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Larger Companies Tolerate Longer Paybacks Energy Efficiency Investments Widely Anticipated in Upcoming Months
November, 2007
The following are highlights from findings of Johnson Controls' survey of 1,250 executives throughout North America. The survey asked what companies are doing in response to rising energy costs, what sort of payback they expect on investments in energy efficiency, and to what extent they are motivated by concerns about the environment versus pure economics. The full version was published as part of the Continental Automated Buildings Association (CABA) information series and is available in CABA's research library at www.caba.org.
The vast majority of decision makers for energy related issues believe that electricity and natural gas prices will increase significantly over the coming year.
( 79% believe prices will increase in the next 12 months.
( The average expectation is an increase of 13.25%, with over half of respondents pegging the increase in the 6% to 20% range.
Consistent with these expectations, the majority of decision makers expect to make investments in energy efficiency improvements in the next year.
( Almost 60% expect to make improvements with capital expenditures, and just over 60% expect to make improvements from operating expenditures.
A look at what companies have already done to improve the energy efficiency of their facilities reveals that a number of measures have already been embraced, but these tend to be measures that require little or no investment or are relatively simple to do.
( Educated staff and other facilities users (70%)
( Adjusted HVAC controls to reduce the times it runs (60%)
( Switched to energy-efficient lighting (67%)
( Installed lighting sensors (46%)
The larger the area of facilities, the larger the expenditure on energy and the larger proportion of total expenses for energy accounts.
( For those with at least 500,000 square feet, energy accounts for an average of 12% of their total expenses compared to 7% for those with less than 100,000 square feet.
Size of facilities does not appear to influence whether decision makers expect energy prices to rise, or by how much they expect them to rise. However, the likelihood of making energy efficiency improvements (using either capital or operating budgets), and the proportion of budgets they expect to invest, increases as the size of facilities increase.
( About 80% of those responsible for 500,000 square feet or more expect to make energy efficiency improvements with capital expenditures, and 80% expect to make them with operating expenditures. This compares to just 35% (capital) and 46% (operating) among those with responsibilities of less than 100,000 square feet.
( Those with the largest area of responsibility expect, on average, to spend 9% of their capital budget and/or 7% of their operating budget on such improvements, compared to 7% and 5% respectively for those with the smallest responsibilities.
The larger the facilities, the greater the importance of energy management to a company.
( 68% of decision makers with responsibility for 500,000 square feet or more consider energy management to be extremely (22%) or very (46%) important. This compares to just 35% of those with less than 100,000 square feet, and 53% of those with between 100,000 and 500,000 square feet.
As a consequence, those with larger facilities review their energy consumption data and their energy forecasts far more frequently than those with smaller facilities.
The attention paid to energy efficiency does not appear to have increased for larger companies much more than it has for smaller companies, but those with the largest facility areas will tolerate a longer payback period on their investment, and have become more tolerant of longer payback periods over the past five years.
( Companies with 500,000 square feet or more will tolerate a payback of 5.1 years on average, which compares to only 3.7 years for the smallest companies. Perhaps more importantly, though, is that 27% of the largest companies will tolerate a return of six or more years, compared to just 9% of the smallest companies.
( 26% of those with 500,000 square feet say their company's tolerance has relaxed relative to five years ago.
The relative influence of cost savings versus environmental responsibility in energy management decisions does not change with facility size. The emphasis is always on cost savings, with environmental responsibility playing a secondary role.
The preceding survey results are reprinted from iHomes & Buildings, Winter 2007, the publication of the Continental Automated Buildings Association. For more information, see the web site at www.caba.org.
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