Many buildings have a master meter, and the tenant pays their power bill by way of a charge embedded in their monthly rent – called CAMs for Common Area Maintenance. This is not a metered calculation but rather a formula for approximate cost. The landlord pays the utility, and the landlord imposes a ‘management fee’ on top of the energy cost. So you can see there is no incentive for the landlord to promote conservation because the lower the monthly energy bill – the lower will be the management fee in terms of actual dollars.

Now, if the government mandates conservation, the landlord will find a new way to collect money, perhaps higher rents. That isn’t good for business. And if the property owner is holding the property to sell in the near future, conservation measures will add to the sale cost (price) without particularly adding any value to the buyer. Again this is not good for business.

Another factor is that commercial properties typically have distinct budgets for capital improvements and for operations, with each in annual competition for more money. Why would the people in charge of capital projects spend their share of the money to help the people in operations? Which is indeed the case with energy conservation projects. And why would the people in operations spend their money on capital projects that will be built by another department in the company? These businesses simply aren’t structured to work this way.

Building codes in the US have already reached a point where builders cannot surpass required levels with any practical amount of capital (new construction). In other words the standards now in place are very stringent, and to surpass them would require such a significant increase in capital that people might very well simply elect not to build at all.

http://thebreakthrough.org/blog/2009/11/climate_mccarthyism_part_3_the.shtml

At some point isn’t it far more cost effective for the government to mandate tougher building codes and retrofit requirements instead of providing subsidies to increase the 20% rate of return projects to even higher numbers? It seems that energy efficiency just is not sexy enough to convince people to be rationale with their investment decisions. The reason it matters is because requiring energy efficiency could easily put off a new electricity generation plant, saving the “system” money.

Particularly in triple net properties where the tenants pay the electric bill through their rent, a landlord could acheive millions of dollars of capital improvements paid for by the tenants – without the tenants knowing this because it was concealed in the energy bill. Even today the things that get concealed in a tenants electric bill might surprise many of them.