Full Title: Unlocking American Efficiency: The Economic and Commercial Power of Investing in Energy Efficient Buildings
Author(s): Rhodium Group
Publisher(s): Rhodium Group
Publication Date: May 1, 2013
Full Text: Download Resource
Description (excerpt):
Americans spend $432 billion a year powering their homes, stores and offices, on par with what US businesses spend on employee health insurance. United Technologies Corporation, in collaboration with the Rhodium Group, analyzed the impact of a 30% improvement in US building efficiency by 2030. We find that such an improvement is possible with existing technology and design practices and would generate $65 billion dollars per year in savings, net of investment costs, for American households, businesses and governments.
In corporate finance terms, investing in a 30% improvement in building energy efficiency would have an internal rate of return (IRR) of 28.6% over a 10 year period. An IRR of 28.6% is four times better than average corporate bond yields or average equity performance and more than double the returns even high-performing venture capital firms enjoy. That’s because the most attractive efficiency technology and design options cost the same or only slightly more than conventional alternatives, but deliver significant energy cost savings.
Rising energy prices can take a toll on household budgets. Achieving a 30% efficiency improvement in existing residential buildings would save the average household $163 a year, net of investment costs. If residential efficiency improvements are combined with commercial efficiency improvements and the benefits are passed on to consumers, those savings would rise to $466 per year. That’s more than twice as much as the average household spends on fresh vegetables, more than they spend on household appliances, furniture or clothing their children, and nearly as much as they spend on prescription and non-prescription drugs.
Federal, state and local governments spend more than $50 billion a year on energy. Achieving a 30% improvement in existing government buildings would yield $8 billion per year in net savings that could be used to balance budgets or cut taxes.
Globally, improving building efficiency in rapidly urbanizing emerging economies could create a $1.8 trillion market for energy efficient building design and technology. Investments in building efficiency improvements at home will help make US companies more competitive abroad.
Smart policy can serve as a catalyst for the investment in building efficiency solutions and includes such things as building labels and codes, effective standards, efficiency finance, portfolio standards and regulatory reform.