Green Goes Mainstream: How to Profit from Green Market Opportunities

1. Green Goes Mainstream: How to Profit from Green Market Opportunities Jerry Yudelson Yudelson Associates 2009

2. “An Inconvenient Truth” • UK: all public housing to be carbon neutral by 2016; private housing by 2018 • Germany: reduce GHG 36% below 1990 by 2020 • Sweden: Eliminate use of imported oil by 2020 • Vaxjö: reduced GHG by 30% 1993-2008, while increasing GDP/capita by 20% • Under Bush, US Government pledged to reduce GHG emissions to 1990 levels by 2050 • Obama will change this dramatically • Many major companies and institutions are tracking their “carbon footprint”

3. Green Market Overview • Huge investments in three areas: • Energy efficiency • $24 billion in 2004 alone • 900 million lamps to retrofit from T12 to T8 or T5 • Lighting/daylighting controls • Motor controls, VSD/VFD • National market, stronger where energy costs higher • Green buildings • Huge growth market • Somewhat regional market; not tied to energy costs • Renewable energy (wind and solar) • Wind power increased 45% in 2007, solar by 21% • Wind greater than solar by 30 to 1 in MW installed to date (7 to 1 in sales $$) • Regional markets

4. Categories of LEED Ratings • LEEDfor New Construction • LEED-EB • existing • buildings • LEEDfor Commercial Interiors The LEED Family of Rating Systems • LEEDfor Core and Shell • LEED for Existing Buildings FuturePrograms • LEED for: • Schools • Retail • Healthcare • Laboratories • Multi-building Campuses • LEED for Homes Neighborhood Developments • LEED for • Market Sector Applications

5. 2007: LEED Growth Accelerates! • 2005 to 2006: 50% cumulative growth in LEED registered projects • 2006 to 2007: 75% cumulative growth in LEED registered projects • 2007 to 2008: +80% cumulative growth in LEED registered projects • Registered projects (new and retrofit): 16,400 • Average size: +100,000 SF Orchard Garden Hotel, San Francisco LEED-certified

6. Why Everyone Uses LEED/ENERGY STAR • Immediate and measurable results • Strongest brand • You get a better building! • Third-party documentation and commissioning • value beyond certification • “testing and verification” • Objective measure of achievements • 3000 ES buildings; 1600 LEED buildings Visteon Village Manufacturing Plant, Detroit

7. Green Developments Are Everywhere Genzyme, Cambridge, MA, LEED Platinum Seven WTC, NYC, LEED Gold • More than 2,150 Certified! • Average Size: $15 million

8. Business Case Elements • Financial/economic gain • Marketing & PR • Productivity/health • Recruitment/retention

9. Financial/Economic Return • Many investors and lenders focused on the value of green • Greater income • Faster lease-up • Resale value • Tax benefits • Utility incentives • Valuable asset that appreciates with time Bank of America Tower New York City

10. The Data are In! • Commercial offices • CoStar data base; 2008 study • 1300 properties; 360 LEED; 940 ENERGY STAR • Higher occupancy (LEED): 3.8% • Higher rents (LEED): $11/sq.ft. • Greater resale value: 30% ($171/sq.ft.)

11. Marketing & Public Relations • Branding and image are critical to all modern business • “Green” and “zero net energy” are important branding opportunities • Marketing is vital to recruit and retain key employees • Green buildings create progressive image Haworth Showroom, Chicago LEED Platinum

12. Productivity Counts • Most costs are “people costs” • Studies show 3%-7% improvement in productivity • A 1% gain in productivity pays all the energy bills! • 10% gain in productivity pays for the entire building (or the technology)!

13. Productivity Studies, Lighting • 11 studies • Median: 3.2% • = 3x energy cost

14. Benefits of Green Buildings • LBNL study of 33,000 occupant questionnaires • Certified green buildings had higher occupant satisfaction ratings • Statistically significant difference • Leads to higher productivity and lower absenteeism Royal Caribbean Call Center, Springfield, OR

15. The Next BIG Growth Markets? • Government • GSA: $80 billion ESCOs • Higher education • A natural • Stakeholder interests drive decision-making • Takes top-down leadership • K12 education • Every school should be a LEED school • Funding and delivery process is cumbersome Lillis Business School, U of Oregon

