The Clinton Climate Initiative: A Business Solution to Climate Challenges
Because the Clinton Climate Initiative is taking a very practical approach to addressing climate change through building energy efficiency, it presents an opportunity for companies to learn vital lessons about implementing energy efficiency programs in their own facilities. Read More
Energy,
green and sustainability are hot topics, and as a result television
programs, radio and newspapers are full of information and advice on
how to go green. Unfortunately, when a wealth of information exists,
there is also a wealth of misinformation. But through the noise, a
program called the Clinton Climate Initiative (CCI) has emerged that
focuses on a true and measurable approach to reducing energy use and
making a quantifiable impact on greenhouse gas reduction.
This article will introduce the benefits of the CCI and how
this program impacts us all, and then explore the ways that
businesses can integrate the solid energy management principles of the
CCI and realize the rewards.
Background on the Clinton Climate Initiative
The Clinton Climate Initiative
(CCI) is a program through the William J. Clinton Foundation that
applies a measurable, business approach to fighting climate change
globally. Specifically, the CCI focuses on working with the C40 Large
Cities Climate Leadership Group, a group of large cities worldwide
dedicated to reducing greenhouse gas emissions. Since cities contribute
about 75 percent of all heat-trapping greenhouse gases, they are
critical to slowing the pace of global warming.
CCI has three goals:
- Create a purchasing consortium to leverage buying power and accelerate implementation of energy saving technologies in cities;
- Mobilize experts to provide technical assistance to cities to create energy programs; and
- Share best practices and tools between cities to speed implementation.
While
these three goals are simple and what corporations aim to do everyday
in their business, they are revolutionary in terms of large-scale,
global energy management.
What are the Roadblocks, and How is the CCI Overcoming Them?
The CCI’s approach is rooted in practical realities that include
recognizing and addressing the roadblocks that make progress difficult.
First, the CCI has recognized that the situation in many countries
today does not motivate large cities to implement energy-efficiency
programs or processes. In the United States, energy is relatively
inexpensive and readily available, so the return on investment for
energy projects has not always been attractive. In booming economies,
like China and India, energy efficiency does not top the list of
challenges when compared to skyrocketing population, inflation or
growth. To address this, the CCI invests in educating cities on the
benefits of energy efficiency and providing them with the tools to make
it a priority.
Next, the CCI recognizes that energy management requires experts,
tools and constant learning. Comprehensive energy management involves
more than changing light bulbs and turning down thermostats. Each
existing building is different and experts are required to survey the
facility, consider energy conservation opportunities, weigh the cost
and benefit of each solution and present a holistic approach that
maximizes energy savings and minimizes cost. Additionally, projects
must be installed with long-term operational goals in mind and savings
must be reported in a consistent and reputable manner. The CCI group
has pre-qualified experts and vendors in this area so that each city
can begin working with reputable and trusted companies immediately.
Encouraged by this methodical approach, many school districts and universities have joined the CCI through the Green Schools Program and the American College and University Presidents Climate Commitment.
The Real Reach and Impact of the CCI
The CCI helps bring into reality the goals of the Kyoto Protocol,
which is an attempt to reduce greenhouse emissions through global
government initiatives. The largest treaty of its kind, the Kyoto
Protocol requires industrialized nations to reduce their greenhouse
gases by 5.2 percent compared to 1990 (note that for each year without
action, the required reduction grows). But the treaty has fallen under
criticism in the United States, because developing nations, including
India and China (the world’s second largest emitter), do not have
binding targets. The U.S., the current per capita leader in greenhouse
emissions, has not ratified the Protocol.
The CCI shows signs of creating progress toward Kyoto targets and
making a real difference. Already, the CCI has secured the support in
developing nations of major cities such as Hong Kong, Beijing,
Shanghai, Delhi and Mumbai. These cities are expected to make large
strides in emission reduction and set an example for building energy
efficiency in developing nations.
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Most
of Europe’s leading cities have joined the CCI because they see it as
an important tool in meeting legislative targets for the European
Energy Performance of Buildings Directive (EPBD) – the E.U.’s action
toward reducing emissions. The E.U. aims to reduce energy use in
buildings by 28 percent, which will result in a total reduction of 11
percent in the European Union countries. Reducing energy use in major
cities via the CCI will help the E.U. meet these targets.
And finally, in the United States, cities like New York, Chicago,
Houston, Philadelphia and Los Angeles have signed on to the CCI, thus
creating progress on a critical climate initiative that the United
States has not yet addressed nationally.
The beauty of the CCI approach is that it focuses on the cities
that are the largest emitters of carbon around the world, and therefore
the areas where reduction would have the greatest impact. To put it
into numbers: if large cities contribute only 50 percent of greenhouse
gas (GHG) emissions, and they reduce energy use by 20 percent, the
total GHG reduction would be 10 percent, which would be a huge step
toward meeting the targets set by the Kyoto Protocol.
How the CCI Can Benefit You
By focusing on business incentives and working with the world’s
largest cities, the CCI is taking a practical approach to address the
challenge of global warming. And because that practical approach is
being adopted through energy efficiency techniques, that means
businesses and buildings around the world can develop and learn vital
lessons about implementing energy efficiency programs in their own
facilities, manufacturing plants, buildings and offices. The CCI has
already noted some very important energy management concepts that every
building owner and operator should observe and integrate into their
energy planning. Let’s examine how the CCI approach can be applied to your business.
