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Taming the Elephant: Encouraging Landlords to Invest in Energy Efficiency

This paper explores strategies for persuading landlords to invest in energy efficiency improvements through the Energy Service Company (ESCO) model. It identifies key barriers, such as low awareness, mistrust, high perceived risks, and administrative hurdles that hinder investment in energy-efficient solutions. The potential benefits include reduced operating costs, increased property values, and improved environmental outcomes. The findings suggest that better communication of costs, benefits, and energy requirements is essential to motivate landlords to adopt energy-efficient practices.

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Taming the Elephant: Encouraging Landlords to Invest in Energy Efficiency

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  1. Taming the Elephant Persuading landlords to invest in energy efficiency Qiulin Ke Nottingham Trent University Qiulin.ke@ntu.ac.uk Bob Thompson RETRI Group bt@retrigroup.com @realindustrial

  2. Conventional supply model Energy supplier Energy supplier Energy supplier Landlord Tenant Tenant Tenant Tenant Tenant Tenant

  3. Key drivers for investment in energy efficiency Source: EEI Survey (2011)

  4. Barriers to energy efficiency

  5. Conventional supply model Energy supplier Energy supplier Energy supplier Landlord Tenant Tenant Tenant Tenant Tenant Tenant

  6. Conventional supply model Energy supplier Energy supplier Energy supplier Landlord Tenant Tenant Tenant Tenant Tenant Tenant INVESTMENT = REDUCED COSTS

  7. Conventional supply model Energy supplier Energy supplier Energy supplier Landlord Tenant Tenant Tenant Tenant Tenant Tenant INVESTMENT = INCREASED COST REDUCED COSTS Increase in rent? Increase in value?

  8. ESCO supply model Energy supplier Increase in rent? Increase in value? ESCO Power Generation Landlord Tenants Reduced operating costs Potential return Defrayed business risk

  9. UK lags behind

  10. Barriers to ESCO development • Low awareness of and lack of information about the ESCO concept; • Mistrust from the clients; • High perceived technical and business risks; • Public procurement rules and accounting rules (including off balance sheet regulations); • Lack of accepted standardized measurement and verification procedures; • Administrative hurdles and high transaction costs; • Principal/agent dilemma with split incentives ; • Aversion to outsourcing energy; • Lack of appropriate forms of finance; • Low priority of energy efficiency measures.

  11. Conclusions – ESCO gives • Potentially significant ROI • Better environmental outcomes • Potentially higher rents and values BUT WE NEED • Better exposition of the costs and benefits of the ESCO approach; • Better understanding of the energy/ utility requirements of building occupiers; • Better promotion of the concept to property owners and landlords

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