16. The Next Growth Markets? • Retail • 21,000 new stores each year • $25 billion construction (10% of total commercial) • Direct contact with consumer • Highly first-cost sensitive • Moving rapidly to embrace green • Hotel • More than 300 green hotels • New chains lead way • Health care • Alignment with mission • Care most about operating costs Discovery Health Center, New York

17. Commercial Interiors/Tenant Improvements • Smaller projects: 50,000 sq.ft. or less • Definitely a lot of work for electrical contractors • Lighting upgrades/controls • Plug-load controls • Business case is straight-forward • 900 new LEED-CI registrations in 2008

18. Existing Buildings • LEED-EB • Large projects (300,000 sq.ft.) • Good for electrical engineers/contractors • Focus on achieving ENERGY STAR • Client is facility manager • High return on investment • 1300 new registered projects in 2008 • Adobe Systems, San Jose, CA, LEED-EB Platinum

19. Opportunity - Lighting • You already know this, but it’s huge! • Changing almost a billion T12s to T8s or T5HO • LED usages will grow rapidly over next 5 years • Long life time: 50,000 hours to half of rated output • Labor savings are huge • Color rendition is still a problem • Heat sink requirement can be a problem • Specialty uses (refrigerated cases, department stores, architainment)

20. Opportunity – Lighting/Daylighting Controls • All green rating systems award daylighting • Needs to be integrated with electric lighting • Get credit also for lighting controls • Occupancy sensors • 50% or more no one is in an office with lights on • Time of day, etc. • Shut off computers at 6 pm • Reduce peak demand charges • Can be 2x to 3x normal electricity cost

21. Opportunity – Intelligent Energy Use • Fundamental electric power problem • 7% demand growth; 2% supply growth • Network control of cooling system • Cut electrical use in half w/network controls • GridWise Alliance • Make all buildings part of electrical grid • Lots of meters are going to be used • Data centers • Continue to grow • 1 MW per 10,000 sq.ft. (vs. 50 to 100 kW for offices)

22. Down to Brass Tacks: How Do You Benefit? • Recognize the opportunities • Reconfigure your strategic plan • Get firm-wide buy in to new direction • Differentiate your service offerings • Execute your opportunities

23. Five Keys to Sustainable Company Success • Leadership Commitment • Has to start at the top and be continually emphasized • Communication to Stakeholders • Internal (employees) • External (marketing) • Knowledge Management • Lessons learned • Use vendor resources • Education and Training • Staff lighting/LEED training • Training for contractors • Operations • Walk the talk • What can you do?

24. Six Good Marketing Ideas • Differentiate your offerings • Become an expert provider; hire specialized sales force • Educate the market • Bundle– create signature efficiency, green or renewable packages • Find out how you can make money for your customers • Present the business case • Emulate ESCOs • Bring money to the table • Everyone loves the rich uncle!

25. Learn the Business Case • Is “payback” what you want to stress? • What about “total cost of ownership”? • What about effect of lighting on productivity? • Gain is 3x the total energy bill • What about increase in building value? • 10x to 15x the annual energy savings • Ex. $100,000 annual savings on $300,000 investment • Engineer: “3 year payback” • $1.0 to $1.5 million increase in value • 333% to 500% immediate return on investment • Which is easier to sell?

26. Marketing Strategies • Form your own investment partnerships • “Mini-ESCO” • May be more difficult until credit improves • Target key customers with multiple properties • Understand their level of commitment • Energy Star • LEED • Climate change commitments • Building owners and managers • Institutional/facility managers • Schools • Colleges/Universities • Public agencies

27. Bring Something Different to the Table • Financing • Risk sharing • Shared savings/ESCOs • Bundling (PV packages) • Technical expertise • Commercial solar packages for financing partnerships • Hire a lighting expert for sales • Figure out LEDs before the competitor

28. Education and Training • Train existing sales force • Learn the LEED system and where you fit in • Understand incentives • Utility programs • State/federal tax credits and deductions • Economics of efficiency investments • Return on investment • Building value • Offer training to contractors and end users

29. Walk the Talk • Put solar on your own building(s) • Give something for the 6 o’clock news to cover • Demonstrate all the lighting possibilities • Reduce your own “carbon footprint” • Cut energy use in facility operations • Change vehicles to biodiesel or hybrid

30. A Final Word “An invasion of armies can be resisted, but not an idea whose time has come” -- Émile Zola, 19th-century French writer

31. Thank You! Questions and Comments?