Thursday, September 10, 2009

Energy-gulping U.S. buildings ripe for savings

Wed Sep 2, 2009 7:26pm EDT

By Andrew Stern

CHICAGO (Reuters) - New York's Empire State Building is doing it, Chicago's Willis Tower is about to start and many more landlords and companies are expected to undertake building retrofits to reduce energy costs.

Spurred by steadily rising utility bills, the need to rein in costs in the recession, a host of government tax incentives and increasing awareness of carbon footprints, energy-saving building renovations are in vogue.

"Things are thriving," said Terry Singer, executive director of the National Association of Energy Service Companies. "There have been a lot of drivers to increased investment," among them new government funding, volatile energy prices and new technology that can reduce energy consumption.

Energy conservation is an unsung hero in the global effort to burn less fossil fuels and buildings account for roughly half of global energy consumption.

Several successive U.S. presidents have championed conservation which is at the center of the Obama administration's proposals to combat climate change.

The energy services industry has grown by at least 22 percent a year since 2004. Additionally, billions of dollars were allocated in the federal stimulus package to retrofit and weatherize government buildings.

"There's this huge untapped potential," said Maria Vargas, a spokeswoman for the U.S. Environmental Protection Agency's decade-old "Energy Star" program. The agency had put its energy-efficient tag on 6,300 U.S. buildings by the end of 2008, which was 57 percent more than a year earlier.

"More will start doing it, as they realize their competitors are doing it and they realize it makes good business sense," said Branko Terzic of consultant Deloitte's Energy & Resources Group.

The energy services industry, which has a myriad of large and small players, is expected to triple in size by 2013 and there is a reservoir of untapped projects valued by a Pike Research report at $400 billion, he said.

The number of "green" jobs is growing, with the sector one of the few to add positions during the recession, said employment expert John Challenger.

The Empire State Building undertook a renovation designed to save $4.4 million, or 38 percent, on its yearly energy bill. Those savings will repay the cost within a few years.

In June, the owners of Chicago's Sears Tower, since renamed the Willis Tower, unveiled a $350 million retrofit that included replacing the 110-story tower's 16,000 single-pane windows.


The high cost of energy-efficient heating and cooling systems, improved and automated lighting, high-quality windows, and variable speed motors on equipment may deter executives aiming to preserve capital during an economic slump.

For others, conservation may lack the cachet of tapping into renewable power sources such as solar and wind.

But experts said investment in energy conservation can often be recouped fairly quickly in lower utility bills -- usually in five years or less. Retrofits also allow building owners to attract tenants by marketing them as "green," a designation known to reap higher rents.

Of about 70 billion square feet (6.5 billion sq meters) of U.S. office space, as little as 1 billion square feet (93 million sq meters) have been retrofitted, Terzic said.

To illustrate the potential, McKinsey & Co projected that U.S. investments of $520 billion in building efficiency through 2020 would yield $1.2 trillion in energy savings and reduce greenhouse gas emissions by 1.1 gigatons annually -- the amount emitted by the entire current fleet of U.S. vehicles.

Existing players in the field of energy conservation are Honeywell International Inc, Johnson Controls Inc, Siemens AG, Ingersoll-Rand Plc, and United Technologies Corp. Recent entrants are Chevron Corp, Cisco Systems Inc, IBM Corp, and Lockheed Martin Corp.

Massachusetts-based Bluestone Energy Services Ltd is among dozens of expanding privately-held companies tapping into the demand, having doubled in size last year and again this year.

"Our forte is we work with the utility companies to qualify those solutions for incentive money. We also bundle tax incentives," said Bluestone Vice President Adam Fairbanks.

Future energy savings can collateralize the financing for the retrofit, and utility grants and government tax credits can help defray the initial cost, he said.

A growing number of utilities add a fee to customer bills and then issue grants to businesses for energy-saving projects. Customers who install solar, wind, geothermal or other power-saving systems and appliances can also get rebates.

Vying for the Willis Tower windows contract is Serious Windows, a Sunnyvale, California-based manufacturer of high-quality windows that have insulating capabilities that can rival a building's exterior walls.

CEO Kevin Surace said his windows are the most cost-effective retrofit available, offering up to 50 percent energy savings in buildings in which cheaper windows were installed to save on construction costs.

"Every building I can see from this vantage point needs new windows, every single one," Surace said in an interview conducted next to the Willis Tower. "They could save $1 million a year. As energy costs go up, it becomes $2 million a year."

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