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Jonathan A. Schein

Jonathan A. Schein

Posted: August 25, 2009 10:28 AM

Energy Efficiency Can Earn Great Financial Returns

Here is a simple investment question.  Would you invest one dollar if you were guaranteed to receive two dollars back and get a 100% return?  I'm not talking about an email scam emanating from Nigeria but an idea for aligning financial priorities and energy efficiency.  Based on a recent study by the consulting firm McKinsey, a $520 billion investment in energy efficiency can result in a savings of up to $1.2 trillion by 2020.  These investments are not the type one thinks about when these amounts of dollars are thrown around.  These savings come from simple actions such as replacing energy-draining household appliances with newer energy- saving models, sealing leaky building ducts, and other mundane initiatives.  According to the study, these changes would decrease our energy consumption by 23% over the next 11 years—that's equal to the entire non-transportation energy consumption of Canada. The numbers are staggering, representing an estimated reduction of  "end use energy consumption in 2020 of 9.1 trillion BTUs...potentially abating up to 1.1 gigatons greenhouse gases annually," as stated in the report.

Of course, there are huge barriers to such a program.  This study indicates that there has to be stimulated demand for energy efficiency in over 100 million buildings across the country, both commercial and residential.  Is it possible to motivate owners and managers to become truly energy efficient? New construction is already addressing many energy efficiency needs.  However, the real issue is the existing building stock, which is by no means up to standards necessary today.  McKinsey indicates that the industrial and commercial sector accounts for approximately 65% of the structures that stand to gain from implementing energy efficiency upgrades, while the remaining 35 percent would upgrade existing housing stock.

First, there's the money issue.  At this point the economic downturn has hit all sides of real estate ownership and there simply may not be enough cash on hand to pay for the upgrades, especially on the single-home-ownership front.  Secondly, this project will probably take a long time to implement.  Right now, there are some commercial owners and managers with the wherewithal to invest in their current portfolios, which makes great short- and long-term sense. For those who can't commit the funds now, this will be decided by the rate of economic recovery and property owners' willingness to invest in upgrades and retrofits. I can't see how anyone could fail to appreciate that this kind of investment in energy efficiency makes good sense.

Jonathan A. Schein is the publisher of and

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