Crate And Barrel Credit Card

(synthesized music) - hi, i'm mark jewell, cofounder of the efficiencysales professional institute in downtown san francisco. today, we're gonna be talking about

Crate And Barrel Credit Card, taking control of your energy use. now i guess the firstsection of this presentation is very, very important, becauseyou have to first compare what is to what could bein order to set the stage

for taking control of your energy use. the first observation thati'd like to put on the table is that energy is not a fixed cost. and you say, well, whywould you ever say that? of course it's not a fixed cost. interestingly enough, many years ago, there was an interviewdone for a variety of cfos across the country, and fully45% of the cfos interviewed said that they thought thatenergy was a fixed cost.

now of course when the usenvironmental protection agency got word of this, they said holy cow. we got to do some lobbyingwith the american institute of certified publicaccountants because apparently, the way they are advancing their formatted financial statements to their brethren, energy is actually in the portionof the financial statement that you'd expect to see fixed cost. alas, the lobby was notsuccessful, so an unseasoned cpa

might actually thinkthat energy is fixed cost because of where it shows upin the financial statement. i'm here to tell youthough, with authority, that energy is not a fixed cost. i've been plying thesewaters of energy efficiency since, well, 1993. so it's over two decades now. and i can tell you thati've seen some remarkable improvements made inorganizations when they finally

wind of the fact thatthere's a lot of control that they have over their energy future and there are things that theycan do to improve their fate. okay? so the first questioni'd like to ask you is are you asking the right questions? let's talk about some of these questions. what's the payback? everybody asks what the payback is, okay?

it's silly, it's crazy talk. why would you be so fixated on how fast you're gonna get yourmoney back when ultimately, you're making an investment? i mean, if you call yourstockbroker at merrill lynch or charles schwab or oneof these other companies, do you ask them, "how fastdo i get the money back "if i buy the stock?" no, it's an investmentjust as improvements

in energy efficiency, capitalimprovements in energy efficiency, are genuine investments. okay, so is simple payperiod even the right period to be using? i would contend it isn't,and we'll talk about some alternative metricslater on in the show. the second questionthat a lot of people ask is how many kilowatts,kilowatt hours or therms would the project save?

let me ask you something. how many decision-makersin your organization think in terms? how many of them evenknow what a therm is? and even if they know thetechnical definition of a therm as 100,000 btus, then theyhave to realize what a btu is and what relevance abtu has to their annual energy consumption. suffice to say i don't thinkthat most decision-makers

are thinking in kw, kwh or therms. a lot of people say, well,let's insulate those pipes. are we insulating themto save therms or are we insulating them to improveplant safety and comfort? and on a similar note, whenyou put modular boilers in, are we doing that to savetherms or are we doing that to improve startup time, reduce downtime and provide the operationwith valuable redundancy? now on a very personal note,a very, how should i say,

accessible level, let'stalk about a typical commercial kitchen. also uses gas, okay, for heating, cooking, and now you ask yourselfwhen someone decides to buy a turbo pot to put in that kitchen, are they doing it to save therms? now what is a turbo pot, you might ask. good question. a turbo pot is a very ingeniously devised

piece of cooking thatis like any other pot except on the bottom, it's extra thick. and into that bottom aremilled thins to increase the ability, i should say technically, to increase the surface areathat the flame can contact, increasing the speed withwhich heat enters the pot. statistically, it's beenproven that a turbo pot can boil water 40% faster. not an insubstantial advantagewhen you're trying to steam

dumplings or vegetables or make pasta in a restaurant setting. so it shouldn't surpriseyou that a national restaurant chain recentlystandardized on turbo pots. did they do it becausethey wanted to save therms? actually, probably not. in fact, in many commercialkitchens i have been privileged to visit, theyleave the gas burners on to save time lighting the burners

as they're firing the entrees. so they're not saving gas. they're doing it becausethey want to quicken the pace at which they can heatthings up, and they could do more lunch or dinner coversduring a typical shift. so it's always importantto reframe the questions you're asking and make itrelevant to the segment that you have to be operating in. another question i hear alot is how much could we save

on our utility bills? but at the same time, does the promise of utility cost savingsmotivate your capital budgeting folks? i think for many ofthem, in most businesses, let's say a typical fire,financial, insurance, real estate operation whereit's paper pushing that they do as opposed to, say,alcoa, where they spend a tremendous amount of energysmelting and molding aluminum,

most of these garden-variety businesses, tax preparers and lawyers and accountants and hairdryer, hairdressersand things like that, i mean, these folksdon't use a lot of energy in relation to the payroll that they have in the facility. so if you ask yourselfhow much can we save on our utility bills, thenumber may actually be fairly small in juxtapositionto the rest of the line items

