Three Ways Businesses Can Save on Power

Steve Gossett Jr. extracts profit by making buildings more efficient.

ABB is the leading manufacturer of a variable-speed drive that allows plants to run motors at just the rate necessary for the job. The money saved on reduced energy use and increased productivity paid back Cruz Azul's investment within six months.

The energy-saving technology is installed in just 10 percent of motors worldwide, but sales are growing rapidly. One ABB customer is a community swimming pool in South Windsor, Conn., which last year installed variable-speed drive motors in the pumps that filter the water. By ramping down to 60 percent at night, the pool operators could keep the water clean and shave $7,000 a year from electricity bills—an investment expected to pay for itself in two summer seasons.

Breaking the landlord-tenant deadlock. In the evening, you can see the lights glowing, and energy burning, in empty offices across America. Inside, cold air keeps blowing down from the ceiling vents—often from aging, inefficient systems—long after the lawyers and bankers have headed home. But commercial building owners don't think chillers, boilers, and intelligent lighting and ventilation systems when they plan improvements. "What you see landlords spending money on are lobbies and elevators—what people see," says Steve Gossett Jr., whose six-year-old company, which he runs with his father, aims to attack one of the nation's most intractable forms of energy waste.

Experts say that commercial buildings, which account for a third of the nation's electricity use, could cut that figure by a third without forcing the people inside to break a sweat. But landlords have no incentive to spend money on energy-efficiency improvements, since they typically just pass bloated utility costs through to tenants. And tenants, who would be delighted to cut utility costs, don't have the authority to make capital improvements. It's a deadlock, but one that Gossett's company, Transcend Equity Development of Dallas, has a way to overcome.

Under unique agreements worked out with landlords, Transcend Equity invests in capital energy improvements and then earns its returns from the energy savings it is able to squeeze out of commercial real estate. For example, Transcend Equity was hired in 2004 by the private investors who owned a 1920s-era 10-story midrise on Elm Street in Dallas where Bank of America had its offices. Transcend Equity replaced five old railcar-size boilers with new efficient units as compact as refrigerators. Most significant, the company installed a building intelligence system, which controlled temperature, and efficient lighting.

For the $1.3 million investment, Transcend Equity was able to slash energy costs 39 percent. Its deals also shield landlords and their tenants against a portion of future energy rate increases. This has been a big factor in Maryland, where Transcend Equity's largest client, Corporate Office Properties Trust, has hired the firm to make $13 million in efficiency improvements to 24 buildings. Gossett expects to realize 30 percent savings; COPT won't see any increase on that portion of its utility bill, even though electricity rates are rising rapidly in Maryland. "The problem with real estate is the economic incentive to go green is very difficult," Gossett says. "We exist to build the business case for embracing efficiency."