Value Beyond Cost Savings - Green Building Finance Consortium

Value Beyond Cost Savings: How to Underwrite Sustainable Propertiessystems come to their expected performance. If they underperform significantly, a goodcommissioning agent will also be able to develop solutions to the problem.Proper measurement and verification (M&V) will also provide the O&M staff with livedata to verify that the building is performing as expected. This way, if they see actualenergy use significantly higher than predicted energy use, they can diagnose the systemsin order to bring actual energy use more in line with the predicted values, assuming thatthey are trained in how to interpret and act upon the M&V data.Conflicts Between Capital and Operating BudgetsThe discussion thus far has been predicated on the assumption that energy efficiencydecisions are made at the enterprise level. That is, some decision-maker or decisionmakingbody attempts to make a decision that will optimize enterprise value, based on allcosts, benefits and risks affecting the enterprise. However, this is not always the case. Insome organizations, there is a separate decision-making process, and a separate decisionmaker,for operating budgets and capital budgets. While certain energy efficiencyupgrades may have a worthwhile positive impact on reducing operating expenses, theymay not be undertaken because funding would have to come out of a capital budget, anddecision makers who control the capital budget may have different priorities. It should benoted that these conflicts could exist even when the same person is responsible for bothcapital and operating budgets.A possible solution to this barrier to efficient investing is for the enterprise to restructuremanagement and incentives to allow for an integrated approach to decision-making andoptimal enterprise level decisions to be made.8. The Evidence of Building Energy PerformanceUnderwriting energy/carbon reduction investment requires both a process and set ofpractices, but also evidence of the reliability of initial development costs estimates, energyforecasts, and longer term building energy performance. For decisions on theimplementation of specific features like daylighting or lighting controls, additionalevidence of performance at the feature level is also needed. Detailed energy performanceevidence at the process, feature and building level is presented in Expanded Chapter IV,Sections C, D and E.9. The Impact of ESCOs on Underwriting Energy Efficient InvestmentThe analysis thus far has been predicated on the assumption that all costs, benefits andrisks accrue to the enterprise making the investment decision. However, financingstructures exist to shift these costs, benefits and risks, in whole or in part, to a third party,thus dramatically changing the approach to the underwriting decision. For example, thisshift can eliminate the initial cost of the investment and strip off only a portion of the171