on your profit and loss statement. so what value do youemphasize when proposing efficiency projects? and by the way, thiscourse is really designed for owners and occupants for organizations trying to take controlof their own energy use. but it is well advised forservice providers and vendors who serve those occupantsto also look at this course because whether you're theowner, the internal champion

trying to sell the owner; oryou're the external champion trying to bring it a valuableenergy service or product energy savings, service or product to the fore, it's important to understandwhat does that ultimate decision-maker value? and how does what you'reproviding map into those values, okay? so admittedly, there areorganizations out there that wanna save energy.

for whatever reason, maybean ideological belief that we've got global warming,we got to save energy, it could be verycost-efficient thing. people who believe i'm gonna save energy becausei want to save money, okay? this doesn't float everyone's boat. i mean, classically,americans are not known as a nation of savers. i mean, credit card debt isthree times what it was in 1994, is just one example.

and in fact, even savingenergy, a lot of people, for a lot of people,saving energy may be sort of an intangible that theycan't really quite get their arms around. now when you're advocating for a project inside your organization,should you focus on the money? okay, you might want to focus on the money because you think, well, moneytalks and we're gonna ask for money to do theimprovements, so let's focus on

how much we're gonna save. okay, that might work in some settings. but let's talk about whatyou're going to quantify and monetize and what you'regonna put into that basket when you bring it in tied up with a bow and ask the capital budgetingofficer to write a check for something that you're proposing. i find, and again, i've touched3,000,000,000 square feet of north american realestate in the last 20 years

in this business, andwhen i studiously look at what causes people to say yes or no to energy-efficient projects and services, i often see that most peopleare incompletely viewing the basket of benefits. they limit theirintentions to utility cost financial benefits. that would be rebates,incentives and of course, a reduction in the monthly utility bill.

but they don't reallygive enough attention to bucket number two, the non-utility cost financial benefits, and we'll give you plenty of examples ofthat in just a minute. and finally, the non-financial benefits, thinks like getting an energy star label, things like getting a leed certification, these are important as well. and i'll tell you something,i've witnessed organizations

jumping through hoopsto get these stickers. the energy star label,the leed certification, expending dollars and man hoursthat they would never have expended if the only promise of rainbow -- the only promise of the goldat the end of the rainbow was a lower utility bill. they're doing it, quitefrankly, out of pride, out of avoidance of embarrassment, out of competitive naturebecause they want to excel

in their business milieu,they want to impress their customers, theirtenants, their employees, their investors, whatever. so the non-financial benefitscan be very, very significant even if they don't everhit the bottom line. now i'm here to tell youalso that, in many cases, the non-financial benefits do leak back into the second bucket. and one example is, of course,the value of an energy star

label in a commercial office building that is rented for income. we'll talk about thatin a couple of minutes. so could these other financialbenefits far outweigh the utility cost savings? i'm here to tell you that they can. as one example, and iuse this example from our learning to s.e.e, sellefficiency effectively curriculum, it's very obvious that ifyou juxtapose the value

of the real estate energy efficiency, or i should say thevalue of the utility bill per square foot of realestate, versus the value of the payroll that is being operated on that square footage real estate, you'll find that thepayroll is about 200 times, i'm sorry, 100 times largerthan the energy bill. in this example, you've gota $40,000 salary and benefits being divided about by 200square feet per person,

giving you about $200 asquare foot in payroll. and if you take a lookat $2 a square foot, which is around the nationalaverage for energy cost, of course in a place likehawaii, it's a lot larger than that because the unitcost of a kilowatt hour is a lot higher, butin certain other places like new york city and losangeles and other places, you'll have hotspots of utility rates, especially in critical peak pricing,

automated demand response environments. but bottom line, gettingback to the national average, you're talking about $2 a square foot, which is roughly 100thof the amount of money you're spending forpayroll per square foot in your operation. so i get to the bottom linehere, this last bullet, what if your efficiencycampaign boosted productivity by even just 1%?

