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May 18, 2007

Cost Savings, Not Environment, Main Reason For Energy Efficiency Upgrades

North American business leaders plan to invest in energy efficiency measures to help fight rising costs, according to research commissioned by Johnson Controls. Executives cite a desire to decrease energy expenditures within their organizations as a greater motivator than environmental responsibility:

• 52 percent say costs savings as either entirely or somewhat the driver for their decision to invest in energy efficiency measures.
• 35 percent say cost savings and environmental responsibility are equal motivators,
• 13 percent cite 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: 79 percent say they believe that electricity and natural gas prices will increase significantly during the next 12 months, with an average price hike of 13.25 percent expected.

Almost 57 percent expect to make energy efficiency improvements using their capital budgets in the next 12 months, spending an average of 8 percent of those budgets. In addition, 64 percent anticipate using their operating budgets, allocating 6 percent 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:

• 70 percent educated staff and other facility users on how to be moreefficient
• 67 percent switched to energy efficient lighting
• 60 percent adjusted HVAC controls
• 46 percent installed lighting sensors

When it comes to energy supply-related matters:

• 36 percent have negotiated energy contracts with suppliers.
• 14 percent are putting energy price hedging strategies in place.
• 11 percent currently have a stated carbon reduction goal.

Whatever the motivation for making energy efficiency investments, companies have by and large not relaxed their payback requirements for such measures:

• 64 percent have a maximum payback period of between two and five years.
• 18 percent of those surveyed say their companies would allow a longer payback period today than five years ago.
• About 45 percent say 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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