Indiana Jones and the Great Portfolio Challenge
Picture the scene: a lone hero is fighting the bad guy. Every punch, nunchuck smack, foot sweep, and spinning back kick has been exhausted. The enemy is finally showing weakness. With a last surge of energy, our hero casts his bullwhip and wraps the lever that flips the switch to pull the chain that releases the tramcar that crushes the villain. Done!
Slumping, our victor wearily turns around, only to confront…an army of a hundred more bad guys coming straight for him. “Indy? What now?”
Assuming you have ever watched an action movie, you know the kind of scene we mean.
But it begs the question: If we can reap exceptional energy cost savings from taking a whole-buildings perspective in an individual building, what can we gain from deploying a whole-systems approach to energy savings across entire portfolios?
Perhaps most importantly, can it be done cost-effectively?
The answer to this question will help accelerate the adoption of deep energy saving retrofits across the United States, perhaps at the pace of hundreds of buildings at a clip. And that’s important, because the country’s 120 million buildings consume 42 percent of our nation’s total energy and 72 percent of our electricity. The annual cost to fuel and power buildings is $400 billion—as much as we spent on Medicare in 2009—and much of this is wasted. We know through our research for Reinventing Fire that this could conservatively represent $1.4 trillion in savings over the next 40 years.
It wouldn’t be practical or desirable to conduct the level of energy and financial modeling analysis used in the Empire State Building retrofit across every individual commercial building in the U.S. We have limited resources and time, and the level of effort wouldn’t necessarily be worth the return in all buildings.
In the movies, the problem is usually solved by one of the following:
- The cavalry arrives to take on the multitude.
- The hero activates a simple (but heretofore undiscovered) strategy to turn the situation around.
The building industry is working on option one. Today, more service providers than ever are learning how to optimize the deep retrofit process and achieve upwards of 60 percent energy savings in a single building. What’s needed is progress on option two—scaling the solution by enabling large portfolio building owners to pursue upwards of 50 percent savings across multiple buildings through a deliberate and well-timed portfolio-wide strategy.
Earlier this year, Rocky Mountain Institute launched the Portfolio Energy RetroFit Challenge to
partner with large portfolio owners and change how they identify opportunity at scale.
The response has been terrific and continues to generate potential partners as we fill the first few places in the Challenge. We’ve had interest from Fortune 100 companies, banks, municipalities, popular retail corporations, and more.
Our first (soon-to-be-named) partner has a diverse building portfolio and bold energy and resource efficiency goals that reflect their position as a global technology and telecommunications leader. Stay tuned…
A portfolio approach begins with a portfolio-wide analysis upfront, because addressing energy efficiency across large numbers of similar buildings will reveal opportunities not realized when looking at buildings individually.
Although energy cost reductions can be pursued on a per-measure or per-building basis, the most cost-effective way to reduce energy consumption is to develop a portfolio approach for assessing and improving energy efficiency in all existing facilities. This drives larger energy savings, enhanced real estate value, and improved financial returns.
Beginning with a high-level, portfolio-wide analysis helps determine a roadmap for spending limited capital to reap the greatest impact. The product of that analysis is a long-term capital and construction schedule for deploying deep retrofits and other bundles of efficiency measures across a portfolio at the right time, utilizing the right technologies.
In the Portfolio Energy RetroFit Challenge, RMI works with partners to develop a replicable process for:
- Dividing portfolios into groups of buildings for streamlined energy and financial analysis, based on building characteristics and other sorting criteria.
- Conducting energy and financial analysis to generate recommendations that can be modified and applied across peer buildings.
- Selecting efficiency improvements that support important corporate real estate goals, such as improving space utilization or improving occupant satisfaction and demand.
- Developing a strategy for prioritizing and scheduling individual building improvements by taking advantage of existing capital improvement projects (retrofits that were going to happen anyway for repositioning, rebranding, or equipment replacement) and coinciding interventions in a single building for multiple benefits.
So, in George Lucas’ next commercial retrofit thriller, what will our heroes do when they face an army of inefficient, zombie buildings?
They’ll radio their integrative task force to deploy systemic disruptors that bring the buildings back to high performance. Then, of course, the converted army teaches the rest of the town how to build their own disruptors to get to net zero in the future.