Welcome to Building Matters:
A Blog by Davor Kapelina, President & CEO of AtSite
I believe Buildings Matter. Not just because we spend most of our lives in buildings, but also because buildings can provide environments that inspire us to accomplish great things. And it is in buildings that organizations find opportunities to positively impact people, economics and the planet. Today buildings are often seen as part of the problem when they can and should be part of the solution.
It's a fact that buildings are the single largest consumer of global energy and natural resources, and they often represent one of the largest operating costs in an organization. Despite this, most buildings and spaces are still being designed, constructed and operated without consideration for long-term performance. Shouldn't buildings matter to everyone?
Yesterday, March 26th represented a big day for Washington, DC with respect to Buildings and Energy. A group of nearly 500 building owners, energy experts, and technology pioneers converged in the Ronald Reagan Building to discuss the challenges and opportunities surrounding the need for more energy efficient and higher performing buildings. There is a lot to be said about gathering industry leaders in energy, technology and sustainability and hearing their opinions on where we are going and how we can positively affect changes in how buildings are built, managed, and operated. The Summit brought together leaders from both the public and private sector to discuss energy efficient technologies and building performance solutions, policy, funding and incentives and alternative sources of energy.
As a keynote panel member in the general session, I was joined by a group of industry veterans to discuss new building technologies, funding building performance initiatives, occupant engagement, market pressures, and government regulations. Each panel member offered a unique point of reference including DOE, GSA, and professional Real Estate Services, giving way to engaging dialogue about the way we are currently operating buildings and what needs to be done to do so better and to deliver higher performance. While certain topics and directions were not new, key points came out of the panel discussion, such as: building technology will continue to impact the way buildings are operated; affecting management/occupant behavior remains an on-going challenge; rating systems offer standards, but are not the end all to performance; and, regulatory mandates are necessary to drastically change energy consumption. Bottom line: a great day providing innovative insights to drive performance – we were proud to be a Platinum sponsor of the event and I enjoyed being on the panel.
During the recent State of the Union Address, our President offered a goal and a counteracting economic gambit that makes the goal unrealistic. While setting the objective to “cut energy waste in half over the next 20 years” might be achievable, it will be nearly impossible for us to get there if we are also planning to drive energy costs down. President Kennedy set out to go to the moon and back within a decade, but he did not say that we would do so while holding rocket-ship fuel costs down. The forces of behavioral economics will not allow us to achieve The President’s ambitious energy goal, unless there is a fundamental change in the cost equation that we consider as we consume energy.
Building owners and homeowners have generally adjusted to today’s energy prices, meaning that businesses have energy costs pretty much baked into their P&Ls and homeowners have their budgets set to account for monthly energy bills. While many are enticed to reduce energy consumption costs, the very high energy users for sure, at today’s prices many people have limited interest in such aggressive energy efficiency efforts. Further, to achieve a 50% reduction, we will need to make material investments into our building systems, as wearing sweaters and turning off lights will only go so far.
While shifting to cleaner alternative energy sources will create a lower carbon environment, cleaner energy by itself does nothing to curb our energy consumption appetite. The way to make big strides in energy efficiency is to change the economics of energy use through a variety possible forms. We know this as we see what has happened in response to the rapid increase in gas prices. Almost instantaneously, ridership on public transportation systems soared, auto traffic reduced, and people began switching to more fuel efficient cars – big surprise. I am not necessarily advocating for this, but imagine how attractive energy efficiency investment opportunities might be if the cost of energy rose materially, with a clear telegraph of impending price increases. It is certain – we would get very efficient very fast.
Clearly, having a rapid rise in energy costs, done poorly and without proper tax policy, would have an adverse impact on economic growth and jobs. However, a near revenue neutral carbon tax, offering investment incentives and offsets, could ease the transition to a lower energy, lower carbon economy. Done well, this energy efficiency transformation would unleash more innovation, create many jobs, and place the US in a better position for global competition. Regardless, the idea that we will materially increase energy efficiency without changing the economics to do so is akin to leaving supply constant and expecting demand to go down – not an economic theory that we should expect to work.
