United States
           Environmental Protection
           Agency
    PROTECT THE ENVIRONMENT THROUGH
    ENERGY  EFFICIENCY
INTRODUCTION
The ENERGY STAR® program has been a tremendous
success in its first decade. Established by the U.S.
Environmental Protection Agency (EPA) in 1992 for
energy-efficient computers, the ENERGY STAR
program has grown to encompass more than
35 product categories for the home and workplace,
new homes, and superior energy management within
organizations. Some highlights demonstrating the
impact of this program are:'
 • Thousands of organizations have partnered with
   the federal government to demonstrate a
   commitment to protecting the environment
   through energy efficiency.
 • Americans have purchased more than 1  billion
   ENERGY STAR qualified products.
 • More than 100,000 families live in new homes that
   have earned the ENERGY STAR.
 • More than 40 percent of the American public
   recognizes the ENERGY STAR.
 • Thousands of buildings have  undergone effective
   energy improvement projects.
 • More than 15,000 of the nation's buildings have
   been rated using EPA's national energy
   performance rating system.
 • More than 1,100 buildings have earned the
   ENERGY STAR label for superior energy
   performance.
Further, because using energy more efficiently avoids
emissions from power plants, avoids the need for new
power plants, and reduces energy bills, sizable national
benefits have accrued. In 2002, with the help of the
ENERGY STAR program, Americans prevented
greenhouse gas emissions equivalent to those from
14 million vehicles and avoided using the power that
50 300-megawatt (MW) power plants would have
produced, while saving more than $7  billion."
With this success come questions about the future of
the ENERGY STAR program, such as:
 • What is necessary to build and maintain the
   ENERGY STAR program over the next decade?
 • Have the most easily obtained benefits already
   been realized and will taxpayers receive a similar
   environmental and economic return on their
   investment over the next 10 years as they did in
   the first?
This paper explains how EPA will continue to expand
the ENERGY STAR program, and it shows the expected
growth in environmental and economic benefits. The
overview—Why the ENERGY STAR Program Works-
describes what EPA is striving to achieve with ENERGY
STAR. Then for the major energy end-use sectors—
residential, commercial, and industrial—the paper
summarizes  accomplishments to date and program
elements that require further development. Finally, it
outlines EPA's longer term goals for greenhouse gas
reductions and energy bill savings for the nation, and
shows that the ENERGY STAR program will continue
to be a sound taxpayer investment over the next decade.
THE ENERGY STAR PROGRAM PROTECTS THE ENVIRONMENT BY

PROVIDING  COST-EFFECTIVE ENERGY EFFICIENCY SOLUTIONS TO

BUSINESSES,  ORGANIZATIONS, AND INDIVIDUALS.
                                                                               ENERGY STAR
                                                                                 INTRODUCTION

-------
WHY THE ENERGY STAR PROGRAM WORKS
The ENERGY STAR program has dramatically increased
the use of energy-efficient products and practices and is
well positioned to promote more widespread efficiency
improvements. Success is due, in part, to common market
conditions surrounding energy efficiency. That is, there
are many opportunities to save money by improving the
efficiency of our homes, buildings, and industries using
technologies and practices that already exist.'" However,
homeowners, businesses and others do not take advantage
of these opportunities because market barriers, such as
lack of information and split incentives, limit their
expenditures on what are, in fact, attractive  financial
investments when judged on the basis of complete
information.
ENERGY STAR is designed to overcome many
of the market barriers to the adoption of cost-effective
energy efficiency products and services in a sustained
manner and to help unleash the attendant savings for
individuals and organizations.  EPA's funding is not used
to buy equipment, products, or services as is the case
with some energy efficiency programs, such as traditional
demand-side management (DSM) programs seeking
near-term energy savings. Funding is used to provide
businesses and consumers with information and tools
that break down major market barriers and alter
decisionmaking for the long term. This approach, which
helps direct private capital toward energy efficiency
investments, provides a large environmental and
economic payback for the government investment.
One way to look at the role of ENERGY STAR is to
examine the costs and risks involved in purchasing
energy-efficient equipment or investing in an energy
efficiency project. Beyond the actual capital  outlay to
purchase a product or technology and a required return
on the investment (ROD dollars, there may also be:
  • Transaction costs for researching product or
   project choices.
  • Risk premiums in  case the  product or project does not
   perform as claimed.
ENERGY STAR enhances the market for energy efficiency
by reducing the transaction costs and  lowering the
investment risks to the point that many more projects
become attractive (see Figure 1). It plays a distinct role in
the market place by providing credible, objective information
upon which businesses and homeowners can make
better informed decisions.
FIGURE 1.
ILLUSTRATION OF PROJECT COSTS BEING REDUCED BY
ENERGY STAR INFORMATION
                              Expected Savings
                              Risk Premium
                              Transaction Costs
                              Required ROI
                              Capital Outlay
       Savings    Costs

           Before
Savings    Costs

 Market Enhanced
      with
  ENERGY STAR
NOTE: This example assumes that the energy-efficient technology delivers the
exact same service as the standard technology.
Source: Adapted from a working paper by Katrin Ostertag, Transaction costs of
raising energy efficiency (May 1999), presented at the IEA International Workshop
on Technologies to Reduce Greenhouse Gas Emissions: Engineering-Economic
Analyses of Conserved Energy and Carbon. Washington, DC. 5-7 May 1999.
   WHY THE ENERGY STAR PROGRAM WORKS

