What CFOs should know about energy saving buildings
Monday, 23 November 2009

By Ben Riechers

Finance leaders today face an unprecedented energy and operating environment. Organizations are pinched more than ever. Operating expenses continue to rise and are coupled with intense pressure to cut costs. Access to cash and credit are limited. Businesses have a limited appetite for capital investments without clear payback. At the same time, energy use in buildings - already up to 40 percent of total operating expenses - is projected to grow and organizations must grapple with a tremendous amount of new energy-related policy to improve the environment.

Too often, investment in building systems falls low on the priority list. However, an organization's unplanned downtime - caused by building environmental system, structural or other failure - can reap significant costs. Because the stability of facilities is so intertwined with overall business objectives, finance leaders ask and answer the critical questions to make sure buildings are operating efficiently.

Finance leaders who view their buildings as assets link the physical environment to business outcomes - customer and employee satisfaction, productivity, operating expense reduction, among others. These buildings can be "high performance" and tie to the mission, values and results of a business. By looking at buildings as assets, financial leaders can communicate its:

  • Value to people the building serves (environment, comfort, safety)
  • Value to customers and community (competence, environmental responsibility)
  • Value to the bottom line (cost savings, avoidance, ROIC)

Investment in a high performance building should be undertaken with the goal to remain budget neutral, and funding can come from a number of sources.

Internally, look at your energy, operating expense and capital improvement budgets. Older assets are often inefficient and energy savings combined with lower maintenance costs can partially offset asset replacement.

Externally, explore options to share and/or outsource some of the expense. Ask suppliers to seek out innovative approaches to cost-containment. Leverage available funding for infrastructure by seeking out clean energy funds, utility rebates, manufacturer discounts, cost-deferment programs, and other budgetary subsidies.

There is no "one size fits all" when it comes to taking your building's efficiency to the next level. The purpose of the building determines the investment strategy, but there are a number of approaches to secure significant energy, operating, environmental and business benefits.

If your payback horizon is limited to two or three years, retrofitting lighting and updating building automation systems may be good approaches. With a slightly longer timeframe for payback, look at improving HVAC systems or installing a new building automation system. Truly long-term investments (eight or more years) might include replacement of major chiller/boiler systems and building envelope improvements. Many bundle short-term payback investments with longer term paybacks to help bring the overall investment within a manageable timeframe.

Investment in building efficiency involves low risk - similar to a Treasury Bill - but the return is much higher. Comprehensive energy retrofits historically average more than 25 percent for common investments.

A proactive maintenance strategy is an essential component to any energy undertaking and can ensure that desired outcomes are assured throughout the life of the asset. Doing so will avoid high capital, energy and repair costs.

Energy efficiency makes more sense today than ever before. Projects can move forward despite the economy, and the case to do so is clear when the building is linked to the larger business mission.

Financial leaders must actively determine funding strategies, understand the energy saving options and lifecycles for payback, and consider the total cost of ownership.

A thorough financial analysis - including cash flow - will demonstrate opportunities to make your facility more reliable, competitive, and a significant asset to the organization's financial health.

Ben Riechers is the finance leader for the Trane Global Services business. He can be reached at This e-mail address is being protected from spam bots, you need JavaScript enabled to view it

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