From a market-driven perspective, the fight against global warming hinges on creating demand for both energy-efficient technologies and renewable alternatives to fossil fuels.
But these innovations come at a steep price, and cost-conscious businesses, already burdened by rising health care costs, want a relatively quick return on their investment in a facility upgrade or solar panels. If the payback is too long, most won't commit.
According to the second annual Johnson Controls Energy Efficiency Indicator survey, 72% of North American companies report that they are paying more attention to energy efficiency than last year. But the percentage of companies planning to invest in energy-efficiency improvements has not increased.
Blame “return on investment,” or ROI. If energy prices continue upward, the time needed to recoup one's investment in energy-efficient technologies is shortened. But if businesses think energy prices may soon level out or even fall, they will put off the cost of energy-efficient investments.
“It's one thing to be aware of a problem, and another to take steps to solve it," said Clay Nesler, vice president of global energy and sustainability for Johnson Controls. "But as energy prices continue to rise, our research indicates that the combination of economic pressure and environmental awareness will motivate people to make smart investments that have a big payoff in the long term."
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Shari Epstein, associate director of research for the International Facility Management Association, says her organization's own research, released last month, shows that most companies report spending more for energy even as energy use has fallen.
“Most facility managers would love to make these building improvements, but there's only so much money to go around,” Epstein said. “Companies need to justify those types of investments. Not that facility managers would wish it, but if energy costs increased even more, that would tilt the cost-benefit equation more in their favor, and then we'd see more spending on energy efficiency.”
Even the expectation of dramatically escalating prices can tilt the ROI equation.
When Dave Boucher, owner of Amaranth Bakery and Café, 3329 W. Lisbon Ave. , installed a solar water heating system in 2003, he expected an ROI of 15 years. But with soaring prices for natural gas and electricity in the interim, Boucher said he estimated that the system has nearly paid for itself in five years. He also installed high-efficiency heating and cooling equipment.
“Any business considering this type of project will naturally consider the cost-savings benefit,” Boucher said. “Some businesses will spend the money because they have a mission to be green, but that's the exception.”
Amy Taivalkoski, a renewable energy consultant, said most companies are looking for a five-year payback or less.
“They are interested in efficiency, but not sure where to start,” she said. “I always tell businesses that it's way cheaper to do an efficiency upgrade before they commit to solar panels or windmills.”
She said the ROI on a solar or wind installation can be 25 years, although tax credits and depreciation deductions can reduce the payback to 12 years.
“That's still too long for most businesses. It's a different way of thinking than they are used to,” she said.
So far, churches have been among the first to put ethical considerations ahead of cost-benefit. “To them it's a moral issue, and solar is a major part of the package,” Taivalkoski said. She recently coordinated a solar panel installation on the Unitarian Universalist Church in Brookfield .
It's the first solar panel installation in Brookfield in at least 30 years. The church will be holding a ribbon-cutting ceremony June 19, beginning at 2 p.m. at 13001 W. North Ave.