-------
IF HALF OF ALL U.S. HOUSEHOLDS REPLACED A STANDARD

TV WITH AN ENERGY STAR MODEL, THE CHANGE WOULD BE

LIKE SHUTTING DOWN A POWER PLANT.
RESIDENTIAL ENERGY EFFICIENCY
The residential sector offers sizable opportunities for
protecting the environment through energy efficiency.
Consisting of more than 100 million households, this
sector contributes about 17 percent of the nation's
greenhouse gas emissions'17 (see Figure 2) and offers
potential energy savings in the range of 25 to 30 percent
compared with current consumption. These retrofit
options include adding the appropriate amount of
insulation or buying more efficient products such as
refrigerators and light fixtures. However, this sector also
presents a large challenge for improving energy
efficiency. To capitalize on the possible savings,
homeowners face numerous decisions. They receive
information on energy efficiency options for the home
from many sources, including manufacturers, utilities,
retailers, and contractors. Frequently this information
comes in  pieces, is inconsistent, and leaves homeowners
with more questions about the best option, such as:
 • Which products (or homes) offer the energy savings
   claimed  by the manufacturer, product vendor, or
   home builder?
 • Which products of those that cost more up front offer
   a reasonable return on the additional cost?
 • Which products offer the desired features and
   performance in addition to greater energy efficiency
   (i.e., is a sacrifice required)?
 • What design and installation issues are important to
   obtaining the claimed energy performance of a product?
 • How do owners address the growing energy needs of
   the smaller electrical products and equipment in the
   household?
 • How do owners find a  heating and cooling contractor
   or home improvement professional who is well
   versed in the best practices for home energy
   efficiency?
EPA offers ENERGY STAR to homeowners as a
straightforward, powerful, and reliable resource for
answering many of these questions and showing the
benefits of energy-efficient choices. The ENERGY STAR
label is designed to clearly identify products, practices,
and new homes that are energy efficient—meaning they
lead to lower energy bills and help protect the
environment while providing desired features and
performance. The clear government backing of the label
allows consumers to rely on it as credible and unbiased.
ENERGY STAR has had major accomplishments bringing
greater energy efficiency to the residential sector; however,
much more needs to be done. Accomplishments and key
next steps are summarized below.

Clearly Indicating Which Products are Energy Efficient
A cornerstone of the ENERGY STAR program is
identifying efficient products that will reliably deliver
energy savings and  environmental benefits. EPA and the
U.S. Department of Energy (DOE)17 work closely with
more than one thousand manufacturers to determine the
energy performance levels that must be met for a product
to earn the ENERGY STAR. The Agencies only award the
label in product categories where the efficient products
offer the features and performance consumers want and
provide a reasonable payback if the initial purchase price
is higher.
 • Currently, the ENERGY STAR label can be found on
   products in more than 35 product categories (see
   Table 1). The qualifying products offer a homeowner
   considerable savings: a home fully equipped with
   ENERGY STAR qualifying products will operate on
   about 30 percent less energy than a house equipped
   with standard products, saving the typical homeowner
   about $400 each year (see Table 2).
                                                                      RESIDENTIAL ENERGY EFFICIENCY

-------
FIGURE 2.
U.S. GREENHOUSE GAS EMISSIONS
          Other Gases
             16%
    CO2 from
     Other
      4%
   C02 from
 Transportation
     25%
 Source: EPA, 2003
CO2 from
Industrial
 Energy
  22%
      C02 from
    Commercial
       Energy
        15%
                            CO2 from
                           Residential
                             Energy
                              17%
   For many ENERGY STAR qualifying products, there is
   no additional cost at the time of purchase. ENERGY
   STAR has played an important role in the efficiency
   of products such as office equipment and home
   electronics because much of their energy use occurs
   when they are in standby mode. This is not apparent
   to the user. Through ENERGY STAR, the energy
   needs during standby have been greatly reduced with
   no change in product performance (see Table 1). To
   date these products have contributed impressive
   energy savings and environmental benefits.
   For other ENERGY STAR qualifying products such
   as kitchen appliances and heating and cooling
   equipment, the additional first cost may be
   significant. ENERGY STAR has played a pivotal role
   here, as well, by showing consumers that the higher
   initial cost of these products can be justified by the
   energy savings every month, year in and year out.
   ENERGY STAR provides a clear definition of what is
   energy efficient for many stakeholders across the
   country (utilities, state energy offices, etc.) who are
   implementing their own efficiency programs.
 • Although many of the energy-using products in a
   household are now available with the ENERGY STAR
   label, additional  products are always under consideration.
   In particular, EPA is examining other products that
   use energy in standby mode. These products, along
   with small household appliances, are expected to
   consume about 40 percent of home energy by 2015 if
   no improvements are made.17'

Providing Easy Access to Consumer Information
Through a government ENERGY STAR Web site and
hotline, EPA and DOE provide information directly to
interested consumers about the products that qualify
for the  ENERGY STAR. This information encompasses
more than 18,000 individual product models across
more than 1,250 manufacturers. It includes savings that
can be  expected, stores that carry the products, and
environmental benefits that will result from using the
products. This comprehensive Web site provides one
place consumers can rely on to determine the authenticity
of key information, see the list of products that qualify
for the  ENERGY STAR, and find additional home
improvement tools and guidance. It is currently servicing
more than one million visits per year.

