Energy efficiency has gained significant traction within the built environment as one of the easiest and most cost-effective ways to work toward Net Zero while curbing costs. But the value of energy efficiency extends far beyond reduced costs, and understanding this value is key to combatting broader economic and social challenges globally.
While the upfront costs of “greening” a commercial building can be significant, data shows that energy-efficient retrofits still provide a positive return on investment. According to the American Council for an Energy-Efficient Economy, the average ROI for energy-efficient upgrades is 20%. Reduced maintenance costs; higher tenant satisfaction; premiums on occupancy, rental pricing, and sale price; and even increased productivity have all been linked directly to energy efficiency in commercial buildings.
In this post, we’ll explore the broad range of benefits investment in energy efficiency provides to many stakeholders, touching all aspects of our environment and society.
By reducing the overall demand for energy, efficient buildings also reduce dependence on external energy sources and help stabilise the energy supply. Traditional fuel sources such as oil, gas, and coal are often imports, making them susceptible to dramatic price increases or supply interruptions.
Efficiency measures can also work with conservation measures to reduce demand in an emergency, as with the Great East Japan Earthquake in 2011. More recently, geopolitical instability in Russia has disrupted one of the primary sources of gas imports to the European Union, resulting in price surges.
Reduced consumption has already made a difference in minimising the impact of rising gas prices. According to the IEA, gas consumption would have been 21% higher in Germany and 27% higher in the UK without the benefit of efficiency improvements since 2000. Reducing reliance on external fuel sources therefore helps ensure long- and short-term energy security for buildings, portfolios, and governments.
Reduced greenhouse gas (GHG) emissions
Buildings are responsible for nearly 40% of global CO2 emissions, due in part to their level of energy consumption. Traditional power plants burn fossil fuels that release greenhouse gases and pollute the air, decreasing air quality and creating serious challenges to public health. In densely populated countries like China, air pollution has contributed to an estimated 2+ million premature deaths, reducing average life expectancy by two years.
Improving energy efficiency can significantly reduce these emissions, playing a critical role in the path to Net Zero. Energy-efficient buildings are also better equipped to adapt to renewable energy sources.
Increased asset value
The “green premium” on energy-efficient buildings has been widely publicised, particularly in high-demand markets such as London and New York. In Australia, a study by the University of Western Sydney found that a 5-star NABERS Energy rating in commercial buildings delivered a 9% increase in overall asset value, while more modest 3.5-4.5 star ratings still saw a noticeable increase of 2-3% in value. The difference in the UK was even more striking, with an estimated 20% premium for green-certified buildings.
The IEA also found that manufacturing businesses can achieve higher asset values for both equipment and facilities by investing in energy efficient initiatives that improve productivity and capacity utilisation, or by extending the useful life of the assets by reducing wear.
Reduced vacancy and turnover
Energy efficiency in a commercial space can support increased tenant comfort while reducing operational costs. The many tenant-facing benefits, including improved health and safety, often result in improved tenant satisfaction and lower vacancy rates.
In the United States, the increase in property value stemming from reduced vacancy and tenant turnover has been shown to equal the savings in utility costs. Energy-efficient ratings can also help secure government tenants bound by consumption targets. In Australia, for example, government buildings must achieve at least a 4.5-star NABERS energy rating.
Health and wellbeing
Health and wellbeing are the foundation of increased tenant satisfaction and can be traced back to benefits like better air quality and thermal comfort, which reduce risks to both physical and mental health. Energy-efficient buildings can contribute to lower instances of respiratory and other health issues, helping to reduce employee sick days and support a healthier, more productive society. Chronic thermal discomfort and low indoor air quality have been linked to poor mental as well as physical health, including anxiety, stress, and depression.
Benefits beyond the built environment
Of course, the net benefits of energy efficiency reach beyond the scope of the built environment to every facet of society and the larger context of climate change. Here are just a few of the additional benefits identified by the IEA:
- Industrial productivity: Efficient use of energy in commercial buildings supports increased productivity by reducing operational costs and creating optimal working environments, helping to enhance both output and competitiveness.
- Positive macroeconomic impacts: Energy efficiency stimulates economic growth by creating jobs and promoting sustainable development. The energy efficiency industry supports employment in construction, retrofitting, and energy management sectors, helping to boost the overall economy.
- Poverty alleviation: Low-income populations are especially well-placed to benefit from reduced energy costs. Energy efficiency can help make energy more widely available, alleviating energy poverty and increasing overall access.
- Resource management: Sustainable use of resources encourages the use of renewable materials and technologies, leading to better resource management and conservation.
- Public budgets: Public buildings that embrace energy efficiency can redirect their net savings to other public services, enhancing overall societal welfare.
Among the IEA’s other referenced societal benefits are increased: increased disposable income, lower energy prices, macro-economic impacts, employment, local air pollution and resource management.
The benefits of energy efficiency in the built environment extend far beyond energy savings. They encompass overall economic growth, environmental protection, health and wellbeing, and greater social resilience. As global challenges like climate change and resource depletion evolve, the role of energy-efficient buildings will become increasingly crucial.
Looking for a cost-effective way to make your buildings more energy efficient? Watch a demo of CIM’s PEAK Platform, a building analytics tool that maximises efficiency in buildings of any age.