1. K.R. Grosskopf, Ph.D.
M.E. Rinker, Sr. School of Building Construction
University of Florida

2. Introduction
The U.S. represents roughly 5% of the world’s population,
yet, 23% of its fossil fuel consumption
1/3 of all energy in the U.S. is consumed within the built
environment, and more than 1/3 of this energy is used by
the commercial business sector
Half of all commercial energy is used by lighting and
HVAC
Commercial buildings in the U.S. number more than
4,859,000 and occupy more than 6.7 billion square meters
of floor area
The average U.S. commercial building consumes
577kWh/m2
/yr

5. Market Barriers
Energy Suppliers
Reduce costly peak load generation, capacity expansion
and wholesale power purchasing while maintaining (or
increasing) sales revenue
Reduce peak energy demand (kW) while maintaining
(or increasing) energy consumption (kWh)
Most ECMs contribute much more toward reduction in
kWh than kW
ECM investment incentives in U.S. have steadily
declined since peak in early 1990’s

6. Market Barriers
Energy Consumers
Reduce operating costs and improve production
efficiency
More than half of U.S. commercial buildings are lease
space; tenants pay their own energy costs
High tenant turnover; average lease <5 years
Little or no incentive for either building owner or
tenant to invest in ECMs

7. Rate Absorption Approach
Absorb cost of utility provided ECM incentives (e.g.
rebates) by increasing energy rates
‘Adopters’ become more energy efficient; realize net
reduction in energy costs in spite of higher rates
Non-adopters realize significant increase in energy
costs; become significantly less competitive
Utility reduces the need for costly peak load generation,
capacity expansion and wholesale power purchasing
‘Win-win’ maximizes energy use reduction and carbon
offset

8. Case Study
Small-to-medium sized U.S. city of approximately
200,000 residents
610MW utility
4,700 businesses with 13,827 commercial utility
accounts

9. Case Study
Methodology
Merge energy use data from 1994-2006 with building
property tax data to determine average energy use
intensity (kWh/m2
/yr) of commercial market and
submarkets
Determine average added ‘first’ cost and ‘payback’ of
high efficiency lighting and HVAC upgrades
Determine conservation program costs
 First cost rebate (15% - 65%)
 Market adoption (5%-25%)
 Administrative costs
 Lost sales revenue

10. Case Study
Methodology
Determine conservation program benefits
 Avoided supply costs
Determine net present value (NPV) of program costs
and benefits
 n = 15 years (average life of upgrades)
 i = 8.75% (utilities’ weighted average cost of capital)
Determine increase in commercial energy rates
necessary for utility to remain cost neutral
Determine energy use and carbon footprint reduction

12. Comparison of U.S. and case study energy use intensity (kWh/m
2
/yr) by market.

13. Investment costs and annual energy savings for select lighting upgrades
Min Max Avg Market Upgrade Base
Added first cost
($US/100m
2
)
292
1,930
1,001
N/A
2
N/A
2
Food sales
T-8, 34w
CFL, 13w
MHalide, 175w
T-12, 60w
Incand, 60w
Incand, 500w
Energy savings
(kWh/100m
2
/yr)
474
11,693
5,483
Education
Retail
Food sales
T-8, 34w
CFL, 13w
MHalide, 175w
T-12, 60w
Incand, 60w
Incand, 500w
Demand savings
(kW/100m
2
)
0.03
1.53
0.71
Education
Retail
Warehouse
T-8, 34w
CFL, 13w
MHalide, 175w
T-12, 60w
Incand, 60w
Incand, 500w
Energy SIR
1
($US/kWh/yr)
0.06
0.61
0.22
Food sales
Education
Healthcare
MHalide, 320w
T-8, 34w
CFL, 13w
Incand, 1000w
T-12, 60w
Incand, 60w
Demand SIR
1
($US/kW)
478
10,567
2,180
Retail
Education
Office
MHalide, 320w
T-8, 34w
T-8, 34w
Incand, 1000w
T-12, 60w
T-12, 60w
Simple payback
3
(yrs)
7.9
0.7
2.5
Education
Retail
N/A
2
T-8, 34w
MHalide, 320w
N/A
2
T-12, 60w
Incand, 1000w
N/A
2
1
SIR, savings to investment ratio
2
N/A, multiple or varies by market, building characteristics or other attributes
3
12-16 year service life, $US 0.085/kWh “blended” energy rate (energy, demand, account fees, etc.)