Educating the Public
For the ENERGY STAR label to be attractive to home-
owners (as well as businesses), they must not only
recognize the label, but also understand that it represents
cost savings and environmental protection. EPA
undertakes a variety of efforts to (1) educate the public
about the link between energy use and air emissions,
(2) raise awareness of how products and services
carrying the government-backed ENERGY STAR can
protect the environment while saving them money, and
(3) educate consumers about the hidden price tag of a
product—the cost of energy to operate that product over
its lifetime.
  RESIDENTIAL ENERGY EFFICIENCY

-------
ABOUT 40%  OF THE AMERICAN PUBLIC CURRENTLY
RECOGNIZES THE ENERGY STAR LABEL
TABLE 1.
OVERVIEW OF PRODUCTS
      THE ENERGY STAR PROGRAM
 Product Groupings
 (# of product
 categories)
Lead Agency
Energy Savings
Above Standard
 New Products
 Market Penetration of
ENERGY STAR Qualifying
 Products Sold in 2000
        Other Highlights
 Office Equipment (8)
  Computer/Monitor at Home      EPA
  Computer/Monitor at Work      EPA
  Copier                      EPA
  Fax                         EPA
  Other                       EPA
                     27%
                     52%
                     42%
                     40%
                    26-49%
                           95%/97%
                           95%/97%
                             90%
                             99%
                            range
                        Specifications for monitors and
                        imaging equipment are under
                        revision in 2003.
 Home Electronics I
  Televisions
  VCRs
  TV/VCRs
  Audio
  Other
    EPA
    EPA
    EPA
    EPA
    EPA
    24%
    29%
    30%
    69%
    4-17%
       46%
       94%
       76%
       31%
       range
Audio equipment needs to use less
than 1 watt in standby to earn the
ENERGY STAR effective January 2003.
Products in other categories (e.g., TVs, VCRs)
are expected to meet 1 watt levels by 2005.
 Heating/Cooling (7)
  Central Air Conditioners         EPA
  Furnaces (Gas)                EPA
  Programmable Thermostats      EPA
  Other                       EPA
                     24%
                     15%
                     20%
                    7-30%
                             20%
                             27%
                             36%
                            range
                        Specifications for programmable
                        thermostats are being examined
                        to help improve usability for
                        the consumer.
Appliances (6)
  Clothes Washers
  Dishwashers
  Refrigerators
  Room Air Conditioners
  Other
   DOE
   DOE
   DOE
   DOE
   EPA
    25%
    10%
    10%
   10-43%
       10%
       20%
       17%
       13%
       range
Current specifications are effective
as of the effective dates of most
recent minimum efficiency standards.
 Lighting (3)
  Fixtures
  Bulbs
  Exit Signs
    EPA
    DOE
    EPA
    66%
    66%
    75%
       3-5%
       3%
       73%
Specifications are being revised as
additional testing methods are developed
to address performance criteria.
 Building Envelope (3)
  Windows
  Other
   DOE
   EPA
    range
    range
       range
       range
Specifications for windows were
recently revised.
 Other (5)
    EPA
                                              range
                                             range
                                                                                 RESIDENTIAL ENERGY EFFICIENCY

-------
Educating the Public (continued)
 m About 40 percent of the American public currently
   recognizes the ENERGY STAR label. In regions that
   have active energy efficiency programs, this recognition
   is at 60 percent or more. About half of those who
   have made a recent ENERGY STAR purchase report
   that they were influenced by the label.17"
 • EPA is working toward the goal of having 60 percent
   of the American public recognize the label. Based on
   the effort required to attain this level of recognition,
   EPA will develop additional goals for the latter part of
   the decade.
 • EPA is also striving  to increase public awareness of
   ENERGY STAR as a government-backed program
   providing credible,  unbiased information. Recent
   reports suggest that some consumers are confused
   about who is behind the ENERGY STAR, with some
   believing it is a private sector eco-label, a perception
   EPA must correct to continue building consumer
   confidence.w//

Providing Energy Efficiency Information When and
Where Decisions are Made
In addition to product manufacturers, EPA and DOE
collaborate with a number of organizations to get clear,
accurate ENERGY STAR information to consumers. These
organizations include retailers, utilities, state energy
groups, and public benefits funds administrators. EPA
provides them with training and template materials to
use in their own energy efficiency programs and outreach
efforts. This support is  particularly useful to those groups
administering public dollars because it allows them to
use their own funds to  reach the businesses and
individuals in their regions, not spend them on the
creation of a regional infrastructure for energy efficiency.
EPA expects to broaden these partnerships over the next
several years because these organizations frequently
have direct contact with consumers and are well
positioned to provide consumer information on home
energy efficiency at the time of purchase.
Protecting the Integrity of the ENERGY STAR Label
Maintaining the integrity of the ENERGY STAR label is
essential to building awareness of and maintaining
consumer confidence in the label, as well as protecting
the taxpayer investment in the  program over the past
10 years.
 • EPA routinely monitors the  use of the label on
   products  in the market place to ensure that it is used
   to identify only products that qualify.
 • EPA selectively tests products to ensure that products
   said to qualify for the label  do indeed qualify.
 • EPA updates the performance specifications for the
   ENERGY  STAR as market conditions change so that
   the ENERGY STAR continues to identify the most
   efficient, cost-effective products on the market. EPA is
   currently updating the ENERGY STAR specifications
   for monitors, imaging equipment, and programmable
   thermostats, while DOE recently updated the
   residential window  specification (see Table 1).

Improving New Home Construction
EPA has provided an energy efficiency platform for
builders of new homes since 1995, assisting them
with  information  on how to construct homes that are
30 percent more efficient than homes built to the Model
Energy Code. Builders can promote ENERGY STAR
qualified homes as energy efficient, comfortable, and
affordable.
 • More than 2,000 active home builders partner with
   EPA in the ENERGY STAR program.
 • The market penetration for  ENERGY STAR has
   reached more than  20 percent in several markets.
   EPA has focused on the rapidly expanding new
   housing markets  in  California, Texas, Phoenix, and
   Las Vegas. New Jersey, New England, and the
   Midwest also  have high concentrations of ENERGY
   STAR  builder  partners.
    RESIDENTIAL ENERGY EFFICIENCY

