California’s $3.1bn Energy Efficiency Budget: What’s in it for Commercial Real Estate?

The California Public Utilities Commission (CPUC) last week approved a $3.1 billion budget for energy efficiency programs for the years 2010-2012, a 40% increase over the previous program cycle. The funds will be directed through the state’s publicly owned utilities and are expected to create energy savings of almost 7,000 gigawatt hours, avoid 3 million tons of greenhouse gas emissions and create between 15,000 and 18,000 skilled green jobs.

The $3.1 billion budget includes hundreds of millions that will be available for commercial real estate owners who want to improve their sustainability and who have the smarts to take advantage of the subsidies and incentives that are available.

Never before have there been so many programs, subsidies and incentives available to building owners. Here are five steps to tap into state funds to transform your CRE business from a green laggard to a green leader:

1. Find out your energy efficiency score

The state has ambitious goals to make all new buildings Zero Net Energy by 2030 and achieve major energy reductions in existing buildings...

But there’s currently a lack of data about how existing buildings perform, which the CPUC wants to overcome through benchmarking:

“Benchmarking is a beginning step in managing a building's energy cost, one that should motivate the building's owner or manager to take actions to improve the building's energy profile."

The public utilities are charged with implementing massive benchmarking programs. You can get them to measure the performance of your building and provide you with valuable information about its current energy usage and how it compares to buildings of a similar type.

2. Get an energy efficiency audit

An energy audit takes benchmarking a stage further by first assessing the building’s current technologies and systems, and then identifying energy saving opportunities. The state owned utilities operate various programs that provide commercial building energy audits, such as Direct Install, which provides free energy efficiency audits and hardware upgrades through third party contractors.

3. Prioritize and plan for retrofits and upgrades

Your energy audit will identify the low cost or no-cost initiatives that can be implemented immediately. It will also list retrofit options and other major initiatives that have a longer payback. At this stage you’ll need to assess retrofit options against the available incentives and upgrade programs that are available. You should also use life cycle cost analysis to assess the true financial impact of the retrofit options, and make sure the full impacts of tax incentives and other subsidy programs are incorporated in the ROE calculation.

4. Acquire financing and incentives

Financing initiatives, such as on bill financing, and AB-811 municipal district financing programs, are already being developed and implemented across the state; expect to see new programs and pilots being rolled out after the CPUC’s adoption of the enhanced budget. Ambitious owners should contact their local public utility to get in early with pilot programs while funding is available.

5. Complete the transformation with green leasing, training and recognition

Greening a commercial building requires more than retrofits to the building systems. Most of the benefits of an energy efficient building are only harvested if the building is maintained and operated using sustainable principles and procedures. For a leased multi-tenant building this means ensuring that the occupants adhere to the building’s green policies and procedures. Green leasing provides the framework for green behavior using a modified version of the commercial lease. Expect to see new programs from utilities that focus on promotion of green leasing.

Training for jobs in the green economy is a key component of the state and federal government’s sustainability strategy. Take advantage of subsidized programs to get your property managers and engineers trained in green building technologies and practices.

Your building may also be a candidate for certification under LEED and/or EnergyStar. Certification provides great publicity for the building and the owner. Studies show that certified buildings have higher values and better rental and occupancy performance than their non-green peers.