Leveraging energy efficiency to create asset value

Since 2000 the United States has grown by 60 million people while GDP has expanded by 170%, yet energy consumption has stayed relatively flat. How did we do that? In part, we made buildings more efficient.

With electricity demand surging, especially from data centers and the growth in artificial intelligence, there is increasing concern over how to meet our power needs while balancing grid resilience, affordability and climate impacts. The supply side of this equation tends to get more attention than the demand side of the equation. How do we get more energy generation across the finish line?

But that’s not a fully informed way to look at the issue; it’s on the demand side that we can make an immediate difference, because increasing energy efficiency in buildings is a proven, scalable solution to both energy affordability and decarbonization. The bottom line is that, for significantly lower cost than new power generation, we can meet a large part of energy demand through improved building energy efficiency and energy use time shifts.

Buildings’ role in energy infrastructure

Buildings use nearly 75% of U.S. electricity and more than a third of natural gas. A McKinsey study, “Powering a new era of US energy demand,” leads with a graphic showing that buildings comprise the majority of demand, but the study does not mention buildings in its analysis or proposed solutions. Similarly, as the federal government wipes out clean energy investments, talk about climate action in this new context largely ignores the role of buildings. A recent episode of the Ezra Klein Show, entitled “Is Decarbonization Dead?” mentions buildings exactly zero times even though they are the largest single end-user of energy. 

As many as 8 in ten buildings that will be in use 25 years from now are already built, and the EPA estimates that 30% of the energy used in commercial buildings today is wasted. Older buildings, in particular, represent a huge amount of overall energy use, and a major untapped opportunity to reduce demand.

Of course, supply-side discussions matter because the fuels we use to generate energy offer starkly different paths forward. We can take the path of investing in clean technology that reduces air pollution and helps mitigate the worst effects of climate change. Alternatively, we can prop up fossil fuels at great cost to our physical health and financial well-being. In addition to dirtier air, utility customers may be stuck with the bill for stranded assets if AI turns out to be a market bubble.

But demand determines how much energy we need to produce. In essence, energy efficiency should be thought of as a demand-side infrastructure solution. Greater demand raises prices for all fuel types, and it makes power outages more likely. If there’s one thing everyone agrees on, it’s that we don’t want blackouts while waiting for more power to come online.

Addressing affordability and decarbonization

For a fraction of the cost, time and difficulty of adding new power plants, we can improve the way our buildings use energy. In less than a year, building efficiency and demand flexibility — like pre-cooling buildings on summer days — can make a difference in lowering electric demand, improving affordability and keeping the lights on. By contrast, new transmission lines and power plants typically take more than a decade for design, permitting and construction.

Energy use by the building sector has remained relatively flat for the last 20 years, even while adding more square footage and electric devices. That’s because building codes and appliance standards continually improve, making newly constructed buildings more efficient. 

Efficient buildings cost less to run, ­­and with smart lease structures, both the landlord and tenant can benefit. Efficient buildings are also more valuable. Six academic studies found that ENERGY STAR certified buildings earn a 5-16% rental premium, a 6-13% sales price premium and 3-6% higher occupancy.

Furthermore, upgrading less-efficient buildings creates local jobs that can’t be outsourced. These jobs can be done by people with a range of skills and experience. Policymakers can intentionally grow these jobs in areas with limited opportunities and target job training to those residents. In 2024, there were 2,290,179 energy efficiency jobs contributing to the U.S. economy, constituting the majority of jobs in the clean energy sector and outnumbering all fossil fuel extraction and processing jobs, according to the U.S. Department of Energy. 

For anyone who cares about climate action, buildings are critical. In many urban communities, buildings represent 50%-75% of greenhouse gas emissions. That means there is simply no way to meet climate goals without reducing building energy use. And unlike clean energy, most policies that influence building energy efficiency are passed and implemented by states and localities, making them less vulnerable to changes in federal incentives. More than 50 jurisdictions have benchmarking laws that require building owners to track their energy use and 15 have passed building performance standards that set energy reduction targets.