so you ask yourself, what does that mean? well, i don't know, 10 houra day, which is a long day for most professionals,times 60 minutes an hour, which means no bathroom breaks,no coffee breaks, no lunch, that's 600 minutes a day. improving that person's productivity by 1% means making that person more productive for six minutes a day. that's two turns of a williams-sonomasoft-boiled egg timer,

one of those hourglass sand thingies, tells you when yoursoft-boiled eggs are ready? two turns of a littlehourglass sand timer, three-minute sand timerfor soft-boiled eggs. okay, so do you think thatthings that you're gonna be doing to take control ofenergy use in your environment will also have the concomitant benefit of making people morethermally comfortable in the environment, therefore less likely

to complain about theirenvironment to the coworkers, which wastes a lot oftime, not only their time but also the coworker's time? maybe you're gonna get rid of some glare. maybe you're gonna get morelights so they can actually see what they're doing. i remember a story of ametal manufacturing shop making aluminum doors and windows, and they improved thelighting of the shop.

it was a 4.2-year payback. but when they realized thatthe better lighting quality allowed people to see whatthey were cutting, screwing and drilling, they actuallywound up having 25% less scrap, and that reduced thepayback of the investment from 4.2 years to 39 days. now in that case, you hadtwo distinct non-utility cost one is making people more productive, and two is reducing aluminum scrap, okay?

so let's go back to somedocumentation we can see in the marketplace thatcan underscore this point and really make you understandthat we're not talking about one and two percent benefits here. statistics show major companies, lockheed, west bend mutual insurance,ing bank, verifone, these are big increases in productivity. substantial, noticeableincreas-- or decreases in absenteeism, okay?

and this is by the way fromthe department of energy and the rocky mountain institute. now this is a funny storyyou'll probably be telling your spouse about this evening. can you reduce the paybackof an led lighting retrofit of a milking parlor, goingfrom fluorescence to led lamps, from four years to three months if you remember to includethe increased milk production that the cows give you,because apparently,

cows like leds more than florescent. (chuckles)who knew, right? bottom line is, it's avery real still phenomenon that's been witnessed not only in texas where this original study was done, but also in places likecalifornia and beyond. so just be careful when you'retalking about what benefits you're gonna value and whatthe payback is, et cetera, how you're gonna attractattention in your organization

to give you the money that you wanna do, that you need to do theproject that you'd like to do. just remember, don'tlimit yourself to how much the utility bill is gonnabe reduced each month. by the way, if you happen tohave a data center-centric operation, every minuteyou have in downtime in a data center, atleast national average, $5,600 in real costs to the organization. if you're a surgical environment,

a hospital has a surgical theater -- just think about it for a moment -- how much revenue would youlose if you could no longer properly pressurize that surgical suite? think about it. i mean, every c-sectionis $22,000 or thereabouts. let's say you do five or 10 of them a day. let's say you do one open-heart surgery and maybe a hip replacement.

it's not unusual to havea little surgical theater do a quarter of a millionto half a million dollars worth of revenue a day. what happens if you have apast-rated life fan system that's about to fail, andyou have the opportunity to replace that with, let'ssay, a fan array system, which would give you prettymuch absolute redundancy to make sure that fromnow until the end of life of that rated fan system, therated life of that fan system,

you would have redundantairflow to that surgical suite and not have to worry about losing revenue in that surgical suitebecause of some malady of the air conditioning system? switching now to schools. not every state does it thisway, but as we talked about in the learning to s.e.e,sell efficiency effectively, it really helps torecalibrate energy savings into human comfort andinto the driver of value

that, that human comfort provides. so for example, in schools,very common to have school districts besubsidized by the state based on average daily attendance. if you increase the energyefficiency of the school, studies have shown thatmore teachers show up, which decreases yoursubstitute teacher budget; more students show up,which not only improves learning outcomes, but alsomakes sure there are more

juvenile butts in seats, whichgives you a bigger check from the state at the end of the year. ice cream sales. i've read a study inbritain not so long ago that 19% higher frozenfood amidst-- let me correct myself-- 19%higher sales were witnessed after installing led lightsin mid and low temperature reach-in cases in asupermarket environment. that's paraphrasing a prettyaccurate statistical study.

bottom line is do youthink they made more money on saving electricityor maybe replacing lamps less frequently, or selling 19%more ben & jerry's ice cream at six bucks a pint? i think the answer's obvious. so how significant are theseutility cost financial benefits for income-producing properties? i alluded to this before. i've been in the realestate business since 1984.

i was in commercial realestate in los angeles with a two million squarefoot portfolio with partners. and then of course, sincethen, we've been working with commercial real estatewithin a variety of settings. but bottom line is ifyou take a look at what the mother's milk of realestate investors are-- is, you'll find that it'snet operating income. and energy is a huge coston the income statement of an income-producingproperty, owner or manager.