14. Investment costs and annual energy savings for select HVAC upgrades
Min Max Avg Market Upgrade Base
Added first cost
($US/100m
2
)
33.36
694.50
283.92
Lodging
Food Service
Office, Retail
Screw 2.1COP
Unit 11.0EER
Unit 11.0EER
1.9 COP
9.5 EER
10.0 EER
Energy savings
(kWh/100m
2
/yr)
186.18
1,495.86
517.88
Office
Food Service
Retail
Unit 11.0EER
Unit 11.0EER
Unit 11.0EER
9.5 EER
9.5 EER
9.5 EER
Demand savings
(kW/100m
2
)
0.06
0.64
0.27
Education
Food Service
Retail
Unit 11.0EER
Unit 11.0EER
Screw 2.0COP
10.0 EER
9.5 EER
1.7 COP
Energy SIR
1
($US/kWh/yr)
0.08
1.51
0.65
Healthcare
Office
Retail
Screw 2.1COP
Unit 11.0EER
Unit 11.0EER
1.9 COP
10.0 EER
9.5 EER
Demand SIR
1
($US/kW)
93.91
5,833.64
1,552
Lodging
Education
Food Service
Screw 2.1COP
Unit 11.0EER
Unit 11.0EER
1.9 COP
10.0 EER
10.0 EER
Simple payback
2
(yrs)
18.6
0.9
4.3
Office
Healthcare
Retail
Unit 11.0EER
Screw 2.1COP
Unit 11.0EER
10.0 EER
1.9 COP
9.5 EER
1
SIR, savings to investment ratio
2
Unitary systems - 15 year service life, chillers - 20 year service life, $US 0.085/kWh “blended” energy rate (energy, demand,
account fees, etc.)

15. Casestudy electric generation, transmission and distribution supply costs
Cost Cost Component Value of Reduction (USD)
Avoided T&D Facilities Fixed 104.94/kW
Avoided T&D Personnel Fixed 6.15/kW/Yr
Avoided Generation Unit Fixed 1,452.00/kW
Avoided Generation Personnel Fixed 5.52/kW/Yr
Avoided Generation O&M Variable 0.0049/kWh
Avoided Generation Fuel Variable 0.01864/kWh
Fuel Cost Escalation 3.9%/Yr
Inflation 4.0%/Yr
Line Loss Percentage 6.0%
Cost of Capital 8.75%

16. Rate absorption schedule
Rebate
(%)
Market
Adoption
(%)
Energy
Savings
(MWh/yr)
Rebate
Cost
($US)
Admin
Cost
($US/yr)
Lost
Sales
($US)
Avoided
Cost
($US)
NPV of
Costs
($US)
Rate
Change
($US/kWh)
15 5 6,219 199,804 39,961 528,636 146,401 3,653,807 0.006
25 10 12,438 666,015 133,203 1,057,272 292,802 8,009,915 0.013
35 15 18,658 1,398,631 279,726 1,585,908 439,203 13,068,325 0.021
50 20 24,877 2,664,059 532,812 2,114,544 585,604 19,531,338 0.031
65 25 31,096 4,329,097 865,819 2,643,180 732,005 27,047,804 0.043
* Discount period, 15 years; discount rate, 8.75%

17. Rate absorption impact on average consumer energy costs

18. Conclusions
If a 15% rebate on a high performance lighting and
HVAC upgrade stimulates 5% of the business market
to adopt, the case study utility would have to increase
energy rates $US 0.006/kWh to remain cost neutral,
assuming the cost of the rebates are repaid in the first
year.
In spite of higher energy costs, ‘adopters’ save an
average of 14% on annual energy costs; non-adopters
realize a 7% energy cost increase.

19. Conclusions
If a 35% rebate on a high performance lighting and
HVAC upgrade stimulates 15% of the business market
to adopt, the case study utility would have to increase
energy rates $US 0.021/kWh to remain cost neutral.
‘Adopters’ are cost neutral; non-adopters realize a
20% energy cost increase.
For all levels of rebate and market adoption, annual
energy costs for non-adopters is approximately 20%
higher than adopters, making them less competitive.

20. Further Research
What level of rebate will stimulate what level of
market adoption?