-------
THOUSANDS OF BUILDERS HAVE CHOSEN TO  QUALIFY
THEIR HOMES AS ENERGY STAR.
TABLE 2.
TYPICAL ANNUAL HOME ENERGY BILL SAVINGS FROM ENERGY STAR QUALIFIED EQUIPMENT VERSUS STANDARD
NEW EQUIPMENT-for Homes with Varying Heating and Cooling Equipment (in 2000 dollars)
Product Category
Home with Gas Furnace and
  Central Air Conditioner
Home with Gas Furnace and
  Room Air Conditioners
 Home with Gas Furnace
and Air Source Heat Pump
Office Equipment
  Computer and Monitor
  Fax
  Laser Printer



Home Electronics
 TV
 DVD



Heating and Cooling
  Heating
  Air Conditioning
  Programmable Thermostat
         $108
         $75
         $100
         $108
         $15
         $130
        $100
Lighting
  5 most used fixtures

Appliances
  Dishwasher
  Clothes Washer
  Refrigerator



Indirect (Other) Savings
 Water Heating Energy Savings
 Clothes Dryer Electricity Savings
 Other Fuel Savings



Total Savings
         $465
         $377
        $412
    Avg. $418
NOTES:
Table compares ENERGY STAR with standard new equipment; additional savings are realized when compared to stock.
Heating and cooling savings numbers assume equipment working together.
Room air conditioning number assumes 3 units in the house.
The 5 most used lighting fixtures: kitchen, living room table, living room floor, outdoor wall, and bathroom wall.
                                                                             RESIDENTIAL ENERGY EFFICIENCY

-------
  Improving New Home Construction (continued)

   m One-third of the top 100 builders are ENERGY STAR
     partners. And the Army Corps of Engineers now
     builds all new Army homes as ENERGY STAR.
   • EPA has found ways to reduce builder costs when
     testing homes for the stringent ENERGY STAR
     guidelines, providing homeowners with verification
     at low cost to the builder.
   • EPA will continue to build consumer interest in
     energy-efficient homes with its current partners, as
     well as expand into additional regions of the country
     such as the Pacific Northwest. EPA will also work with
     the manufactured housing industry to ensure that
     more of these homes meet ENERGY STAR guidelines.
   • EPA has set a goal of more than 500,000 ENERGY
     STAR qualifying homes by 2006.

  Better Trained Home Contractors and Informed
  Home Owners
  EPA supports the growing number of professionals
  trained to understand how parts of the home work
  together to maintain comfort while reducing
  energy costs.
   • Through ENERGY STAR Home Sealing, contractors
     and homeowners are learning about the importance
     of sealing air openings to the outside while properly
     insulating walls and attics. When combined with
     ENERGY STAR qualified windows, this sealed home
     envelope keeps conditioned air within the living
     space, improving comfort and reducing energy  bills.
   • EPA actively supports the  North American Technician
     Excellence (NATE), which tests HVAC contractors on
     proper installation, maintenance, and repair or
     service of heating and cooling equipment.
 • EPA also partners with organizations around the
   country to offer a new home retrofit program called
   Home Performance with ENERGY STAR. In this
   program, trained professionals provide homeowners
   with detailed home energy audits and make  key cost-
   effective recommendations to improve efficiency and
   comfort of the home. At the homeowner's request, they
   will also make the improvements. Work performed by
   home performance contractors is quality controlled by
   the sponsoring organization. EPA is expanding this
   program to more than 20 areas of the country over
   the next 3 years.

Affordable Housing
The only truly affordable home is an energy-efficient one,
with a lower monthly energy bill that places a  smaller
burden on limited monthly resources. EPA supports the
U.S. Department of Housing and Urban Development
(HUD) in its integration of ENERGY STAR into  home
energy programs and other affordable housing efforts.

International Partners
EPA also cooperates with countries around the world that
are  interested in adopting the ENERGY STAR label. In
2001, EPA signed an international agreement with Natural
Resources Canada, allowing it to implement an energy
efficiency labeling program modeled after ENERGY STAR.
This complements existing ENERGY STAR agreements
with the European Community, Japan, Taiwan, Australia,
and New Zealand.
8    RESIDENTIAL ENERGY EFFICIENCY

-------
MORE THAN  1,100 BUILDINGS ACROSS THE UNITED STATES

HAVE EARNED THE PRESTIGIOUS ENERGY STAR.
COMMERCIAL AND INDUSTRIAL
ENERGY EFFICIENCY
Increasing energy efficiency in the commercial and
industrial sectors also offers sizable opportunities for cost
savings while avoiding emissions of greenhouse gases.
These sectors contribute about 37 percent of the nation's
greenhouse gases, with buildings alone contributing
15 percent (see Figure 2).IXAgain, a number of analyses
suggest that substantial savings from cost-effective
improvements are available across these sectors if
certain market barriers can be overcome/-XlThese
barriers include:
 • Lack of corporate commitment. When questioned,
   many high-level financial decisionmakers see electricity
   as the least controllable category of business costs.
 • Lack of information. Buildings and industrial facilities
   have complicated energy operations. While
   information is available on how to approach and
   undertake effective energy efficiency improvements,
   this information  is not widespread. And the expertise
   for making changes is lacking within many
   organizations.
 • Lack of measurement tools. People routinely accept
   the premise that you cannot manage what cannot be
   measured. Until  1999, there was no reliable measure
   for the energy performance or efficiency of various
   types of commercial buildings or industrial facilities.
   Nor was there a  clear definition of what makes a
   building or facility efficient.
 • Tenant/landlord split incentives. Frequently, utility bills
   for a commercial building are passed through to and
   paid by the tenants. In these cases, the building owner
   has little incentive to engage in energy efficiency
   efforts because the tenants directly benefit from the
   savings, not the  owner.
EPA offers ENERGY STAR to  businesses and other
organizations as a straightforward way to adopt superior
energy management and realize the cost savings and
environmental benefits that can result. EPA promotes a
strategy for superior energy management that starts with
the top leadership, engages the appropriate employees
throughout the organization, uses standardized
measurement tools, and helps an organization prioritize
and get the most from its efficiency investments.
While EPA has made significant progress promoting
greater energy efficiency across these sectors, much
more needs to be done.  EPA is undertaking the
following activities:

