see these (code requirements) in place before they feel they can invest more, particularly when the building next door may look like the very same bright and shiny apple and be much less efficient,” she reasons. “If they are going to invest more, they want to make sure they are on a level playing field — and that’s what codes do.”

A somewhat differently worded version of the question posed to the broader business community also garnered favourable results. More than two-thirds of those 475 respondents expressed support for enhanced energy performance requirements in the building codes even if they increase the cost of commercial real estate.

Defining ROI

Meanwhile, real estate managers already on board with energy efficiency urge their business peers to re-examine how they define cost. Notably, cost is the primary obstacle to heightened energy efficiency in commercial and residential development cited by 55 per cent of design and construction specialists. It is also the leading reason business representatives gave for not pursuing opportunities to improve energy performance.

“For me, that was the biggest disappointment in the survey findings,” says Roger Johnson, senior vice-president of TD Bank Group’s Enterprise Real Estate. “That’s where I think there is an opportunity missed.”

He points to a return on investment that’s much greater than mere energy savings, which includes reduced maintenance and labour costs and improved productivity. It’s a message he also champions in his voluntary role as co-chair of the Commercial Building Energy Initiative Leadership Council under the auspices of the non-profit community development organization, Greater Toronto CivicAction Alliance (CivicAction).

“It didn’t appear to me (from the survey responses) that people were taking into account the total cost of ownership. They were looking at dollars saved on energy for dollars spent. That’s not necessarily the fullness of the evaluation that should be done,” Johnson notes.

Interestingly, among 314 respondents who reported making an upfront financial investment in equipment, technology, audits or renovations with the goal of cutting energy use, 47 per cent could not quantify how the investment had contributed to energy cost savings in the past year. Another 8 per cent claimed no energy cost reductions due to the investment, while 18 per cent pegged cost savings in the range of 1 to 9 per cent; 10 per cent saw savings of 10 to 19 per cent; and 6 per cent reported cost savings of 20 per cent or greater.

Quick paybacks appear to be better bait for action. Among the 346 businesses that own their own buildings, 176 stated they would be very interested in energy retrofits with a two-year return on investment, while only 76 were very interested in retrofits with a five-year payback. However, that’s a bias that could actually help place energy efficiency into the broader context of operational savings.

“The key is to align energy efficiency with building renewals that are occurring through the normal maintenance, planning and budgeting process,” counsels Andrew Pape-Salmon, chair of the CEEA’s board of directors and senior energy specialist with RDH Building Engineering, based in Victoria, B.C. “Then the payback periods are shortened as the costs will reflect only the increment for higher-efficiency equipment, and labour costs will often be covered as part of the baseline renewals budget.”

Program penetration

Nationally, 38 per cent of business respondents have taken advantage of a government or utility incentive program — a somewhat impressive participation rate given that only 46 per of the same sample professed to be very or somewhat familiar with the programs. In contrast, 58 per cent of the building sector respondents were very or somewhat aware of the programs, yet only 34 per cent had tapped into one.

Regionally, awareness and participation levels may reflect the numbers and types of programs offered, as well as promotional efforts in the jurisdiction. Business respondents in Ontario and Atlantic Canada claimed more familiarity and were more likely to be program beneficiaries, with Ontario boasting the highest take-up rate at 52 per cent.

Only 30 per cent of Quebec-based respondents reported that they were very or somewhat familiar with incentive programs, but the same percentage has taken advantage of a program. A slightly higher percentage of British Columbians — 32 per cent — have taken advantage of programs, even though 48 per cent claimed to be very or somewhat familiar with them. Meanwhile, prairie businesses had the lowest program participation rate at 27 per cent.

Varying levels of awareness and participation also tend to reflect an organization’s size, sophistication and business milieu. Even when there are energy management staff on the payroll, they are rarely found in the boardroom.

“This is usually one person within an organization that employs hundreds if not thousands of people. It is not surprising that there is a lack of awareness of specific utility offers among those making the financial decisions, managing individual buildings or overseeing capital upgrade projects because these are among the hundreds of people whom the energy manager or specialist may not reach within a large organization,” Pape-Salmon observes.

“When you go to work and your role is not dedicated solely to energy, you don’t think about it the same way. You think about it in dollars and cents. We need to convey the message about the cross-benefits of energy efficiency so that the CFOs understand it’s worth the investment,” McDonald maintains. “If energy is only one-eighth of what they’re responsible for and there are seven other parts to their job, how can we make focusing on one-eighth of what they do important and attractive?”

Perhaps illustrative of her point, when asked if they would be interested in occupying LEED or BOMA BESt certified space, 3 per cent of business respondents confirmed that they already did, while 25 per cent said they did not know. Energy audits — widely endorsed as the logical starting point of any energy management program — also appear overlooked and/or undervalued, as a mere 16 companies ranked audits among significant measure they have undertaken.

Participation strategies

Nevertheless, such responses may underpin the confidence of two-thirds of building sector respondents who agreed there is a  growing market for businesses seeking to own or lease energy-efficient commercial space. Clearly, there is untapped potential, and service providers could be key knowledge brokers, providing design and operational guidance and assistance in identifying and applying for available programs.

“There is a need for more advocates in the professional ranks,” Johnson says. “I think the Ontario Power Authority and the utilities have been very active in promoting their programs and it’s surprising that people don’t pick up on things, but that falls into the category of education and advocacy. It’s the bailiwick of the engineering firms, the architecture firms, the contractors.”

Pape-Salmon agrees that consulting firms like the one he works for could potentially reach out to thousands of individual buildings in their client base.

“Property managers could offer to promote programs among aggregated portfolios of buildings,” he adds. “In either case, it’s critical that the communications within the consultant and property management firms are good so that the utility programs are widely promoted.”

CivicAction’s Race to Reduce — a collaborative landlord-tenant campaign to reduce electricity consumption, leveraging friendly competition with other buildings’ landlord-tenant teams — and countrywide efforts like the 20 x ’15 campaign, which is aiming for an average energy intensity of 20 equivalent kilowatt-hours per-square-foot in office buildings by 2015, likewise promote operational and behavioural practices that can save energy with little or no requirement for capital investment.

“There are lots and lots of things you can do that are low cost to no cost that do have an impact,” Johnson asserts. “It can be something as simple as setting up a tenants’ council and bringing your tenants together to discuss how things might be done differently. That’s a no-cost measure that can have an impact.”

Survey results indicate business respondents have plenty of room to manoeuvre on this front. For example, 132 had made capital investments to replace or upgrade lighting, while only 72 reported efforts to use lighting more efficiently. Just 60 companies had made efforts to make employees and or clients more aware of energy efficiency.

Drawing from the Race to Reduce experience, it appears rivalry might be positive influence.

“The idea of the competition in the race is one of the big drivers of why people get into it,” Johnson reports. “I don’t really know why that is, but it does say something about how to motivate people. It is an interesting thing to learn.”

Barbara Carss is the editor-in-chief of Building Strategies & Sustainability and Canadian Property Management.

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