6 Ways to Overcome the Landlord-Tenant fight on Energy Efficiency
Anyone can tell you that energy efficiency is a great investment today. With the reduction in cost of LED’s which are leading the charge of lowering facility energy costs, why isn’t everyone taking advantage of it?
Tenants leasing a building want lower cost of energy but often don’t want to invest in a building that is not their own. Here are a few ways to look at energy efficiency upgrades that align both initiatives:
1) Green Lease
Signing a green lease can be a great way to get the upgrades you are looking for with little to no money out of pocket. Depending on a few variables, the cost of the lease be smaller than your savings.
2) Energy shared savings model
This financial model is becoming wildly popular in recent months. This service allows a company to come in and install energy efficiency products and share in the savings at a predetermined percentage.
3) Energy Service Agreements
Energy Service Companies, ESCO’s, and renewable energy companies are looking at energy efficiency as a superior offering. Companies are now modifying Power Purchase Agreements (PPAs) to allow for payments for energy reduction. Payments per kWh reduced are often times lower than the facility cost of energy, thus yielding immediate savings. The equipment is owned and maintained by the third party provider.
4) Pass-through Cost Recovery
The Institute for Market Transformation outlines lease language where a Landlord can recoup operational savings from energy efficiency improvements until the capital expense is paid back. Once that is paid back, the Tenant reaps the ongoing benefits.
5) Install Sub-Meters
Sub-meter costs have come down in recent years. This is great for centrally metered properties where the Landlord pays the energy bills. Installing sub meters not only allows the Landlord to bill back for actual energy used, it makes the Tenant more conscious of their energy use.
Landlords can lower costs by sharing savings with Tenants. This may require modifications to the existing lease. Commissioning not only saves energy (on average $.41 per square foot according to Berkeley Lab), but helps assure Tenants that the building is being actively managed.
Finding companies that develop and install energy efficiency shouldn’t be hard. Many solar companies are adding energy efficiency in their portfolio for diversification. It also could be that the most effective way to save money includes energy efficiency. Reduce then produce.
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