Policymakers should engage both real estate professionals and residents in efforts to improve buildings’ energy efficiency, creating opportunities for greater civic engagement and discussion about the future each community wants to create. Building energy code advancements have been powerful tools for improving newly constructed buildings. Building performance standards, which drive upgrades to existing buildings, have the potential to reduce energy use dramatically. The National Building Performance Standards Coalition is a group of 49 local and state governments committed to passing such policies. If all members of this coalition adopted BPS policies, the energy savings by 2040 could eliminate the need for more than 100 gas power plants.

More-efficient buildings offer beneficial outcomes for everyone: fewer taxpayer dollars, lower individual and business utility bills, higher net operating income, healthier air and lower greenhouse gas emissions. Philanthropy, state and local governments and businesses need to work together to reduce energy waste in buildings. Energy efficiency may not be attracting attention, but it is a proven solution that is cheaper, faster and more practical than most supply-side alternatives.

Congress has fully funded the Energy Star program through fiscal year 2026 as part of a funding bill that President Trump signed into law Jan. 23. The administration tried to zero-out the program in early 2025.

“The funding is a huge win,” Sabine Rogers, federal policy manager at the U.S. Green Building Council, says in a blog post.

A provision in the fiscal 2026 appropriations bill that funds the U.S. Environmental Protection Agency and several other federal agencies, H.R. 6938, mandates that the administration provide at least $33 million to carry out the program through the fiscal year ending Sept. 30, a modest increase over the $32 million provided in FY2024, the most recent year where program funding data is available. The provision includes a directive from Congress that the administration not take actions to reduce the amount.

“[This is] the very first time that Congress has stipulated a mandatory annual spending level for Energy Star,” Rogers says, “placing a clear and binding legal requirement on the administration.”

More than 1,200 organizations lobbied Congress last year to save Energy Star after the Trump administration in May proposed eliminating EPA’s Office of Atmospheric Protection, which oversees the program. In letters calling for the EPA to continue the program, organizations said its elimination would damage the real estate sector at a time when it is already facing significant uncertainty. 

The Energy Star program has saved consumers and organizations some 5.2 trillion kilowatt-hours of energy and more than $500 billion in costs since it was created in 1992, according to the program website. “Energy Star has grown to become the international standard for energy efficiency and one of the most successful voluntary U.S. government programs in history,” the site says. 

Energy Star Portfolio Manager, a free tool that allows commercial building operators and municipalities to track their energy and resource usage, is used in about 25% of all commercial building space in the U.S. and is the basis for building energy requirements in seven states, 48 local governments and two Canadian provinces, according to Energy Star. The tool contributes more than one-third of the Energy Star program’s savings, according to the Institute for Market Transformation. 

”The ENERGY STAR Program provides critical infrastructure for organizations to benchmark their building performance, as well as comply with state and local laws that require building owners to disclose their energy and water consumption,” Craig Walter, principal energy advisor at Engie Impact, said in an email. “While use of the funding and next steps are to be determined, approval of the line item funding with bipartisan support is a celebrated win for corporate efficiency programs and the long-term outlook of the program.”

Energy Star funding levels have historically been left to the discretion of the administration, resulting in steady decreases over the past 10 years, so Congress’ mandate that no less than $33 million go to the program is a milestone, Rogers said. But the program still faces challenges, she said

“[It’s] currently operating with limited staff and function because of reorganization efforts within the EPA, as well as the loss of many longtime ENERGY STAR staff members in 2025 through federal buyouts, early retirements and layoffs,” she said. 

Mike Zatz, a 19-year veteran of the Energy Star Portfolio Manager program, left last year to join Measurabl. There, he is working to expand the company’s proprietary building performance benchmarking platform, the Free Sustainability Software Solution. 

In addition to feeling the loss of Energy Star staff, energy-efficiency supporters will have to deal with other federal-level challenges, Cliff Majersik, senior advisor at the Institute for Market Transformation, wrote in a LinkedIn post. “Sadly, there are spending cuts elsewhere in the package that will hurt energy and environmental programs,” he said.