Encouraging Top-Level Commitment to Energy Efficiency
EPA offers the ENERGY STAR partnership to organizations
of all types and sizes. As part of it, senior-level executives
make a commitment to the superior energy management
of their buildings or facilities. This top-level organizational
commitment has proved to be the catalyst for energy
efficiency investments in many of the most successful
partner organizations.
 • Almost 12,000 organizations have partnered with
   EPA in the pursuit of superior energy management
   (see Table 3). These partners include:
   • More than 425 public organizations such as state and
    local governments, schools, and universities.
   • More than 880 businesses across the commercial
    and industrial sectors.
   • More than 8,000 small businesses.
 • ENERGY STAR partners represent over 9 billion
   square feet or 13.8 percent of the commercial
   building market as well as a significant number
   of industrial facilities (see Table 3).
 • EPA will expand partnerships across the commercial
   and industrial sectors to catalyze energy efficiency at
   the top management levels and to facilitate the
   development of best practices and information
   sharing. While EPA will partner with any interested
   organization, special focus will be placed on those
   sectors for which EPA has been able to develop new
   standardized measurement tools. These sectors
   include commercial real estate, public buildings,
   schools (K-12), higher education, healthcare,
   hospitality, automobile manufacturing, cement
   manufacturing, wet corn  milling, and others
   (see Table 3).
                                                      COMMERCIAL AND INDUSTRIAL ENERGY EFFICIENCY

-------
   ERA'S PROVEN ENERGY MANAGEMENT STRATEGY
   Guidelines for Superior Energy Management
   EPA offers a superior energy management strategy based on the success of thousands of ENERGY STAR partners.
   Partnership with EPA turns energy management plans into actions:
   • Top-level attention and a public commitment to secure resources for sustained improvements.
   • A credible, objective energy performance rating system to assess the performance of buildings, validate savings,
     and recognize top performance.
   • 5-stage building upgrade approach based on building science and designed to take advantage of building system
     interactions for greater savings and comfort.
   • Visibility of an organization's achievements in the public and financial markets.
   • Access to a network of partners, bringing creative approaches to problem solving.
  Building the Financial Case
  To engage top-level managers, they must see the link
  between effective energy management and their core
  objectives. EPA is working to demonstrate this connection
  and to provide organizations with new financial indices
  that help management understand how their energy costs
  affect their profitability relative to others in their sector.
   • EPA  has collaborated with Innovest, a financial
     analysis firm, whose studies have determined that
     companies with effective energy management plans
     in place tend to be strong environmental performers
     and strong performers on Wall Street. Innovest
     research shows that leaders in corporate energy
     management outperform their competitors by
     20 to 30 percent on Wall Street/"
   • EPA  has also succeeded in describing energy
     savings in terms of core business objectives for a
     wide range of business sectors. For example, EPA
     has demonstrated that:
     • A commercial building owner can generate $2 to
      $3 of incremental asset value for every $1 invested in
      energy performance improvements.
     • A retail grocery can reap the equivalent of increasing
      sales by $85 when it reduces annual energy costs by
      $1,  given this sector's low profit margins and
      relatively high energy expenses.

     • A full service hotel can realize the equivalent of
      increasing its average daily rate by $1.35 (about
      1.6  percent) from a 10-percent improvement in
      energy performance.
   • EPA will continue to use a variety of outreach
     activities to convey the strong financial case for
     effective energy management.
Offering Guidelines for Superior Energy Management
Through its work with thousands of partners in Green
Lights and now ENERGY STAR, EPA has identified the key
elements of superior energy management. They are:
 • Top-level commitment to reduce energy waste.
   Without this commitment, resources are often not
   allocated to energy projects, and efficiency programs
   are not sustained.
 • Routine assessment of organization-wide performance,
   against competitors and across own portfolio.
   Assessing energy use in all operations and all
   buildings results in resources being targeted to those
   facilities with the greatest potential for improvement.
   Organizations can rank their own properties, learn
   from the high performers, and upgrade  the poor
   performers.
 • Use of a systems-integrated approach to upgrade
   buildings. Sizing heating and cooling equipment,
   integrating individual technical components, and
   controlling, operating, and maintaining equipment
   play a big  role in the energy performance of a
   building.
Organizations using these guidelines have realized twice
the energy savings for a given investment as alternative
approaches. The case for these guidelines is clear given
the findings from the past decade:
 • The efficiency of building components such as
   windows, chillers, etc., has improved by more than
   30 percent over the past 25 years, yet building energy
   use has not improved by nearly as much.x///
10   COMMERCIAL AND INDUSTRIAL ENERGY EFFICIENCY

-------
 Food Lion, LLC, Salisbury, North Carolina

 Food Lion, LLC, a subsidiary of Brussels-based Delhaize Group, operates more than 1,200 supermarkets in 11 Southeastern and
 Mid-Atlantic states. Food Lion received the ENERGY STAR Award for Excellence in Energy Management in 2002 and 2003.

 Tracking 10 cents of its earnings per share to its energy efficiency accomplishments. Food Lion has successfully integrated energy
 management into its corporate business objectives. Food Lion benchmarks all of the stores in its portfolio, evaluates the worst performing
 stores on a monthly basis, and provides quarterly energy bonuses to maintenance staff to encourage improvements. A key partner
 in developing the EPA benchmark for supermarkets. Food Lion has used the energy ratings to justify recommissioning services.