1. Take a holistic building approach
First, the CCI stresses the importance of taking a comprehensive
building approach when beginning an energy management plan. You should
begin by completing a return on investment analysis with a lifecycle
cost view. While this sounds complicated, it only involves
understanding the energy savings that are possible in your facility,
along with the costs required to achieve those savings. You can use any
financial criteria, including return on investment, internal rate of
return or net present value. It is important to understand your
company’s acceptable return on energy projects. Don’t be afraid to ask
the question “Can we change that allowable return requirement based on
the fact that we are improving the environment, reducing our emissions
and contributing to the public good?”
Next, be sure to take a lifecycle view of the facility. The initial
construction of a building is only about 11 percent of the lifetime
cost of that building. Focusing too much on first, or installed, cost
can result in skyrocketing annual operating costs, which make up 75
percent of the life cycle cost.
Lastly, a holistic building approach can balance the interaction of
various energy conservation measures. A simple example is a lighting
retrofit. By replacing all of the lighting in a building with energy
efficient bulbs and ballasts, an organization can reduce the heat added
to the building. In a cold climate, this heat will need to be replaced
by the heating system. That begs the question, “Will you actually
reduce your energy bill each year?” An experienced energy professional
can review the impact of all energy conservation opportunities and help
calculate the net annual energy savings.
2. Don’t pick all of the low-hanging fruit
As business people, we are prone to “cherry picking” key
opportunities with excellent payback. However, energy management is one
area where selecting these ripe prospects can be detrimental to the
building and the bottom line.
It is very common for building owners and managers to quickly
select energy conservation projects with a simple payback of one to
three years. These projects include lighting or basic automation which
generate savings with a relatively high ROI. While short payback and
high return projects are attractive to all of us, this approach may
also encourage a building owner to delay investment on the systems that
are using up to 70 percent of the energy.
For example, aging air conditioning equipment requires annual
maintenance and possibly constant repair. Replacing the equipment may
provide a simple payback of five to seven years, which looks
unattractive on the surface. But that investment also decreases repair
costs AND increases the comfort of the occupants, while providing
overburdened maintenance staff the time needed for proactive
maintenance on the entire buildings. The net gain can be significant.
The lesson? By balancing the short-term payback projects (lighting and
controls) with larger infrastructure (equipment) upgrades, you can reap
an attractive return while increasing the value of your property and
the satisfaction of your occupants.
3. Use a trusted partner
It may go against your business instinct to hand over many
activities to a single vendor, but energy efficiency is one area where
committing to a trusted partner will help guarantee an ROI. The process
of implementing an energy management program usually begins with a
series of energy audits, a proposal, implementation and sustained
performance. A single vender can survey the total facility, and propose
and implement a project designed with lasting performance and energy
savings in mind. Breaking the process into multiple vendors will
distribute the responsibility and accountability and dilute the desired
performance results. Additionally, “bidding” out the implementation of
energy efficiency will only drive the cost down and not deliver the
lasting value and energy savings you are really looking to achieve.
If multiple proposals are required, it may be possible to solicit
qualifications, conduct interviews, review past projects and talk to a
vendor’s existing customers. This process may take more time at the
beginning of the journey, but will save headaches and lost dollars over
time. Keep in mind that driving up energy savings will improve the
return and your company’s impact on the environment. Driving down cost
can only decrease the potential for lasting energy reduction.
4. Finance or pay out of pocket? That is another question.
The CCI has chosen performance contracting to implement energy
savings projects in the C40 cities. In this process, projects are
financed over 10 to 15 years, and savings are financially guaranteed by
the vendor implementing the project. This process works amazingly well
in facilities that do not have a budget for capital improvements (or
only a small budget). Examples include schools, universities and
municipalities. The interest on the bank loan, and cost of the
measurement and monitoring required to receive the financial guarantee,
are acceptable because end users are long term tenants and can
implement 10 to 15 year projects.
Businesses and short term tenants (less than seven years) may want
to weigh the options and consider paying for the project up front. If
the cost of capital is less than the interest rate on the loan, it may
be more advantageous to invest in a facility with cash.
Additionally, financial guarantees on projects require extended
service contracts and strict measurement and operational guidelines.
This can increase the cost (and the payback) beyond your company’s
financial criteria. While everyone likes a financial guarantee, you
might achieve a better payback by implementing a service contract that
includes quarterly monitoring and continual suggestions for energy
improvement.
Financing projects and paying out of pocket are both acceptable
practices for energy projects. It is important to consider the
situation of the facility, the length of occupation of the building,
the willingness to spend on energy or “green” projects, and the
trustworthiness of an energy management partner.
The CCI and you
While it may be many years before we begin seeing the measurable
impacts of the CCI, the program is already beginning in 16 cities
around the world. In the interim, we can watch the program and learn
from its shortfalls and successes. We can use these important lessons
to reduce the energy in every facility, while decreasing greenhouse gas
emissions. This will have a positive impact on the environment and
deliver a satisfying return on the investment.
Whether your concern is financial ROI or climate responsibility, there’s no better time to begin than now.
Brandi McManus is the energy services manager at TAC,
a supplier of integrated building management systems. Prior to TAC,
McManus worked for Conoco as an environmental engineer where she gained
experience in energy procurement, refining and distribution focusing
heavily on the environmental impact of natural gas production.