A successful sprint through Seoul was very enlightening as I packed 3 days full of meetings with a wide range of organizations, including several major Korean companies exploring energy efficiency, potential local solution partners and leadership at the Korean Green Building Council (KGBC). Korea is in a similar place as the US, weary of ESCOs and deep retrofit spending, frustrated by propriety systems, disappointed by alternative energy generation, and enthusiastic by opportunities to design, build and operate their buildings better. Specifically, there is growing interest to be more energy efficient, greener and smarter – looking to leverage the Korea’s technology leadership as part of a solution that integrates better management practices and informed decision making. There was near consensus in all our meetings that the AtSite building performance management approach is a very appealing solution to address a growing need.
What I found particularly interesting, as I did during a recent visit to the UAE, is that despite limited immediate economic incentives there is strong interest in energy efficiency, which is also tipping over to water and overall resource management. While electricity is relatively inexpensive today, the Korean Electric Power Corporation (KEPCO) is having challenges keeping up with demand, so much so that blackouts are both a fear and a reality. And while it has been steadily raising rates, KEPCO and the government have been focused on getting customers to reduce demand, for example by demanding that building owners keep building temperatures down during the winter. Keep your coats, in commercial building lobbies, until you get to a temperate suite, as building lobbies are kept very cold during the colder months.
A desire to be green is also permeating the culture. Not only are companies using it in their promotional material, but there are requirements by the government for buildings of a certain type and size to meet the government’s green certification. And there is a growing pipeline of buildings pursuing the USGBC’s LEED rating, which is gaining popularity as a better system of recognition for green and efficient buildings. So much so that the leadership at the KGBC indicated there is insufficient professional support to guide building owners through the process. Bottom line is that Korea presents a great opportunity to become a region leading country in energy efficiency and environmental sustainable practices. As a certain level of green washing gives way to real measured progress, progressive building owners and organizations will not just reduce costs but also gain market recognition and credibility.
AtSite entered the new year with tremendous momentum and, despite a great deal of year-end drama in the national dialogue, I remain very bullish on the US economy and overall business climate. The bottom line is that there are very few other countries today that provide the political stability, long term security, and economic prospects for investment and growth. We are very focused on our national expansion aimed at capitalizing on a great US climate for our business, while we continue to build on the international opportunities we began exploring and developing over the past couple years. We have a lot of runway – please take your seats and strap in.
We continue to add clients and client buildings nationally, and we have added several solution partner technologies that are helping us continually devise innovative approaches to client portfolios. Starting in the UAE late last year, we continue exploring international partnerships that may provide us additional reach, knowledge and solution innovation. Which is why I am authoring this blog from my hotel room in Tokyo (enjoying an earthquake with my coffee), the first leg of an exploratory sprint through Japan and Korea.
While very short, the visit to Tokyo was both educational and productive. As I learned last year from my Trip to Dubai and Abu Dhabi, seeing first-hand the building infrastructure and how countries are approaching building performance, energy in specific, has been useful in many ways. In Tokyo, I had the opportunity to spend some time with the leadership at Shodensya, a pioneering ESCO styled company that is also bringing alternative energy solutions to clients throughout Japan.
While not necessarily surprising, many of the challenges that US organizations face in improving building performance carry from one country to the next, as do many of the typical approaches. And while the ESCO business continues to be very fruitful for Shodensya, our approach to building performance management is of specific interest as organizations in Japan face the same new challenges as their US counterparts. From growing regulation to carbon management, from broken proprietary systems to data overload, from stretched facility teams to growing management demands, an integrated approach to building performance delivered on an ongoing basis is needed in here in Japan, just as it is in the US.
Off to Seoul, hope the wheels are up before there are any more aftershocks.