 Food Lion's energy management measures have resulted in impressive energy savings. In 2001, even with a 6-percent increase
 in store square footage. Food  Lion reduced energy consumption by 1.3 percent—equivalent to over $50 million in sales. In 2002,
 Food Lion saw energy savings of 5 percent, and annualized cost savings of nearly $15 million, despite increasing its net square
 footage by 2 percent. These savings are the equivalent of increasing sales by $465 million or eliminating the energy use of 55 stores.
 • An examination of U.S. buildings shows that the best
   performing buildings use 75 percent less energy than
   the worst performing buildings. It also shows that
   this difference cannot be accounted for by particular
   technologies, climate, building size, or building age.xlv
EPA offers its proven energy management strategy to
each of its 12,000 partners. EPA estimates that to date
more than 47.5 billion kWh have been saved through
these efforts/17 EPA will continue to promote this
approach to its current partners and offer it to more
businesses and organizations.

Providing New Standardized Measurement Tools
Fundamental to this whole-building systems approach is
EPA's national energy performance rating system for
buildings, unveiled in 1999. This rating system measures
how well the building systems are integrated and how
well the building is operated and maintained.  It fills an
important measurement gap because no consistent or
comparable metric existed prior to this system. Now a
building owner or manager has a rating  akin to the
miles per gallon rating for an automobile. And this
rating can be used in key market transactions  such  as
the assessment of a  building's asset value or the lease
price of building space.
 • EPA has developed the online rating system for office
   buildings, schools (K-12), hotels, grocery stores, and
   hospitals (see Table 3). Numerous organizations have
   embraced it and evaluated more than 15,000  buildings
   through 2002.  They represent 16 percent of the
   nation's office building market, 13 percent of schools,
   20 percent of supermarkets, 21 percent of hospitals,
   and 5 percent of hotels.
EPA has also seen major organizations adopt the
national rating system as part of their energy
management efforts. For example, many organizations
are using energy performance ratings to help direct
their project investments and monitor progress
(see sidebars). Two large pension fund managers,
TIAA-CREF and Lend Lease, have announced that they
are requiring managers of the buildings in their
portfolios to rate the energy performance of these
buildings and work to improve their performance/17'
EPA expects to add court houses, residence halls, fast
food establishments, and other retail building spaces
to the rating system over the coming year. At that
point, the rating system will apply to more than
50 percent of the building space across the country.
EPA will also continue to promote the rating system
to its partners and other organizations as an effective
means of measuring building performance and
setting future performance goals.
EPA is now exploring how to adapt the rating to
the industrial sector. A substantial portion of the
industrial sector could benefit from improved energy
performance measurement tools and enhanced
corporate energy management. EPA is investigating
industrial energy performance indicators at the
facility level with interested sectors, including
automobile assembly, malt beverage production,
and corn refining. The glass manufacturing and
pharmaceutical industries have also expressed
interest. EPA will support the development of
indicators for three to five sectors per year.
                                                        COMMERCIAL AND INDUSTRIAL ENERGY EFFICIENCY   n

-------
   Starwood Hotels & Resorts Worldwide, Inc., white Plains, New York

   Starwood Hotels & Resorts Worldwide, Inc., is a leading U.S. hotel company, owning, operating, and franchising over 700 hotels
   in 80 countries. Its brands include Four Points, Sheraton, Westin, and W Hotels. Starwood received the ENERGY STAR Award for
   Excellence in Energy Management in 2002 and 2003. And at the Energy Efficiency Forum at the National Press Club in June
   2002, EPA recognized Starwood's Sheraton Boston Hotel as one of the first hotels in the nation to earn the ENERGY STAR.

   Starwood's "Energy Management is Good Business" strategy is centered around its commitment to making energy management
   everyone's responsibility. The company has benchmarked all of its owned and managed hotels using EPA's energy performance
   rating system and will apply for the ENERGY STAR label for top performing  hotels (those scoring 75 or better) to demonstrate
   its environmental commitment to guests and the public. Starwood based a portion of its 2001 bonuses for its energy team on
   energy consumption reductions, and its "Watts for Wheels" contest created  competition among the company's properties for
   energy efficiency accomplishments. Starwood also helped EPA test the benchmarking system for hotels  by providing energy
   data for all of its buildings.

   Starwood's energy management initiatives are paying off. The company invested $8.5 million in energy  projects completed
   in 2001, and saved $3.4 million—equivalent to renting 9,370 additional rooms. In 2002, Starwood invested approximately
   $4.6 million in energy projects and saved $1.3 million, the equivalent to renting 9,800 additional rooms.
  Distinguishing the Top Performing Buildings
  Based on results from the national energy performance
  rating system, EPA offers the ENERGY STAR label as a
  way to distinguish buildings that are top energy
  performers—those scoring in the top 25 percent of
  their class which also meet industry standards for
  indoor air quality.
   • Hundreds of organizations have applied for the
     ENERGY STAR and by the end of 2002, 1,100 top
     performing buildings nationwide had earned the
     prestigious label.
   • As a group the ENERGY STAR qualifying buildings
     use 40 percent less energy than  the average building
     in the United States while providing quality space.
   • EPA will continue to offer the ENERGY STAR label for
     top performing buildings and work with organizations
     to help them  highlight the design, operations, and
     maintenance features that make the buildings qualify.
   • EPA is collaborating with leaders in the Green
     Buildings Industry to ensure that similar approaches
     are used to recognize top energy performing buildings
     in the ENERGY STAR program as are used for green
     building certification.

  Identifying Efficient Products for the Workplace
  While ENERGY STAR for the commercial and industrial
  sectors places a large emphasis on whole-building
  system improvements, there are times when making the
  efficient choice is as easy as choosing the most efficient
  product. This is largely the case with products that plug
  into an outlet—plug  loads. Many such products, including
  office equipment and appliances, already qualify as
  ENERGY STAR and offer significant  energy savings
within these sectors. EPA recommends that organizations
specify the following products as part of their bulk
procurement practices: office equipment, commercial
refrigerators, water coolers, and unitary heating and
cooling equipment. EPA may add commercial cooking
equipment and vending machines to this list in the
coming years.

