Are We Investing Energy Efficiency Dollars in the Wrong Buildings?

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It’s not easy deciding what buildings merit our energy efficiency dollars. In fact, the obvious choices may be the wrong choices.

That’s the takeaway from a report issued today that is bound to stir up some discussion within the energy efficiency industry.

Produced by Boston-based analytics firm Retroficiency, the “Building Energy Efficiency Opportunity Report” offers some counter-intuitive advice on how to find the buildings that offer the most  potential for energy savings.

Retroficiency based the report on data gathered from 500 randomly selected buildings analyzed with its automated energy audit platform from March 2011 through March 2013. The analysis indicated that:

  • Energy Star is a weak signpost for energy savings potential
  • Energy savings do not necessarily lead to big carbon dioxide reductions
  • Small energy users can net big savings

The findings are important because the US spent about $400 billion on energy for its commercial and industrial buildings last year. In fact, buildings account for about 50 percent of the country’s energy use, according to the US Department of Energy.

President Barack Obama has set a goal to cut energy use 20 percent in buildings over a decade. In addition, some states have energy efficiency targets of their own, and they task utilities with meeting them. These utilities try to identify the best portfolio of buildings in their territory for receipt of limited energy efficiency incentives.

Identifying best prospects turns out to be very important. Retroficiency found that buildings with a high energy savings potential can save 14 times more energy than poor prospects. By prioritizing buildings, investors can maximize their return on investment and utilities can more quickly hit targets.

“What this drove home for us is that it is super important to identify the right buildings in a portfolio. If you miss that top set, you will leave a lot of savings on the table,” said Retroficiency CEO Bennett Fisher, in an interview

What’s wrong with Energy Star?

Nothing really – as far as it goes. But investors and utilities may rely on Energy Star ratings more than they should.

Energy Star compares building nationally and estimates how much energy a given building would use as the top performer, worst performer, or something in between. It offers a benchmark – an indicator – but does not encompass the complexity of an individual building’s energy behavior, according to Fisher.

So a low Energy Star rating doesn’t necessarily indicate that a lot is left to be done in the building; nor does a high rating mean little is left to be done.

“From a benchmarking standpoint, yes, Energy Star has a place and a purpose and is very powerful in the market. But when you’re really trying to drive true energy savings potential, you need to look at more detailed analytics,” Fisher said.

By way of example, Retroficiency described a building that performs relatively well in the middle of the day, and very efficiently on summer days. The building appeared to have a good cooling system. This building would earn a high Energy Star score, and perform well on a related  measure.

At night, however, the structure uses more energy than it should, a factor not made apparent in the Energy Star rating.  Retroficiency found 18 percent savings potential in the building, most of it through better lighting and plug load controls.

This indicates that the Energy Star rating does not capture all of the data necessary to determine a building’s energy efficiency potential. Relying on Energy Star, alone, can mean that a lot of energy savings will go unrealized.

Energy savings is not carbon savings

Energy reductions and carbon deductions are sometimes discussed as though they are interchangable: cut a certain amount of energy use and you cut the equivalent amount of carbon. This is another common misconception surrounding energy efficiency, made more by the layman, not the energy technician.

The US still generates the bulk of its power from fossil fuels, about 68 percent. Coal produces about 37 percent of our power, according to the US DOE. So chances are if a building cuts its energy use significantly, it also will take a chunk out of it carbon emissions.

However, if a building is already green – say it generates most of its power from solar – than reducing energy use nets little in the way of lowering carbon dioxide emissions.

Or here is another, more subtle example, one provided by Retroficiency.  Efficient lighting generates less heat than old-fashion incandescent bulbs. That means after a lighting retrofit, the building occupants might need to crank higher the natural gas heating system to warm the building. This could cause an uptick in winter carbon emissions following a lighting retrofit.

Pay attention to the little things

This is another takeaway from the report. Just because something doesn’t use a lot of energy doesn’t mean it won’t offer great reward if upgraded. Consider lighting. Lighting may not use a large amount of energy compared with other functions in a building. Yet it is often pursued because of its quick payback, and it often creates a big chunk of the savings achieved when a building undergoes improvements.

‘You really need to take a very comprehensive look at these buildings and assess all of the different areas of consumption for opportunity,” Fisher said.

Retroficiency chart jpg

Longer payback, better savings?

The report also looked at length of payback on investment, a high concern for investors and building owners.

Building owners may be able to achieve better savings if they are willing to extend the payback period. Much depends on the type of building. Extending payback accelerated energy average savings for hotels and labs over time; but the converse was true for education and retail buildings that Retroficiency analyzed.

Extending payback can be a tough sell, however. Company CFOs often demand a certain payback period as a matter of company policy, and they are reticent to change it.

“We’re not saying everybody should be looking at a seven–year payback. But it is a wrong move to walk into a building and say, ‘I have a two-year payback and that’s all I will look at,’” Fisher said.

Retroficiency produces granular information about building performance  with its cloud-based Automated Energy Audit using interval consumption data, monthly billing or other data. The company says it has used the platform to produce an unprecedented level of building data, which is the basis of the report’s conclusions. The full report is available here.

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About Elisa Wood

Elisa Wood is the chief editor of She has been writing about energy for more than three decades for top industry publications. Her work also has been picked up by CNN, the New York Times, Reuters, the Wall Street Journal Online and the Washington Post.


  1. How many of these described buildings have that natural gas chimney poking out of the roof?
    If doing lighting and solar is good for the buildings energy efficiency goals, then maybe they should also be doing the natural gas energy efficiency.
    The us DOE states that for every 1 million Btu’s of heat energy recovered from the buildings natural gas exhaust, and this recovered heat energy is utilized in the building or facility where it was combusted, 117 lbs of CO2 will NOT be put into the atmosphere.
    They also state that if a 60 watt light bulb is left on for 24 hours, it will generate 3.3 lbs of CO2. How many light bulbs have to be changed HOURLY to keep up with the CO2 reduction happening in the buildings boiler room Hourly?
    All forms of Energy Efficiency must be applied where ever possible if America is going to win in this battle against this Climate Change.

  2. “We’re not saying everybody should be looking at a seven–year payback. But it is a wrong move to walk into a building and say, ‘I have a two-year payback and that’s all I will look at,’” Fisher said.

    Not only wrong, it’s a sign of a very unsophisticated perspective. 50% annualized rate of return, really? Implicit lie. Show me where you are getting that with your money.

    OR it’s a sign they’re significantly discounting the performance promise because all the risk is on the purchaser. Recognizing there is no accountability or skin in the results for the one making the promise and lots of reason to exaggerate, they factor the exaggerations into their requirements. It’s a self-perpetuating cycle of crap.

    Widespread promise and results tracking will fix this. Here’s a possible solution –