ACEEE: Energy Efficiency Market ‘Hard to Reach’ in Multi-Tenant Buildings

by | Aug 2, 2013

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ACEEE FinanceOver recent years, financing for energy efficiency investments has been widely viewed as a promising solution to reducing upfront cost barriers to investment in energy efficiency. But several markets, including multi-tenant commercial office and multi-family, remain stubbornly hard to reach, according to research by the American Council for a Energy Efficient Economy.

According to Financing for Multi-Tenant Building Efficiency: Why This Market is Underserved and What Can Be Done to Reach It  commercial buildings currently represent about 18 percent of the total primary energy consumption in the United States. Some 60 percent of office buildings were built before 1980 and many are in need of upgrades due to aging building equipment and systems. So, there is a great deal of potential to install energy efficient, cost-effective systems in office buildings that would reduce monthly utility bills, the ACEEE says.

Often buildings that could benefit the most from energy efficiency upgrades face the steepest barriers to adoption, ACEE says. Evidence suggests that Class B and C commercial office buildings, which typically are older buildings with fewer amenities (particularly those not professionally managed) can sometimes be at a significant disadvantage when it comes to accessing upfront capital for energy efficiency retrofits compared to Class A buildings, ACEEE says.

Today, the vast majority of energy efficiency improvements in multi-tenant spaces is covered through traditional finance mechanisms and self-finance. Driving demand for efficiency improvements is in some cases more important than creating attractive financing mechanisms. However, there are also owners with credit constraints (likely Class B and C, particularly non-professionally managed sub-sectors) that may be swayed by more attractive financing opportunities, ACEEE says.

The above table summarizes existing financing mechanisms and the barriers addressed.

In December, Steve Nadel, executive director of the ACEEE testified before the Senate Finance Subcommittee on Energy, Natural Resources, and Infrastructure advocating well-targeted energy efficiency tax incentives for big buildings.

ACEEE analysis found that a five-year federal tax credit for several high-efficiency products and services cost the government less than one-tenth the cost of the energy resources saved over a 15-year period. According to ACEEE, the options with the best payback are tax incentives for commercial buildings (both energy-efficient new construction and energy-saving retrofits), energy-efficient new homes, heating and cooling equipment, and appliances, and combined heat and power systems.

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