Providing Recognition for Success
An important aspect of an effective energy management
plan is setting goals for continuous improvement and
then meeting these goals. Using the national energy
rating system and other means, EPA recognizes
organizations for reaching key milestones in improved
energy performance and the environmental benefits
these achievements deliver.

Working with Interested Organizations
In addition to the businesses seeking to improve their
energy performance, EPA works with a number of
organizations to get clear, accurate information to these
energy end-users about opportunities for improved
energy performance. These organizations include energy
service providers, utilities, state energy groups, and
public benefits funds administrators. EPA provides them
with training and outreach  materials to use in their own
energy efficiency programs. This support is particularly
useful to groups administering public dollars because it
helps them use their own funds to reach businesses in
their regions, instead of in the creation of a regional
infrastructure for energy efficiency. EPA plans to  continue
to broaden these partnerships because it is these
organizations that have frequent and direct contact with
the end-user.
12   COMMERCIAL AND INDUSTRIAL ENERGY EFFICIENCY

-------
TABLE 3.
OVERVIEW OF BUILDING SECTORS AND POTENTIAL GREENHOUSE GAS REDUCTIONS FROM SUPERIOR
ENERGY MANAGEMENT
  Market Segment
Potential Carbon Savings
       (MMTCE)
Extent of Commitment
  to ENERGY STAR:
 Total Active Partner
   Square Footage
   (% of market)
  Availability of
   Standardized
  Measurement
     System
   EPA 2012
Carbon Savings
    Goals
   (MMTCE)
  Office
   General
   Courthouses
   Banks
   Financial Centers
         17.5
   3.9 billion (32%)
                                                       available since 1999
                                                        available in 2003
                                                        available in 2003
                                                        available in 2003
                               5.3
  Retail
   Drug Stores
   Discount Stores
   Home Centers
   Department Stores
         14.3
   1.9 billion (18%)
                                                        available by 2004
                                                        available by 2004
                                                        available by 2005
                                                        available by 2005
                               3.1
  Education
   K-12
   Higher Education
         7.4
   1.0 billion (12%)
                                                       available since 2000
                                                  residence halls available in 2003
                               2,3
  Healthcare
   Acute Care Hospitals
   Medical Office Buildings
   Clinics
          6,9
  350 million (12%)
                                                       available since 2001
                                                        available in 2003
                                                        available by 2006
                               1,3
  Lodging
          5.9
  730 million (16%)
available since 2002
     1.4
  Food Service
   Fast Food Restaurants
         4,9
    6 million (1%)
                                                        available in 2003
                               1.2
  Food Sales
   Grocery Stores
   Convenience Stores
         3.0
  377 million (37%)
                                                       available since 2001
                                                        available by 2006
                               1.3
  Other
   Post Offices
   Warehouses
   Telecommunication Centers
   Wastewater Treatment Facilities
   Drinking Water Treatment Facilities
         15.8
      1.1 billion
                                                        available in 2003
                                                        available in 2003
                                                        available by 2004
                                                        available by 2005
                                                        available by 2006
                               1.6
  TOTAL                               75.7                   9.3 billion

  NOTE: Savings potential based on a 30% savings in total energy being possible.
                                                                                     17.5
                                                                 COMMERCIAL AND INDUSTRIAL ENERGY EFFICIENCY   13

-------
              E
              o
              1
              E
              c
              o
              .a
              T3
              ;u
              1
              8
                    FIGURES.
                    AVOIDED GREENHOUSE GAS EMISSIONS FROM THE ENERGY STAR PROGRAM: 1993 TO 2002
                 30
•S  2=H
                            I Superior Energy Management
                            I Product Labeling
                 20 -
              O  10-
                 15-
                   1992
                    1994
1996
1998
2000
2002
                                                       Year
                    FIGURE 4.
                    EXPECTED EMISSIONS REDUCTIONS FROM THE ENERGY STAR PROGRAM: 2003 TO 2012

                 50-
              I Superior Energy Management
              I Product Labeling
              I Home Improvement
                   2003
                                                                       2011
14   FUTURE OF THE ENERGY STAR PROGRAM

-------
THE TYPICAL HOME CAUSES MORE GREENHOUSE GAS

EMISSIONS THAN THE TYPICAL VEHICLE. WITH ENERGY

STAR, PEOPLE CAN LOWER THESE  EMISSIONS BY 30% WHILE

SAVING MONEY.
FUTURE OF THE ENERGY STAR PROGRAM
Each year, EPA makes a significant effort to accurately
estimate the environmental and economic benefits from
the ENERGY STAR program. EPA uses peer-reviewed
methods that capture the enhanced flow of efficient
technologies and practices into the residential,
commercial, and industrial sectors due to the ENERGY
STAR program, while accounting for the business-as-
usual improvements that would have  occurred
anyway.*""-*w"
In 2002, EPA estimates that Americans, with the help of
the ENERGY STAR program:
 • Saved more than 100 billion kWh of electricity.
 • Prevented more than 20 MMTCEx/xof greenhouse gas
   emissions, the emissions equivalent to those from
   more than 14 million automobiles.
 • Saved more than $7 billion.
Roughly half of these benefits are the  result of people
using ENERGY STAR qualifying products in their homes
or at work, and the other half from organizations
adopting superior energy management practices across
the commercial and industrial sectors  (see Figure 3).
Looking to the future, EPA expects the activities outlined
above to expand the ENERGY STAR program and to
grow the benefits steadily from 2002 to 2012, as shown in
Figure 4. By 2012, the ENERGY STAR program is
expected to avoid about 50 MMTCE of greenhouse gas
emissions each year, equivalent to the emissions from
more than 30 million vehicles, and reduce energy bills by
about $15 billion annually.
In 2012, EPA expects the use of ENERGY STAR qualifying
products at home and at work to contribute  about
45 percent of the environmental and economic benefits
and the adoption of superior energy management
practices to contribute an additional 45 percent. The
remaining 10 percent will come from widespread efforts
to incorporate energy efficiency more  comprehensively
into home improvement.
The expected 2012 results represent a doubling in the
benefits from the ENERGY STAR program during its
second decade, proving that sizable benefits remain to be
harvested from this approach for delivering energy
efficiency to the country.
The keys for continued success over the next decade to
which the EPA remains committed are:
 • Maintaining the value of the ENERGY STAR label
   among the many partners using it to communicate
   characteristics of their products  or their environmental
   stewardship actions.
 • Providing clear, objective, and accurate information to
   consumers, businesses, and organizations about
   sound approaches for energy efficiency and
   environmental protection.
 • Maintaining transparency with the business
   community as the ENERGY STAR program moves
   forward and energy efficiency specifications are
   updated and improved.
                                                               FUTURE OF THE ENERGY STAR PROGRAM   15

