Regulatory, Economic Uncertainty Blocking Efficiency Investments – Survey

Energy efficiency has never been more important to businesses, but economic and regulatory uncertainty is delaying investments, according to new research commissioned by Johnson Controls (NYSE: JCI).

The Energy Efficiency Indicator (EEI) survey, a research report targeting professionals responsible for energy management, revealed barriers to investing in energy efficiency include: limited funding, uncertainty about future energy prices, government incentives, and energy and climate legislation.

“These findings highlight the fact that business leaders across the U.S. are increasingly aware of the need for energy efficiency and its potential to reduce operating costs while cutting greenhouse gas emissions,” said C. David Myers, president of Johnson Controls Building Efficiency division. “Economic and regulatory uncertainty, however, are inhibiting organizations from investing in proactive measures.”

Johnson Controls partnered with the International Facility Management Association (IFMA) to commission the survey of more than 1,400 North American executives who are responsible for managing, reviewing or monitoring energy use within their organizations. The majority of respondents were CEOs, vice presidents, general managers or facility directors.

According to the EEI results, 71% of business leaders are paying more attention to energy efficiency than they were one year ago. 58% responded that energy management was extremely or very important. Of the organizations making public carbon commitments, 45% identified energy efficiency in buildings as their top carbon reduction strategy. Sustainability continues as a focus for new construction projects as 38% are seeking green building certification, while 45% plan to incorporate green elements, but not certify their facilities.

“This research recognizes the important role workplace professionals play in controlling operational costs related to energy consumption and making strategic capital investments in high-performing building technologies,” said Don Young, vice president of communications, IFMA. “Indications are that as the economy recovers we will see greater investments in energy reduction and sustainable initiatives.”

The study revealed a likely 10% decrease from last year in the use of facility capital budgets to fund energy efficiency projects. It also revealed a 6% decrease in the number of respondents planning to make investments using their operational budgets.

When asked about the barriers to capture potential energy savings, limited capital availability for investments (42%) and unattractive payback (21%) were cited. Nearly 50% of executives who oversee energy efficiency investments expect a payback period that is less than three years.

The EEI research indicates that business leaders believe incentives from utilities or government will drive investment. 85% stated that legislation mandating energy efficiency and/or carbon reduction is likely within the next two years. This data supports a continual upward trend, increasing from 76% in 2008.

44% report that incentives are very/extremely important as they make decisions on energy efficiency, up from 38% in 2008.

There doesn’t seem to be a consensus among respondents about whether energy prices will decrease or increase.

“We see a wide distribution of views about what will happen to energy prices–ranging from a 100% increase to a 60% decrease,” according to Clay Nesler, vice president of Global Energy & Sustainability at Johnson Controls. “This uncertainty appears to be another reason business leaders are holding back on investments,” said Nesler.

Survey participants also were asked about on-site renewable energy technologies. Leaders stated they were considering a range of technologies, including wind, solar thermal, solar electric and geothermal sources of energy. 46% reported considering solar electric–an increase of 8% over the previous year. Geothermal energy also received a substantial increase in interest level, up by 7%.

More than 1,400 executives were polled for the study through an on-line survey, conducted in April 2009.