1. Why Market Evaluations Matter: Significantly Improving Energy Program Outcomes with Market Intelligence in the Large Commercial Building Sector
American Evaluation Association
Annual Meeting
San Antonio Texas
November 2010
John H Reed
Charles Bailey
305 Summer Garden Way
Rockville MD

2. Topics The problem Markets and market evaluation
The large commercial office market
Life before understanding the market
The lift from a market based strategy
Cultural revenge
Reprise — why market evaluation matters

3. The Problem
Optimizing the strategy to reduce energy consumption in commercial buildings

4. The Focus
Buildings and technologies?
or the
Market?

5. A Market
is a system, a social structure, or a collection of activities that may or may not be spatially delimited with informal and/or
formal roles, norms/rules, and/or procedures that allow participants to exchange particular kinds of goods, services, and/or information

6. Context
Programs operate in a

7. Market Evaluation Is Used to:
Determine where and how to intervene to optimize treatment effects
Assessing the effectiveness of an intervention
(e.g. improve the efficient (utility HVAC program)
cy of heating and air conditioning systems (HVAC) and/or

8. These sources and methods were used to understand the commercial building market
Government data (EIA, Commercial Buildings Energy Consumption Survey)
Trade and professional association data
Exploratory In-depth interviews
Focused in-depth interviews
Network analysis
Surveys

9. The evaluation showed the commercial building market to be a complex place

10. Commercial Building Market — Submarkets (4.7 million buildings)
Commercial office lease
Owner occupied office
Food sales
Food service
Warehouse
Education
Healthcare

11. Segments in the Commercial Office Submarket
Large national firms
Large local and regional firms
Small office building owners

12. The Large Office Commercial Submarkets has a Cast of Many Players
Financiers
Developers
Owners (corporations, Real Estate Investment Trusts, pension plans)
Property management firms
Facility engineering firms
Real estate brokers
National renters
Local renter

13. And Players of Many Stripes
Sole owners (own and manage) — EOP; Legacy; Sunset
Owner/manager (REITs) — Hines; Boston Properties
Fee based property managers — Jones Lang LaSalle; CBRE
Large institutional investors — TIAA CREF; CALPERS; Prudential; Calster; Other retirement funds
Engineering service/construction firms — Able Engineering; ABM

14. A defining principle of the market is “aggregates”
About and sometimes fewer than 50 large firms dominate these and other commercial building submarkets
The 80/20 rule

15. 137 Properties 47,735,315 Square Feet Owner A Owner B Owner C Owner D
Owner E
137
Properties
47,735,315
Square Feet

16. So, where does the decision-making occur
Owner
Vice president or senior property manager
Chief Engineer
Facilities Engineering Firm
Property management firm
Property manager
Building Engineer
Building Manager

17. Fleet Cross-Over Owner Fleet 1 Owner Fleet 2 Owner Fleet 3
Fee Manager Fleet 1
Fee Manager Fleet 2
Fee Manager Fleet 3
Fee Manager Fleet 4
Facilities Engineer Fleet 1
Facilities Engineer Fleet 2
Here we may wish to try a ven-type diagram – another way of making the point.

18. There is a cultural disjunction between
Owners and operators who are focused on fleets
And agents promoting energy efficiency (utilities and others) who are focused on technologies and buildings and are organized by geography

19. Traditional Approaches to existing and new buildings (one example)
Contact someone at the building
Provide some minimal education
Identify opportunities
Present a proposal
Install equipment
Ignoring the reality of the market leads to suboptimal results

20. “More than a Million”: A different approach
Focus on aggregates at the C-level (Top down rather than bottom up)
Treat each player type as an opportunity to aggregate services
Benchmarking (assess energy opportunities in every building)
Establishing a set of priorities across and within buildings and technologies
Provide comprehensive planning
Dedicated support team
Education and marketing messages
Tools attuned to the needs to different decision-makers

21. The Impact of Refocusing from Buildings to Fleets
Program Years
Project sites MW
Savings
(GWh)
Therms
Incentives (000’s)
Pre-
More than a million
2005-6 16
0.26
1.98
1,095
$135
Post-
2007-8
270
1.73
6.15
1,098
$564
% change
1588
565
211
0.3
318

22. Cultural Revenge
Pre-MTM costs for operating programs were spread across geographies and account executives and therefore invisible
Focusing on fleets made costs visible in the form of a dedicated account representative
The perception — this program costs too much
The reality — it probably costs less and produces more savings

23. Why market evaluations matter?
They focus on the larger context
They help to identify where interventions need to be targeted
They assist in developing an optimal intervention strategy
They can result in significant increases in impacts
They can help to identify where structural and cultural change is needed
In the energy efficiency case they remind us that consumption is behavior (writ large) mediated through technology rather consumption as a function of technology