-------
 "Our partnership in ENERGY STAR reflects a fundamental commitnn
  by Kodak to continuous improvement of all aspects of our energy
  performance. We will continue  working to strengthen  our commitme
  because it's good for our business, in addition to being the right thin-
  do for the environment."
                                  —CHARLES S. BROWN, SENIOR VICE-PRESIDENT AND DIRECTO
                             GLOBAL MANUFACTURING & LOGISTICS, EASTMAN KODAK COMPAI\
END NOTES
I Climate Protection Partnerships Division, U.S. Environmental Protection Agency. 2003. Change for the Better, ENERGY STAR and Other Voluntary Programs,
 2002 Annual Report, (forthcoming}
11 Ibid.
HI Interlaboratory Working Group. 1997. Scenarios of U.S. Carbon Reductions: Potential Impacts of Energy-Efficient and Low-Carbon Technologies by 2010 and
  Beyond. Oak Ridge, TN and Berkeley, CA: Oak Ridge National Laboratory and Lawrence Berkeley National Laboratory. September (ORNL-444; LBNL-40533}.
/VEPA. 2003. Inventory of Greenhouse Gas Emissions and Sinks: 1990-2001. Office of Atmospheric Programs. April (EPA 430-R-03-004).
  Available online athttp://yosemite.epa.gov/oar/globalwarming.nsf/content/ResourceCenterPublicationsGHGEmissionsUSEmissionslnventory2003.html.
v EPA and DOE have cooperated since 1996 on qualifying products for the ENERGY STAR.
VI Energy Information Administration (ElA). 2001. Annual Energy Outlook 2002 with Projections to 2020. Office of Integrated Analysis and
  Forecasting. December (DOE/EIA-0383(2002».
V!l The Cadmus Group and Xenergy Consulting, Inc. 2002. "National Analysis of CEE 2001 ENERGY STAR Household Surveys." August 1.
VIII The Alliance to Save Energy. 2002. "A Group Study to Explore Consumer Views on Energy Efficiency and Test Alternative Message Benefits." April.
IX EPA. 2003. Inventory of Greenhouse Gas Emissions and Sinks: 1990-2001. Office of Atmospheric Programs. April (EPA 430-R-03-004).
  Available online athttp://yosemite.epa.gov/oar/globalwarming.nsf/content/ResourceCenterPublicationsGHGEmissionsUSEmissionslnventory2003.html.
X Interlaboratory Working Group. 1997. Scenarios of U.S. Carbon Reductions: Potential Impacts of Energy-Efficient and Low-Carbon Technologies by 2010 and
  Beyond. Oak Ridge, TN and Berkeley, CA: Oak Ridge National Laboratory and Lawrence Berkeley National Laboratory. September (ORNL-444; LBNL-40533).
XI EPA.  1996. "ENERGY STAR Showcase Buildings Program: Results and Lessons Learned." June.
XII Innovest Strategic Value Advisors. 2002. "Energy Management and Investor Returns: The Real Estate Sector." October.
XM Based on Climate Protection Partnerships Division, U.S. Environmental Protection Agency analysis of CBECS 1995 micro data.
XIV Climate Protection Partnerships Division, U.S. Environmental Protection Agency. 2001. "Technical Description for the Office Model." December 31.
XV Climate Protection Partnerships Division, U.S. Environmental Protection Agency. 2003. Change for the Better, ENERGY STAR and Other Voluntary Programs,
   2002 Annual Report, (forthcoming}
XVI EPA. 2002. Administrator Whitman to Commend the Real Estate Investment Industry for its Commitment to the Environment. Headquarters Press Release.
   December 12. Available online at http://www.epa.gov/newsroom.
XVI1 Webber, C.A.,  R. E. Brown, and J.G. Koomey. 2002.2002 Status Report: Savings Estimates for the ENERGY STAR Voluntary Labeling Program.
    Lawrence Berkeley National Laboratory. (LBNL-51319} Available online at http://enduse.lbl.gov/lnfo/Pubs.html.
XVIH Horowitz, M.J. 2001. "Economic Indicators of Market Transformation: Energy Efficient Lighting and EPA's Green Lights." The Energy Journal 2(4):95-122.
XIX Greenhouse gas emissions in the United States are most commonly expressed as "million metric tons of carbon equivalents" (MMTCE). MMTCE is a metric
   measure used to compare the emissions of the different greenhouse gases based on their global warming potential (GWP}. It is determined by weighting the
   reductions in emissions of a gas by its global warming potential for a 100-year period.
     United States
     Environmental Protection
     Agency
     Air and Radiation 6202J
     EPA430-R-03-008
     July 2003


-------