My name is Anthony E. Malkin, I am president of Malkin Holdings, and I run the Empire State Building. Seated behind me are Empire State Building Team leaders Paul Rode of Johnson Controls and Dana Schneider of Jones Lang LaSalle.

At ESB we created the first replicable, nonproprietary, open source, quantitative process to give transparent economic justification to energy efficiency retrofits in the existing built environment. Our work is guaranteed by the balance sheet of Johnson Controls to reduce our watt and BTU consumption by 38.4%. Our contract only guarantees 90% of our projected savings, so our actual savings will be in excess of 40%. Our payback period is three years.

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How do you think energy efficiency in existing buildings should be addressed?

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How are you seeing enthusiasm for energy efficiency rising?

The Bradford County commissioners on Thursday unanimously approved a contract with Johnson Controls Inc. to undertake a $3 million project to make the six main buildings owned by the county more energy efficient.

The project is not being paid for with taxpayer dollars, the commissioners said. Instead, over the next 15 years, the project will more than pay for itself through reduced utility bills and reduced maintenance costs on energy-related equipment, such as air conditioners and water boilers, said Steve Gates, a spokesman for the Bradford County Energy Management Committee.

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What is your local government doing to make its facilities more energy efficient?

Reaffirming their commitment to sustainable development, TERI-BCSD India and its member company Johnson Controls India Pvt. Ltd., today held the first India Energy Efficiency Forum.

The forum brought together leaders of government, business and nongovernmental organizations to discuss and identify barriers to energy efficient practices and to highlight opportunities for energy efficiency in India. The presentations debated energy policy and legislation, and action on potential energy savings and carbon dioxide reductions, with special focus on the impact on businesses.

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What barriers do you see to energy efficiency practices? How can we overcome them?

Assuming the money is eventually disbursed and the push to save energy continues, a handful of big efficiency-oriented companies, including  Johnson Controls, could gain substantially.

A $20 million retrofit project at the Empire State Building that Johnson Controls is overseeing is projected to reap 38 percent efficiency savings annually by 2013, at an annual savings of $4.4 million.

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What should Washington do to speed distribution of stimulus dollars for energy efficiency improvements?

The state of Delaware recently designated Johnson Controls as a preferred energy services provider by the Delaware Sustainable Energy Utility (DESEU). DESEU is a comprehensive program designed to help Delaware generate energy and cost savings, create new jobs, and support the environment.

As one of the first energy services providers to be recognized by DESEU, Johnson Controls will have the opportunity to help improve the state’s government, academic, educational and municipal facilities on both the state and local levels.

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What are public agencies in your state doing to improve energy efficiency?

The Brainerd School District was selected as the only district in the U.S. to receive the benefits of an in-depth facilities management program that will increase efficiencies in district facilities as well as reduce energy and maintenance costs and much more, according to a news release.

Johnson Controls is implementing a $70,000 Enterprise Sustainability Manager system in two of the district’s facilities beginning April 1, at no cost to the district.

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What is your school district doing to increase the energy efficiency of its facilities?

The state of Delaware recently designated the company as a preferred energy services provider by the Delaware Sustainable Energy Utility (DESEU).

DESEU is a comprehensive program designed to help Delaware generate energy and cost savings, create new jobs, and support the environment. As one of the first energy services providers to be recognized by DESEU, Johnson Controls will have the opportunity to help improve the state’s government, academic, educational and municipal facilities on both the state and local levels. The recognition also enables the company to help Delaware move closer toward its goal of reducing greenhouse gas (GHG) emissions by 30 percent by 2020.

“Energy efficiency has never been more important, as validated by the public sector’s continued demand for comprehensive energy efficiency solutions,” said Joy Clarke-Holmes, vice president, regional solutions, Mid-Atlantic region, Johnson Controls. “Performance contracting energy programs are cost-effective and impactful solutions for today’s energy conscious and fiscally responsible government and educational institutions.”

