A Model for Energy Efficiency

Aug. 1, 2008

BOMA Intl.’s Energy Performance Contract Model breaks new ground in energy-efficiency opportunities 

As the recent BOMA Intl. Conference and The Office Building Show in Denver proved, sustainability has become the topic of almost every conversation among facilities professionals. Whether or not your company is pursuing a green certification or recognition program, the guidelines from these programs - the U.S. Green Building Council's LEED® rating systems, the U.S. Environmental Protection Agency's ENERGY STAR® program, BOMA Intl.'s 7-Point Challenge, etc. - provide the foundation and support to truly make a difference in your company, community, state, and nation, and for Mother Earth. Energy efficiency has always been at the core of these programs, but the desire to achieve greater efficiency - and the wherewithal ($) to pursue such a goal - has been, at times, adversarial. Promises of performance contracting, value engineering, and other industry programs seldom reached their potential. Now, that has changed - thanks to a collaborative effort between the Washington, D.C.-based Building Owners and Managers Association Intl. (BOMA) and the Clinton Climate Initiative (CCI).

On June 23, the groups announced their collaboration: a groundbreaking BOMA Energy Performance Contract Model, which allows building owners to perform major energy retrofits to existing buildings, regardless of building age, location, or type, by removing barriers and providing a turnkey solution. Specifically, the BOMA Energy Performance Contract Model provides a standardized energy-performance contract (similar to the American Institute of Architects' construction contract terms) whereby key legal and technical provisions have been vetted by top real estate companies and energy service companies, as well as by BOMA legal counsel and experts, and the CCI. Coupled with other standard documents, FAQs, and case studies, real estate professionals are now offered a new solution for improving performance and value.

BOMA, the CCI, and San Antonio, TX-based USAA Real Estate Co. (USAA) have teamed up as part of this program to generate an energy-efficiency pilot project in the commercial sector that addresses issues confronted by building owners looking to improve financial performance and reduce carbon footprints. USAA provided two buildings for the pilot project to help develop and refine an energy-efficiency building retrofit model to reduce the barriers (time and complexity) of such projects.

The pilot project was launched in January 2008 and has achieved numerous successes that will be directly beneficial to the commercial real estate sector, including a demonstrated positive business case for energy-efficiency improvements and the development of a model financial structure to fund efficiency programs. Working with CCI partner Hannon Armstrong (an investment bank in Annapolis, MD, specializing in energy projects), a financial structure was developed using the assets in the building as collateral, as well as the guaranteed energy savings from the project, to pay for the loan. Although energy-performance contracting has been in place for more than 20 years, it has rarely been used in the private sector due to cost, a lengthy execution timeframe of 18 to 36 months, and limited financing options. This new model represents a significant market shift by standardizing contract terms and conditions whereby energy service companies are committed to lowering costs and financial institutions are committed to extending market interest for the loans.

Look for ongoing details at www.boma.org.

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