and because it's a huge cost, whatever savings you canget on the landlord's income statement to producehigher net operating income, there's a wonderful multiplier effect that goes into effect,and it actually drives higher price value. this is the formula. it's one of two approachesto the income approach to appraisal that's usedto value income property

in the marketplace. and you can see that net operating income is in the numerator. a thing called capitalizationrate is in the denominator. we'll talk about this inthe financial analysis advanced class, and alsoin the intermediate class. but bottom line is if you have higher rent as a result of greater tenantcomfort and convenience or lower utility bills, thatallow you to charge more rent

for your space. if you have lower vacancybecause you've had better tenant attraction or retention,if the landlord's share of operating expenses isreduced because they have the common areas or anyother loads that the landlord is responsible for, reduced in energy cost because of the efficiencymaneuvers that you're doing, all those things inureto the betterment of net operating income.

and if you divide it by astable capitalization rate, in other words, one that is unchanging before and after the retrofit,you wind up with a higher asset value, at least using this direct capitalization approach to theincome approach to appraisal. a lot of appraisers usethis, if nothing else, to triangulate their appraisedvalue of the building. so whether you're in schools or in offices or income property orcow barns, milking barns

or data centers, whatever,any of the examples i just gave you, it's veryclear that by taking control of your energy use, you'regonna have downstream impacts that are very positiveon your organization. and in most cases, the impactsthat are non-utility cost financial impacts are going to be superior to the impacts that areon the utility bill, okay? so you need to reframe efficiency so that it can bemeasured with a yardstick

you're already usingto track your success. if you're a dairy parloroperator, milking parlor operator, that means that you'regonna look at how much milk is produced after you put thisnew efficient lighting in. and if you have the same luckthat the folks in california and texas have had, replacinglighting from fluorescent to led, you're gonnawind up having more milk, and that's exactly one of thethings you've been tracking as a kpi, key performanceindicator, in your dairy business.

so what could be even moreimportant than saving energy or even money? it turns out that, look, thereare a lot of organizations out there, yours might be one of them, where reducing carbonemissions is really high on the executive agenda. and of course, energyefficiency improvements do that. improving occupant comfort. i was reminded the other day that boma,

the building owners andmanagers association, which has 9,000,000,000 square feet, that's billion with a b,9,000,000,000 square feet of members in north america and beyond, they do a tenant satisfactionsurvey once a year with a group, i think, called kingsley. and for as long as i canremember, that tenant, kingsley, the kingsley tenant satisfaction survey done in coordination with bomahas found too hot, too cold,

to be the number one ornumber two largest complaints, most frequently seencomplaints on the tenant satisfaction surveys. enough said. avoiding budget cuts. maybe you're in a municipal environment and you're trying to maintainpolice and fire protection, maybe make sure you have enough teachers. and so you're wiselyreducing your overhead

and operating expenses tomake sure you have more money left over for those salaries. how about improved safety? maybe the control systemsthat you put in place are allowing you to have bettercontrol of the airstream. you're testing forvolatile organic compounds, co, carbon monoxide; co2, carbon dioxide. these all have concomitantbenefits of improving the safety of the environment.

in addition to allowing youto know how much fresh air has to be introduced in that environment, which of course is whyyou put some of those sensors together. ensuring regulatory compliance,closely related concept. emulating best practice facilities. you may be in an organizationthat admiringly glances at a competitor who'salready done a lot to lower their operating expensestructure, their cost structure,

and/or has gotten a lotof green press releases lauding them, congratulatingthem for what they've done to help the environment andbecome a good corporate citizen. so emulating best practicefacilities might just be the acupressure pointto get the thing done in your organization. avoiding obsolescence. you may be surprised tolook at these diskettes and think, wait a second,we've had an energy management system

in this building for 15 years. 15 years ago, thatsoftware was probably put into your building usingone of these disks. wow. now if you give a highschool kid or college kid, a grammar school kid one of these, they'll think you boughtthem a sexy drink coaster at crate and barrel andthey'll say, wow, dad, this is kind of a fundrink coaster but it leaks.

well, son, it's actuallynot a drink coaster. it was what we used to put software on before you were in short pants. (chuckles) upgrading to a better user interface. it's no secret thatengineers across the planet are frustrated with howthey have to control their buildings throughthe change of ownership and change in mechanicalstaffs and other changes

that happen. many people have lost themanuals, these control systems, a long time ago; orthey've just never really been schooled properly in how to control their operating systems. so to the extent you canbring in new visibility and control, thatactually might be a driver to get everybody's approval soft circled around your organization toupgrade to a better system.

not only will you saveenergy, but you'll give the mechanical staff, thebuilding operations staff, more visibility, more preemptive power. they'll be able to see whenthings are about to break because they've got data streams coming in for whatever you'reinstalling to save energy, and it's a really good thing. saving a project manager's job. i heard a funny story the other day.

