The Economics of Energy Efficiency and Renewables

There's understandably a lot of excitement about photovoltaics, solar water heaters, geothermal heat pumps and other sources of renewable energy for today's commercial building. Particularly for the environmentally motivated among us, the desire to reduce our dependence on traditional energy sources is strong.

But when looking at potential energy upgrades for your commercial buidling, you should keep in mind a few important considerations:

1) Energy Efficiency encompasses many forms of energy in addition to electricity. For example, for cold climate North American buildings, the biggest source of energy consumption is space heating; space heating, in turn, is largely fueled by oil and natural gas. Barring a wholesale conversion to electric heat (which may be expensive), photovoltaics will do nothing to reduce the amount of oil and gas that your building consumes.

2) Should you decide to invest in renewables, the scale of your investment will depend on the amount of energy your building consumes. If you can cut  energy consumption in half through simple, low-cost measures, and thus reduce the investment necessary to take your building to net zero by half (think: 1 solar panel vs. 2), you've made a good investment.

3) Air sealing might be a $1,000 dollar investment upfront and could save you $500 or more per year, which would give you a 2-year ROI. A wind turbine adjacent to your building, on the other hand, might cost somewhere in the range of $15,000-$20,000 and would take many years to pay for itself.

4) Energy Efficienct building improvements also lead to greater comfort and better indoor air quality. Done right, sealing air leaks, applying window film and upgrading your insulation are all measures that have a high ROI and will reduce your carbon footprint and your energy costs. Additionally, they will reduce drafts, make your occupants warmer in the winter and cooler in the summer and potentially increase the health and longevity of your property. In short, the relatively low cost of energy efficiency improvements leads to a wealth of external benefits that are not achievable through renewable energy alone.

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