The First Cost Mindset

"We talked about the concern that most of us are conditioned to buy the basic services we need at the lowest first cost," Wolf stated. But we are seeing a trend from year to year to customers purchasing more energy-efficient products, he remarked.

Regarding the cost of energy, three decades ago oil cost $2.50 a barrel; now we're over $50 a barrel, he said. "That is beginning to create an awareness of the importance of energy, and is helping to drive the interest in reducing energy use."

Wolf commented that we don't need any more mandatory requirements regarding efficiency. "Incentives and education could go a long way - with increased cost of energy - to help drive a change in people's purchasing habits."

Basically, he said, when you buy on a life-cycle basis and consider the total ownership cost, "you're buying energy efficiency that's good for you and also good for the environment."

In a lot of commercial projects, Wolf related, we're finding that we can sell up on energy efficiency. "When you're talking about hospitals, schools, government buildings, manufacturing plants, and large office buildings, people [formerly] interested in a three to five year payback may now go seven to 10 years.

"We're seeing a trend."

There's also pressure on companies from the investment community to be environmentally conscious, said Wolf. General Electric, for example, just recently announced that by 2010 it will spend $1.5 billion annually in research on cleaner technologies, up from $700 million in 2004.

It plans to double its revenues from products that provide greater efficiency and environmental performance. The company also plans to reduce its greenhouse gas emissions and improve its energy efficiency. "So they have really put a stake in the ground saying energy use is important and they're going to be one of the leaders."

Business Moves Ahead

"The business community is ahead of public policy - clearly," declared Wolf. "Part of it is cost of energy. Part of it is operating costs. And part of it is environmental image." And this time, unlike the 1970s, the move to energy efficiency will sustain itself, he said. Now it's about more than just supply. It's a much broader issue.

Need Some Incentives

In order to promote energy efficiency, you need some mandatory requirements and some incentives, Wolf said. When you're trying to develop renewable technologies, like wind or solar, you need tax incentives to get the volumes up and make them cost competitive, he asserted.

"Tax incentives to do things like replacing old, inefficient equipment could make sense. Maybe accelerated depreciation would make some sense." But this is not a total, long-term solution, he conceded. This should be done just to stimulate the market.

With large facilities, there's more interest in combined heat and power (CHP), but "it's an incremental situation," he said. Worldwide, there's more interest in central plant installations.

Replacing CFC Chillers

Commenting on the slow pace of replacement of CFC chillers, Wolf said there are several things that can be done to improve this situation. He noted that we should continue to educate owners that they would be wise to replace their current chillers operating at 0.8 kW per ton or worse with today's much more efficient products operating at 0.45 kW per ton. With the energy savings gained, they could pay for that replacement in three to five years. "We have to demonstrate that it's to their benefit and show them facts and case studies."

In addition, he said, "They need tax incentives ... and then they need an understanding that long-term it's not viable to keep CFC chillers." Accelerated depreciation would also help, as well as utility programs, noted Wolf. "It's got to be an economic benefit to get their attention."

Publication date: 06/27/2005