Johnson Controls solutions in state, local government organizations
As the largest energy services provider in the U.S., Johnson Controls helps federal, state and local governments achieve greater energy efficiency through self-funded programs. These programs include systems integration, alternative energy solutions, and innovation, which address facility improvements, create new jobs, reduce GHG emissions and improve comfort and productivity in buildings. Recent projects of note include:

• The Indiana Department of Correction – Johnson Controls helped five prison facilities throughout Indiana implement energy efficient upgrades including the installation of biomass boilers that utilize scrap wood from local businesses. The project helps boost the region’s economy through support of local commerce and is anticipated to save the state of Indiana more than $36 million in energy costs over the next 10 years.
• The Orange County Convention Center – Johnson Controls developed a solar photovoltaic (PV) system for the second largest convention center in the nation, located in Orlando, Fla. The system features a 1.1 megawatt rooftop single-crystalline PV system, providing enough energy to power between 80 and 100 homes annually. The solar upgrades have resulted in significant reduction of energy costs and carbon emissions through renewable technology.
• The State of Maryland – As part of Maryland Governor Martin O’Malley’s energy initiative, EmPOWER Maryland, Johnson Controls supported the retrofit of more than 118 government facilities throughout the state. The revamp is expected to save the state more than $29 million in energy costs through 2017. Johnson Controls also upgraded 40 Maryland State Police facilities, saving an anticipated $15.9 million in utility and operational costs over 14 years.

How might a state government entity – faced with deep budget cuts and a tax threshold that has already been reached– still meet its sustainability goals and raise capital to fund smart government program improvements at the same time?  One potential solution: a “green sale-leaseback.”

The traditional sale-leaseback is a financial transaction in which a government entity sells assets, such as a set of buildings, and then leases them back for an agreed upon term.  In the traditional sale-leaseback model, maintenance, operations and energy are left out of the transaction and remain the responsibility of the former owner, now tenant.  While this model satisfies the immediate goal of generating revenue for the seller, it also misses an opportunity to transform the buildings into high performance spaces that consume less energy, while addressing any deferred maintenance backlog and ultimately delivering a more comfortable and productive work environment.

A green sale-leaseback could include the maintenance, operations and energy into the financial transaction, while authorizing the investor or new owner to utilize a third party, such as an Energy Services Company (ESCO), to manage these operational aspects of the buildings.  The government entity would maintain control through specific contract language regarding facility goals such as LEED® certification, operating conditions and standards, and future facility upgrades the investor would be required to comply with.  This model could allow a government entity to sell a low performing building and leaseback a LEED certified building. 

The green sale-leaseback concept has a series of advantages, but the overarching benefit is the interconnection of smart public investments. Budget constraints often force public officials to forego prudent investments in government efficiency and new technologies. A sale-leaseback strategy could make the capital for these investments available. And because many energy efficiency improvements offer a highly attractive return on investment, they can actually work to improve and enhance budgets.

Including facility operational aspects into a sale-leaseback transaction could also help government entities create more efficient, comfortable and sustainable work environments.  Energy performance contracting is an excellent procurement method for facility owners to use to upgrade their facilities and reduce energy in a budget neutral process.  The green sale-leaseback concept uses a blend of performance contracting and portions of the dedicated lease payments with the new owner or investor to achieve the higher efficiency in operations and meet the facility goals required by the tenant. 

In fact, depending on the return on investment the government entity obtains from its own new capital investments to modernize programs, streamline processes, build new facilities, or make other improvements, this strategy could end up actually generating revenue.

The green sale-leaseback concept could become a critical part of innovative investment strategies for state government entities, offering them opportunities to earn desired investment capital, reduce their environmental footprint and deliver high performance facilities – all while protecting taxpayers.

What funding challenges do you face? How could a green sale-leaseback arrangement benefit you?

If the federal government implements strong energy policies that encourage alternative energy and use of cutting edge high-capacity batteries, the Midwest’s manufacturing hub stands to gain significantly, according to a report by the nonprofit Climate Group and the University of Michigan.

Several of the Midwestern manufacturers that could benefit from such federal programs are located in the Milwaukee area. They include Johnson Controls-Saft, a joint venture between Milwaukee’s Johnson Controls Inc. and the French battery producer Saft, which makes lithium-ion batteries for hybrid cars.

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