a municipality here incalifornia decided to go forward with energy managementprograms because they had a project manager thatthey didn't have anything for him to do. and they knew that ifthey didn't undertake some fairly bold and audacious initiative, they'd have to lay himoff, which would put him and his family on the bread lines. and so bottom line isthat may be an indicator.

you may have underutilizedstaff in your organization who are looking forsomething to really sink their teeth into and createvalue for the organization. of course i talked about this before, earning the energy star,leed certification. only you know how importantone or both of these designations is in your marketplace. but it may just be the acupressure point to get senior management behindan energy-saving maneuver.

avoiding an embarrassingenergy performance score. essentially, if you go to a website called buildingrating.org, buildingrating.org, it's actually run by the instituteof market transformation, been around for a couple of decades, run by a friend of mine, cliff majersik, you'll find they have mapsof which jurisdictions in the country havemandated the disclosure of energy performance.

big cities: new york, philadelphia,boston, washington d.c., chicago, san francisco, wherewe happen to be located. lots of these cities are mandating that if you have a certain type ofbuilding over a certain size, you have to report to the city or the county, in some cases, the state, what your energy usage is. and i'll tell you something,on a scale of one to a hundred with this energy starportfolio manager software,

which, to my knowledge, everyone of these jurisdictions is using the portfolio manageras the benchmark to be using, if you get a 17 from ascale of one to a hundred, knowing that one is not valedictorian, that's not a good thing. and so avoiding an embarrassingenergy performance score might actually tip overmanagement into your side, off the fence and to your side of the yard if you say, listen, we haveto do this because soon,

we're gonna be disclosingour energy performance to some party out there,and we don't wanna have a bad score. it's gonna reflect poorlyon the organization. now what if you're a tenantand you wanna take control of your energy use butmaybe you've not necessarily secured the approval, orthe interest level even, of your landlord? well, the first thing i wouldrecommend is that you need

to know how the costsand benefits of improving energy efficiency would be split between you and your landlord. armed with that information,you can then make a plan, okay? for example, if you're ina triple net lease building where you pay all operatingexpenses, including energy, your landlord is not gonnabe so motivated to pay for energy efficiencyimprovements to your space because you're gonnabe the sole beneficiary

of those improvements -- except if you have language in your lease that says that the landlord can invest in expense-reducing capitalprojects in your space in the middle of existingleases and allow you to benefit from the energy savings and then allow the landlord to claw back some of those energy savingsto amortize his investment in your space, in manycases, with interest

for having done so. and so you can make a really,really, really strong case if you actually have thatlanguage in your lease, or you volunteer to addthat language in your lease for a landlord to invest dollarsthat maybe you don't have to improve the energyefficiency of your space. and maybe you'll give thatperson a payback over, say, five years, on his investment. and in the meantime, you mighteven throw in 6% interest,

which is probably 24times what he's getting in the money market onnon-deployed capital right now. very, very sexy concept tobring up with your landlord if they're looking for ways togrow the net operating income and improve the capitalstructure of the building. boy, if you offer to usedollars that you're now wasting, spending them on utilitiesthat you could really reduce your utility bill, you're willingto give that income stream or that expense streamfor you to the landlord

so it becomes part of his income stream, that's an interesting conversation. i think every landlord in thecountry would be interested in talking with you about that. so how do you tell whichfacilities most deserve capital or attention? capital meaning nobodyhas an infinite budget for improvements; andmanagement attention, you've got to fight for slices of finite

management bandwidth. so in your organization,let's say you have a multi facility organization, howdo you tell which facilities most deserve capital attention? over the years, and againi've had the privilege of dealing with literallyhundreds of organizations and talking to c-levelexecutives about how they do their prioritization, i'veheard lots of different ways to do this.

some people use kilowatts. what's our demand per square foot? some people use kilowatt hours. how many kilowatt hours isthis particular building using? some people use cost, energy cost. lots of different metrics. and by the way, if you use anyone of those single metrics to try to figure out whichbuildings are most deserving of your management bandwidth and capital,

you're probably sadly mistaken, unless you happen to be lucky. this, the energy star portfoliomanager, is your answer to that problem, becausethis is a software tool that the taxpayers havefunded, you as the taxpayer have partially funded this and have participated in funding this, and since 1998 or so, thistool has been available for citizens who areinterested in getting a handle

