Last year the Home Star Act was introduced has since become part of the Clean Energy Jobs and Oil Company Accountability Act of 2010. The purpose of the Home Star program is to create new green jobs by incentivizing energy efficiency improvements in residential buildings using rebates. The program would offer rebates for energy efficient appliances, upgrades to residential mechanical systems, insulation, and whole home energy efficiency retrofits. The $6 billion Home Star Act is currently before the senate. The issue that some have had with the act is that it only addresses energy efficiency improvements in residential buildings and does not encourage energy efficiency in commercial buildings.
Earlier this year, President Obama announced the Better Buildings Initiative, which has the overall goal of making commercial buildings 20% more energy efficient by 2020, saving businesses a total of $40 billion dollars annually. Commercial buildings were responsible for 20% of the total energy used by the U.S. economy in 2010, therefore addressing commercial building energy efficiency is vital to significantly, improving the overall energy efficiency of the country. The President plans on achieving success with the Better Buildings Initiatives through a series of strategies.
The current Energy Efficient Commercial Building Tax Deduction, which is part of the Energy Policy Act of 2005, will be changed to a tax credit and will be more generous. The tax deduction allows commercial buildings to deduct between $0.30 and $1.80 per square foot based on energy efficiency upgrades implemented in the building. Additionally, real estate investment trusts (REITs) will now be able to take advantage of the tax credit. Changing the incentive from a tax deduction to a credit greatly improves the value of the tax incentive to building owners.
President Obama is also seeking to increase the number of financing opportunities available for commercial retrofits. Lack of financing opportunities has been a hurdle for some building owners. The Small Business Administration is working with lenders to take advantage of increased loan size limits to encourage new energy efficiency retrofit loans for small businesses. Additionally, the President’s Budget will introduce a new pilot program through the DOE to guarantee loans for some commercial buildings.
States and local governments typically have control over building codes, regulations, and performance standards. President Obama plants to incentivize states and localities with competitive grants, to streamline energy efficiency standards, encouraging building upgrades and attracting private sector investment.
The President is reaching out through the Better Buildings Challenge to leaders in the commercial and university sectors to make their organizations more energy efficient. Organizations that become partners in the challenge will commit to making their buildings more efficient. Partners will become eligible for benefits such as technical assistance, information on best practices being used by peers, and public recognition.
The last piece of the initiative is to train all of the workers who will be needed to perform the upgrades. The Administration is currently working on creating a Building Construction Technology Extension Partnership that would provide workforce training in areas that will be in high demand in the future, such as energy auditing.
Although the White House still has not announced the budget for the program, according to the Wall Street Journal, President Obama has said he would like to fund the program by increasing taxes for oil and natural gas companies.
The details of the Better Buildings Initiative still have to be formulated, but there are several issues to consider when determining how effective the President will be in laying the ground work for a 20% reduction in commercial building energy consumption.
The initiative provides incentives for implementing energy efficient upgrades, rather than creating penalties for not becoming energy efficient. Commercial building owners are not forced to do anything. Although owners may end up paying more over the long run as a result of higher energy bills, incentives tend to result in less action than penalties.
Additionally, projects that do not have the greatest return on investment may be prioritized over more economical projects. When it comes to energy projects, people often choose to implement the “sexy” projects that will draw attention to their sustainability efforts, such as solar panels, rather lower cost more effective measures, such as building controls. A standardized analysis should be required prior to any building applying for financing or tax incentives and project with a qualifying return on investment should be given priority.
Providing funding for or requiring Energy Audits to be performed prior to receiving any funding or tax credits would ensure that the maximum reduction in energy consumption is achieved per dollar invested in the program. Through Energy Audits, building owners would become educated on their building’s current energy use and on which potential energy efficient projects will provide them with the greatest savings. Often projects which are perceived to yield significant energy savings, do not. Additionally, this would drive the demand for Energy Auditors, which would in turn result in a larger green workforce.
Reducing the energy consumption of commercial buildings by 20% over ten years is an ambitious endeavor. Actively engaging all kinds of commercial building types is imperative to achieving the goal of the Better Buildings Initiative. The amount of funding the bill receives