Bob Dixon, the global head of sustainability and energy efficiency for German giant Siemens, has a practical and pragmatic attitude to climate change issues.
”Has mankind contributed to global warming? The world’s population is now 5 billion, and will grow to 7 billion by 2050. We must be having some impact,” he said. ”We have finite resources. Even if they last hundreds of years, it makes good sense not to be wasteful.”
The key word is ”wasteful”. ”We need to consume less energy. Energy efficiency saves money,” he told BusinessDay during a visit to the Siemens office in Bayswater in outer Melbourne.
In practical terms, that means focusing on buildings. About 40 per cent of the world’s energy use comes from buildings. ”Those buildings are already built, and 1.5 per cent are added each year. There is a great opportunity to make savings,” he said.
Mr Dixon said most new buildings were being designed to a high standard. ”The others are trying to catch up. Buildings, like cars, will not work as well over time,” he said.
The key was to look at total cost of the building over its life - life-cycle analysis, not just the first cost. ”About 20 per cent is the cost of the building, but 80 per cent is maintenance and other ongoing costs. In building the building, most will lower the cost, and not pay attention to the 80 per cent,” Mr Dixon said.
The approach should be what he calls ”value engineering” - reducing costs in the long term. ”If you spend 5 per cent more at the start, you can make a building far more efficient - through the use of things such as more big windows, solar power,” he said.
”In the long term, rents will go up 7 per cent and the selling price will be 16 per cent higher over the payback period. It doesn’t cost much more to go pretty and green - using white versus dark, reflecting the thermal heat, not absorbing it. The cost competitiveness of going green is getting closer and closer.”
Mr Dixon said that unless the basic building was so bad and had to be pulled down, retrofit was the norm, but was limited to what could bring an economic return.
In the US, the average government building had a payback period of 25 years. For the public sector - schools and universities - it was 9-12 years on average payback, but for the private sector, payback was five to seven years.
”The Empire State Building, built in the 1930s, is owned by an old family, not a real estate investment trust. They are replacing all the windows - window by window, floor by floor - a massive job,” he said.
Mr Dixon said building owners faced four actions. The first was to do nothing; the second was lowering costs by fixing simple things, such as fans, boilers and chillers. ”This is not expensive - comparable to tuning the car,” he said.
The third was ”tactical” - change the lighting, or installing automation in lighting. ”Just like rebuilding a car engine,” he said.
The fourth action was capital expenditure, comparable to buying a new car or a new engine, such as replacing the chiller system. ”That has a seven-year payback, and will take some real money,” he said.
There was a constant need to upgrade technology. ”A chiller may be designed to last for 20 years, but it will not be as good as contemporary technology,” he said.
Mr Dixon said technology allowed the capture of data - real time use of electricity - to calculate demand response. ”Do the analysis and judge how the building performs. Turn the data into knowledge,” he said. This would become more pressing as energy prices rose and became more volatile.
But what will we pay to achieve this? Mr Dixon said owners investing in energy efficiency faced a tough task paying for it with high rents. ”The owner must keep tenants happy … the tenant can’t do it on his own, ” he said.
Mr Dixon said one model was to fund energy efficiency with property taxes. ”The owner does not have to come up with the capital. It takes care of short-term ownership issues … and improves the building,” he said. ”Also, if the building is more efficient, the value of the building goes up.”