on what energy performance actually have. what's nice about it, is itnormalizes for a lot of things that you wouldn't thinkof normalizing for. not only weather, perhapsone of the most obvious, but also building size, number of people, number of personal computers,operating hours, space type. i mean, data centersobviously use more energy than garden-variety office space. and the fact that this toolcan take all that into account,

now you might find that thebuilding that had outsized electric utility bills every month was not in fact inefficient,it just had a lot of data center space, okay? so the reason that this tool was invented was that the epa andthe doe wanted to give american citizens a wayto compare efficient and inefficient products,in this case, buildings. now when they startedthe energy performance

benchmarking tool, they weredrafting on the success, the brand equity, ofthe energy star label, which had already beenassigned to hundreds, if not thousands ofproducts, so that customers who are thinking about buyingthose products, consumers, could determine which peerproducts are more efficient than others, okay? and you think well, if there'sever a complicated product that you'd have to bevery skilled to determine

its relative efficiency, it's a building. and so what they're tryingto do is give a sort of miles-per-gallon rating for a building with all the complicated things, statistically significantthings, normalized out so you can really tellwhether or not one building is more efficient than another. that's what the energystar tool is all about. now this is the commercialbuildings program

of which the portfolio manager is a piece. and i don't need to readall these words to you. the fact of the matter is thatsomething that the government put into place, calling uponthe strong brand recognition, the positive associationthat people already had with the energy star label,and they wanted to put it on buildings to clearlytelegraph to the marketplace that this building hassuperior energy performance when normalized against allthese other factors, okay?

now you can't get an energy star label, that blue sticker thatyou saw a picture of, unless you benchmark. and you benchmark, and thenif the building proves to be ratable, we'll get into that in a minute, and it scores on 75 or higher,75th percentile or higher, meaning it's in the top 25%most efficient buildings of its kind, after having been normalized for all the factors,then you get the sticker

and you can brag about that all the way to the bank. now it's also a managementtool because it assesses whole building energyand water consumption, and it allows you to trackchanges in that consumption so that you can take theappropriate action, okay? you can share data, youcan produce reports, you can even create custom reports. and of course, as i mentioned before,

if you have an energy starlabel qualified building, you can actually get the award. it's a metrics calculatorand boy, if you've ever tried to do any of the metricsby hand, you'll know how difficult they are. the energy star buildingsprogram allows you to automatically calculatesource and site energy. what does that mean? well, source energy is howmuch energy is required

at the power plant toproduce the site energy that you see at your wall outlet when you plug something in. so when you look at your electric bill, you're talking about site energy. when you're reallylooking at climate change and the greenhouse gasemissions caused by generation, distribution, transmission,then you're looking at source energy.

not surprisingly, energystar rates your building on source energy because that'swhat causes the pollution and that's why epa anddoe are even in this game in the first place, helpingamericans have a better understanding how muchenergy they're using with the hope that theycan reduce the unnecessary combustion of fossilfuels by stopping waste, the waste of electricityand other fuel sources in their environment.

okay, what's interestingabout this energy star tool is that it's absolutelybeen proven to be effective at driving better decisionsand also rewarding people for having a vigilant eyeover multiple fiscal years on what their energyconsumption actually is. these two graphs come froma 30,000-building study that the epa put together not so long ago, that talks about howbuildings who had benchmarked themselves over these periods of time

enjoyed, on average, a 7%savings in their energy use and a six-point increasein their energy star score. so this is really furtherproof that you can't manage what you don't measure. and if you do measureit and you're conscious about managing it in thewake of that measurement, you're golden, okay? this is a great chart. it comes from the instituteof market transformation,

imt.org. it talks about no less thansix studies that have been done in roughly the last half-dozen years, that show absolutelystatistically significant positive correlations betweenhaving an energy star label on an income-producingproperty, and having higher rental rates, higher salesprice and lower vacancy. here's it's termed as occupancy premium. so what more evidence do you need?

if you're in the income property business, you're obviously there tomake as much net operating income and asset value as you can. you take a look at these statistics, energy star label officebuildings having these attributes of higher rental rates,higher sales prices and lower vacancy. it clearly is something you need to start paying attention to as you'reconsidering taking control

of your energy use. so let's go throughquickly which buildings can be benchmarked. i'm here to report thathappily, any building if you ask a different question though, which buildings can enjoythe energy star rating of one to a hundred, orwhich buildings can receive a rating of 75 or higherand actually get a label, then that's a smaller subset of buildings.

