North American business leaders responding to a recent survey said they expect energy prices to continue to rise and they plan to invest in energy efficiency measures to help fight rising costs. The executives said cost cutting was a greater efficiency motivator than environmental responsibility.
Those are some of the findings of the Johnson Controls Energy Efficiency Indicator research. The survey identified individuals from a wide range of facilities and locations who were decision-makers for energy management issues and asked how they were responding to rising electricity and natural gas costs. Members from the International Facility Management Association were included as survey respondents.
Just over half -- 52% -- of the executives surveyed said cost savings was either entirely or somewhat the driver for their decision to invest in energy efficiency measures. Thirty-five percent said cost savings and environmental responsibility are equal motivators, while only 13% cited environmental concern as the greater motivator.
The executives appear to have reached a consensus that energy costs will continue to rise in the near future. Seventy-nine percent said they believe that electricity and natural gas prices will increase significantly during the next 12 months, with an average price hike of 13.25% expected.
Consistent with the rising energy cost forecast, 62% said their companies are paying more attention to energy efficiency today than five years ago. Almost 57% expect to make energy efficiency improvements using their capital budgets in the next 12 months, spending an average of 8% of those budgets. In addition, 64% anticipate using their operating budgets, allocating 6% to energy efficiency improvements.
Despite the pain of rising energy costs, executives are generally limiting their investments to more conservative energy management solutions. Of respondents who have already made energy efficiency investments:
Commercial buildings consume about 40% of natural gas and 60% of the electricity generated in the United States, according to Johnson Controls. So it's not surprising that three-quarters of executives with companies that are building or planning to build new facilities, or are launching retrofits in the next year, said energy efficiency will be a priority in the design of those projects.
When it comes to energy supply-related matters, 36% have negotiated energy contracts with suppliers. Only 14% are putting energy price hedging strategies in place. In addition, 11% currently have a stated carbon reduction goal.
"This survey provides a valuable snapshot of how organizations are reacting to rising energy prices, and I think we're going to see even more attention paid to this in the future," said C. David Myers, president of the Johnson Controls Building Efficiency business. "There's a growing realization of the role commercial and industrial facilities play in energy consumption, and the role they can play in making the economy more energy efficient."
Whatever the motivation for making energy efficiency investments, companies have by and large not relaxed their payback requirements for such measures. About two-thirds of companies (64%) have a maximum payback period of between two and five years. Overall, only 18% of those surveyed said their companies would allow a longer payback period today than five years ago. About 45% said the required payback period has not changed compared with five years ago.
Executives responsible for larger facilities (500,000 square feet or more) are an exception. They spend a bigger part of their budgets on energy, are planning to invest more of their budgets on energy efficiency measures and will tolerate a longer payback period.
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