The U.S. Senate has introduced a bill that would establish a new program called Building Star, designed to provide incentives for energy-efficient installations in commercial and multifamily buildings.

Building Star echoes Energy Star, the established energy-efficiency ratings system. It is also similar to the Home Star program, commonly known as “Cash for Caulkers”, a parallel program introduced by senators Jeff Bingaman, (D-N.M.), Mark Warner (D-Va.), Bernie Sanders (D-Vt.) and Jeff Merkley (D-Ore.) that offers homeowners rebates to reduce the cost of energy-saving measures such as high-efficiency heating and improved insulation.

Building Star would allow commercial real estate owners access to a rebate program driven by the installation and use of energy-efficient building equipment, materials and services such as building envelope insulation, windows and doors, HVAC equipment, and energy management and monitoring systems.

But the most important piece of the program is that it goes one step beyond Home Star, providing low-interest financing options to small businesses and building owners who need them. These options could be used in addition the typical rebates, tax credits and grant offerings available from a number of programs, including the Tax Incentives Assistance Project, that can be found at http://www.dsireusa.org/, a Web site funded by the U.S. Department of Energy that lists state incentives for renewable and efficiency.

No upfront cost

The upfront costs of installing energy-saving upgrades, such as solar panels and efficient lighting, have long presented a daunting barrier to entry for public and private commercial property owners, especially schools and other municipal facilities.

Recognizing this market inefficiency, a new crop of private companies such as Pro-Tech Energy Solutions based Branchburg, N.J., Facility Solutions Group based in Austin, Texas, and Aelux based in Jenkintown, Pa. are driving a paradigm shift within the industry by allowing clients to make investments in energy upgrades with no upfront costs.

This unique models works through an energy services agreement, which allows the elected company to complete the installation and the customer to pay for it based on the savings derived from the correction measures installed, the resulting kilowatt hours saved and the hours of consumption.

For example, a typical parking lot fixture that is 400 watts typically runs for 4,368-hours annually. This fixture has a power rating of 458 watts and therefore uses 2,000-kilowatt hours per year.

One effective solution is to replace the 400-watt fixture with a 200-watt induction lighting technology replacement fixture that has a power rating of 200 watts and would use 873 kilowatt hours annually. That represents a 56% reduction in kilowatt hours. At a 15 cent per kilowatt-hour electric rate, this equals a savings of $169 in the customer’s annual electric bill.

In an energy savings agreement, the lighting is typically financed by the installer. In return, the customer would pay a fixed fee of approximately $85 per year for three to five years, depending on the application.

Even when green building retrofit companies are self-funded, as in the case of Pro-Tech Energy Solutions, the key to widespread adoption of energy upgrades is bolstered by the creation of customized funding plans that maximize available federal, state and local rebates, tax credits and other incentives.

The proposed Building Star incentive program offers notable financing opportunities. It will extend low-interest financing options to small businesses and other building owners to assist with the upfront costs associated with renovation by letting them pay off the cost out of the savings on their energy bill.

Introduced March 4 by senators Jeff Merkley (D-Ore.) and Mark Pryor (D-Ark.), Building Star would help reduce U.S. emissions by 21 million metric tons, and is expected to save building owners more than $3 billion on their energy bills annually, reducing peak electricity demand by an equivalent amount of power as that supplied by 33,300-megawatt power plants.

Opportunity abounds

Because buildings represent 40% of the energy used in the U.S., green building retrofit companies and commercial property owners stand to prosper if Building Star is implemented. Pike Research predicts that comprehensive efficiency retrofits will more than triple in annual revenue to $6.6 billion by 2013.

Another study shows that commercial building owners can reap higher rental premiums for green buildings. The study, conducted by the Henley University of Reading in the United Kingdom, reveals that certified buildings provide a rental premium and that the more highly rated that a buildings is, the higher the rent.

The study also suggested that there is a rental premium of approximately 6% for buildings with LEED and Energy Star certification. A sale price premium of about 35% was found in 127 price observations of LEED-rated buildings, and 31% for 662 price observations of Energy Star rated-buildings.

Building Star clearly recognizes the role retrofits will play in ensuring the nationwide stock of existing buildings are energy-efficient structures. By extending low-interest financing options to small businesses and other building owners, Building Star will help leverage private-sector investment to create jobs and spur the economy.

John Drexinger is COO of Branchburg, N.J.-based Pro-Tech Energy Solutions.