it's less than 20 types. for those who cannot have enough data from epa, doe, to be able to have the tool give them a one to one hundredscore, there are still about 60 more property typesfor which the government has enough data to at leastgive you a weather-normalized national average expressed asthousand british thermal units per square foot per year. so the kbtu, the thousandbritish thermal units,

is a metric that the government settled on to be the universal metric intowhich all other energy uses are converted. so kilowatt hours ofelectricity, gallons of diesel, et cetera, et cetera, evengallons of chilled water, everything gets converted to kbtu, which makes it easierfor people to think about in the engineering world. now if you're not amongstthe roughly 20 spaces

that are ratable, and you'renot amongst the 60 spaces, for which you can get aweather-normalized national average, all hope is not lost. you can still get your ownweather-normalized kbtu per square foot which youcan use to measure yourself against yourself over time, okay? and somebody says at a cocktail party, how many buildings can be benchmarked using this energy starportfolio manager thing,

the answers is any buildingcan be benchmarked. if they said how manybuildings can get a rating of one to a hundred, then that would be a lesser subset of that,probably 20, 20 or less building types. there are about 17 now. actually, no. there are 20 now, three ofwhich you actually can't get the energy star labelon, although you can get

the one to one hundred rating,and a new space type that's on the horizon for multifamily. so bottom line is about 20. about 60 more you canget a weather-normalized national average for, butnot the one to one hundred score. and the rest of thebuildings in the universe, you can at least get yourweather-normalized kbtu per square foot. it's called energy use intensity.

so this is a quick runthrough of the buildings for which you can get aone to a hundred score. and if you do meet all theother eligibility requirements, you can also qualify for the label. and of course, that'sassuming that the score turns out to be 75 or higher. office buildings, datacenters, banking and financial, a courthouse, medical office, hospital. now, just certain kinds of hospitals.

this is general, medicaland surgical hospital. retail stores, and ina separate category are supermarkets and groceries,because they have such intense refrigeration, as you might imagine. they couldn't be fairlygauged against, say, dry goods retailerslike jcpenney or sears. hotels, dormitories, houses of worship; churches,synagogues, mosques, et cetera. warehouse, both non-refrigeratedand refrigerated.

k-12 schools, wastewatertreatment plants, senior care. now you can also get themfor distribution centers. you can also get it for thenew multifamily housing type that's coming out. the bottom line is a goodhandful, about 20 space types for which you could geta one to a hundred score. the dormitory, militarybarracks and medical office space types, in fact idon't think i had a slide in this run of slides,for military barracks,

but that's another space typefor which you can get a one to a hundred score. those three space types,dormitory, military barracks and medical office, goinginto the january 1st, 2014, epa changed the rules a bitand said you can still get a one to a hundredrating but you can't get an energy star label even ifyou do get a 75 or higher. why? because they didn'tfeel as if the data points that were underpinningthat one to a hundred score

rating system were up-to-date enough. so when they update those,i have it on good authority from washington d.c., whenthey update those data points to a newer database, chancesare those three space types will come back into the foreand not only be able to get a one to a hundred ratingbut also to get a label. okay, so if you're everinterested in what kinds of property types are outthere that can be benchmarked, either ratable or atleast weather-normalized

national average, epa has this document that you can find onlinecalled property types, definitions use details. what's nice about this in the last column, it tells you the datapoints that you have to get in order to get a benchmarkscore of some sort, or at least a weather-normalizednational average or the kbtu numbers, okay? these are the ingredientsfor cooking this recipe,

and this is availableonline, the energy star portfolio manager website. now one of the most impressive aspects of this tool is the ability to setbaselines and savings targets. this is a very wordy slide, but i'll read it to you. an energy baseline periodmust be a 12-month period for which the property hasenergy data for all meters

and fuel types. an energy baseline can beestablished by selecting a specific period ending month and year, or by allowing portfoliomanager to automatically determine the period. when automatically determiningan energy baseline period, portfolio manager willstart with the year 2000 and determine the earliestdate for which the building, for which the buildinghas complete energy data.

the energy baseline periodis the baseline period to be used for trackingall energy emissions and performance rating changes. specific energy performancetargets may also be set, and this functionalitymay be used in conjunction with entering facilityimprovements to increase energy efficiency to properlyreflect the facility's energy performance history. so bottom line is this is aquote out of the epa website,

what does it say? it says that if you don't do anything, the energy star tool is gonnaassume a baseline period of the oldest 12 months of data you have, the oldest 12 months forwhich you have complete data in your tool for your building. but at any time, you canset a different baseline. and it also alluded to thefact that setting targets is also both possible and important.

so going to that topic, let me talk about how to set a target. because when you're talkingabout taking control of your energy use, you haveto be talking about targets. you can't manage what you don't measure. and you once you measureit, in order to manage it, you've got to set somegoals, you gotta track your performance toward those goals. so in this particularsituation, you see a building.

