By Clay Nesler
It is difficult to ignore the stories about energy prices, energy independence and climate change that blanket the front pages of newspapers and crawl across the bottom of our TV screens. It shouldn't surprise us, then, that executives are paying increased attention to energy management, as demonstrated by the second annual Johnson Controls Energy Efficiency Indicator survey, released in mid April.
According to the U.S. Department of Energy, commercial buildings consume 40% of all natural gas and 60% of the electricity produced in this country. And according to "The Case for Investing in Energy Productivity," a new report from the McKinsey Global Institute, squeezing more productivity out of the energy that industries, homes and vehicles consume is the most economical way to stifle rising energy demand and control the output of planet-warming gases.
We initiated the Energy Efficiency Indicator survey of energy management decision-makers last year because we wanted to know if and how organizations were adjusting their operations in response to rising energy prices. On a number of fronts, we saw quite a bit of movement from 2007 to 2008. Nearly three-quarters of businesses are paying more attention to energy efficiency than they were just a year ago. That's up from the 62% in 2007.
We also saw an increase in the importance being attached to energy management. Today, one in five regards energy management as extremely important. In 2007, only 15% felt that strongly.
Businesses expect energy prices to continue to rise, but it may be that the full impact of risings costs has yet to be felt. In last year's survey, 79% said they expected energy costs to rise, and the average increase was anticipated to be 13%. However, according to the Energy Information Administration, commercial natural gas and electricity prices were relatively flat last year. (In this year's survey, 80% of respondents said they believe natural gas and electricity prices will rise over the next year. On average, the expectation is for prices to rise 14%.) Despite expectations for rising energy prices, plans for investment in energy efficiency remained constant from 2007 to 2008. There is a trend, however, toward more significant energy efficiency measures including replacing inefficient equipment before the end of its useful life (41%, up 13% from 2007) and switching to energy efficient lighting (78%, up 11%). Also, 88% claim that energy efficiency is a design priority in construction and retrofit projects, up 11% from a year ago. While cost has been the historic driver of energy efficiency investments, environmental responsibility is gaining ground as an additional motivator for energy efficiency investments. For 53% of respondents (up 5%), environmental responsibility is an equal or greater motivator than cost reduction for investing in energy efficiency. Seventeen percent cited environmental responsibility as the stronger motivator, up from 13% in 2007. Thirty-six percent (about the same as last year) said they were equally motivated by environmental responsibility and cost savings. For the first time, the Johnson Controls Energy Efficiency Indicator probed deeper into how environmental and financial factors influenced energy efficiency decisions. We found it compelling that many companies are considering energy efficiency, renewable energy and green buildings as strategies to address environmental sustainability.
• 28% feel climate change has an extremely or very significant influence on their energy efficiency investments and 31% said it was somewhat significant. • 39% think that significant legislation mandating energy efficiency and/or carbon reduction is extremely or very likely • Nearly one-third (31%) believe that green buildings will be extremely or very important in attracting and retaining future employees. • 34% plan to have new construction projects certified to a recognized green standard while 20% plan to certify existing buildings after retrofit. An additional 59% plan to include at green elements in future retrofits. • 38% said they were including or considering solar electric (PV) technology in new construction or retrofit projects while 24% were also considering solar thermal.
Cost control has always been a boardroom issue and energy efficiency has proved to be an effective improvement strategy for decades. With increased organizational focus on environmental responsibility, it will be interesting to see if energy efficiency garners more strategic attention and investment in the coming years. We intend to continue monitoring and reporting on these important trends.
A complete report of the Johnson Controls Energy Efficiency Indicator research results is available by clicking on this link.