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This chart shows the average source of cost savings, by sector, associated with hiring an energy services company.

Energy service companies generally prefer to tackle larger projects than BAE’s in order to earn good profits. The same is true for banks or other investors that finance this type of project. Large public institutions have been the main target for these companies because many public facilities are in old, worn-down buildings with inefficient wiring and equipment for heating, cooling, and lighting, Larsen says. Private companies tend to carry out smaller energy efficiency projects that they can finance themselves. They also expect a much quicker payback period in order to keep their shareholders happy. The median payback period for a private company’s project is three years, while the median for public projects is eight years, according to Berkeley Lab’s database.

But a growing number of private companies are choosing long-term service contracts, Larsen says. As energy costs rise and reducing carbon footprints becomes a corporate focus, more businesses are undertaking larger, more complex energy efficiency projects. An ideal customer would spend about $1 million on energy per year, says Metrus’s CEO, Bob Hinkle. Metrus then bundles projects into one investment portfolio when it discusses project financing with banks or other types of investors. Hinkle cites an Urban Land Institute report showing that retrofitting commercial buildings for energy efficiency is expected to be a $190 billion market in the United States over the next 10 years.

“Customers generally recognize that energy efficiency is a good thing, but when push comes to shove, they don’t want to use their capital for it,” Hinkle says. “They want to put the capital to work in their main line of business, not in boilers, chillers, or lights.”

Metrus, which is based in San Francisco, was founded in 2009 and was previously part of MMA Renewable Ventures, a company that focused on developing solar-energy projects. The work taking place at BAE’s New York facility is the second retrofit project it has worked on with the defense contractor: Metrus completed a $1 million project for BAE’s facility in Merrimack, New Hampshire, in the fall of 2010. That project, which comes with a 10-year service contract, should save BAE about $200,000 in utility bills alone, according to Metrus (Hill says the energy and operational cost savings should reach $227,000 per year).

For the New Hampshire facility, BAE asked for less expensive upgrades, which included new lighting and sensors that shut off equipment when it’s not in use. Overall, the project should reduce BAE’s carbon emissions by 400 tons per year; the improvements in New York should cut 800 tons. Hill says the company is considering retrofitting its other facilities for energy efficiency as well: Hill’s business group operates 15 main sites, or 4.7 million square feet of indoor space, in the United States.

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Credits: BAE, Lawrence Berkeley National Laboratory.

Tagged: Business, Business Impact, Corporate Energy Strategy

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