this, by the way, is out of the new portfolio managementtool that was introduced july 17th, 2013. you see i have three buildings here. and if you go to the action column, which is last column on this table, i want to, the choicesare: view property goals and improvements, add oredit baselines or targets, add performance improvements,open sustainability checklist.

so these are all actionsthat are available to you. so let's imagine that youwanted to set a baseline or a target. what do you do? well, you go to thebuilding that's in question. in this case, it's the demooffice building abridged. you click the goals tabat the property level. this is the property level series of tabs, and then if you click this um--you select the set baselines

or targets button thatyou see on the lower right-hand corner of your screen. when you do that, you'llnotice that the baseline has already defaulted inthis particular building for 12/31/2011. why? because that is no doubtthe earliest period of time for which energy starportfolio manager knew that you had completedata since the year 2000. so you can see here the radiobutton let portfolio manager

automatically set mybaselines is selected. at the bottom half of thescreen you'll see where you notice what the target is for the billing. you have the opportunityto change the target. in this case, there's no target, okay? but you could just as easilytake a look at where you are, at least in view of the median property, which is the 50thpercentile type of property, national average.

you see that your score here is a 76. your baseline score on scaleone to a hundred is 61, but your current score,the most recent 12 months when this slide was produced, was a 76. and so what does that mean? that means the median property is a 50, not surprisingly 50th percentile, and you could see the next line, source energy use intensity,the following line,

site energy use intensity, this is in kbtu you can see here thatthe baseline was 199, the current is 161, thenational average is 223. so it's not surprising of ascore that's better than 50, because you're actually using less energy than a typical building at the median, the average building, okay? but let's say we want to set a target. let's say we wanted to set atarget and want it to be 30%

better than your baseline, okay? so here, you select the target percentage better than the baselinefrom the drop-down menu, and you typed 30% in for the target. and then you simply save andcalculate the other metrics by clicking that blue button there. you'll notice immediately afteryou click that blue button, save & calculate othermetrics, that the column that is presentlypopulated with a series of

not available notifications,that fourth column there from the left in the target column, as soon as you do that,it's gonna be populated with real numbers. and you'll see that inorder to be 30% better than the baseline, youhave to get yourself to a score of 86, and thenyou have to, of course, reduce your site energyusage from 52 to 45 roughly kbtu per square foot per.

what i like about thisspecificity is that, much in the spirit ofthe jerry lewis telethon where you're coloring in athermometer to get to a certain level of contributionsduring a certain radio or television hour, in thiscase, you know that the delta between where you were, whichis about 28 million kbtu per year, to where you needto be to get the score of 85 at 24.4 million kbtu peryear, now you have a number of kbtu per year, aboutfour million kbtu per year

that you have to reduce, okay? and now it's only a matter ofgetting potential projects, converting their projectedenergy savings into kbtu, and you're golden, okay? so as much as you might likecoloring that thermometer for the jerry lewis telethonabout how many projects have i gotten to raisethese-- how many donations that i've got to meet this goal, in this case it's how howmany projects have i put

on the boards and approvedwith capital budgeting so that at the end of theyear when i do my math, i'm going to find outthat i had four million, roughly four million kbtu per year saved. it's a great tool if you'reinterested in taking control so one piece of advice i'll give you, and i think it'll be very, very helpful, is you have to trackand share your successes and be sure to let capital budgeting know

how smart they were to give you the money. i speak all over the country. i speak more than a hundred times a year. and in many audiences, wheni'm on this topic, i ask: show of hands, how manypeople write a thank you note to capital budgetingfor the money they gave to a particular project? and ideally, a thank you note that says, "thanks for the capital,i just am happy to report

"that we're actually aboveprojections in terms of savings. "in other words, we'veexceeded the projections "that we gave you when weasked you for the money, "and thank you again forgiving us the capital "for what has turned out to be "even a better-than-expected project." if you do that, what doyou think's gonna happen in the mind of the person who'sa capital budgeting expert? they'll say, "well first of all,this is the only person

who's ever been thankful for thecapital i've given them. everybody else is ungratefulin this organization." and secondly, what'sgonna happen the next time you give another proposal? they're gonna clear their desk. they're gonna look at yourproposal because they know, a, you have respect for thedollar; b, you have the common courtesy to thank them forthe dollars that they sent your way; and c, you'retracking the results; and d,

you're willing to share the results. so it makes everybody feelgood all the way around, and it's definitely agood practice to get into. (gentle keyboard music)

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