Those include a cut of 10% to the Office of Energy Efficiency and Renewable Energy, a 13% cut to the Building Technologies Office and a more than 40% cut to the Federal Energy Management Program, according to USGBC. 

“Unfortunately, a significant portion of the FY26 funding for EERE — $1.15 billion — is taken from remaining unspent dollars for programs created under the Bipartisan Infrastructure Law,” it said.

This likely means that the final rounds of funding for IIJA programs like Renew America’s Schools and the Resilient and Efficient Codes Implementation program are likely to be taken back, Rogers said. 

“In the months to come, USGBC will be watching closely how the administration administers the ENERGY STAR program with this new funding,” Rogers said.

An aging Texas mall has cut its energy costs by around 30% and slashed its monthly energy use by about 5,000 kilowatt-hours since implementing a custom HVAC demand management solution in 2017, the energy management company that worked on the project says.

The two-level Woodlands Mall near Houston was the flagship site for GGP’s peak demand reduction initiative, which has since rolled out to other properties in the Canadian retail giant’s portfolio. GGP is the new name for Brookfield Properties’ retail division, which it adopted Jan. 5.

OTI, the energy management company that led the project, said the solution helped Brookfield control energy costs at the facility after Houston-area utilities introduced an energy pricing scheme that charges higher retail rates during peak demand periods. After implementation, OTI collected energy use data from the facility across multiple seasons to incorporate “smarter peak demand prediction and pre-cooling algorithms,” further reducing peak energy demand.

Companies in the building management space say integrated systems  — including automated HVAC controls — can significantly improve facilities’ energy efficiency and reduce environmental impacts without major technological advances or changes in regulation. 

For example, “AI-driven HVAC management software” can reduce HVAC systems’ energy use by 25%, PwC and the World Economic Forum said in 2024. The Energy Transitions Commission said in a report published last February that cutting-edge HVAC and building management systems have “a major role to play” in energy-efficiency gains.

Utility rate structures designed to reduce load on the electric grid during peak periods are increasingly common in competitive electricity markets like Texas. In addition, a growing number of local and state governments are implementing regulations that push building owners to track or even reduce their energy use.

Eight states and more than 35 cities and counties require owners of larger commercial buildings to track their intensity of energy use, according to data compiled by Facilities Dive. At least four states and 23 local jurisdictions require owners to take additional actions, such as reducing energy use or conducting audits on greenhouse gas and water usage. 

New York City’s Local Law 97, for example, requires owners of buildings larger than 25,000 square feet to reduce their carbon emissions 40% by 2030 and 80% by 2040 or face noncompliance penalties of nearly $300 per excess ton of emitted carbon dioxide equivalent. 

In Chicago, the Building Energy Use Benchmarking Ordinance has been in force since 2013. It requires owners of buildings larger than 50,000 square feet to report energy usage intensity, greenhouse gas emissions and energy performance scores — the energy-efficiency metric used by the federal ENERGY STAR program.

Chicago Mayor Brandon Johnson proposed a stricter, more comprehensive ordinance in 2024 that would have banned fossil-fuel appliances in most new-construction buildings and existing buildings undergoing major renovations while using federal tax incentives and grant programs to incentivize electrification. The Clean and Affordable Buildings Ordinance has not yet passed into law amid a sharp pullback in federal support for clean building technologies.

We’re “making a big impact on energy savings and operational efficiencies across our enterprise,” Jeff Nash, vice president of national operations at GGP, said of the work his company is doing with OTI.

Energy use and electricity costs dropped more than 60% when the software powering smart HVAC systems used quantum computing, and the better results occurred without lowering indoor air quality, researchers said.

In quantum computing, processors analyze data on a simultaneous basis, so more complex data can be processed faster than with conventional, linear processing. When simultaneous processing is applied to smart systems, the software that controls HVAC temperatures in different parts of a building can make decisions more quickly and more accurately based on an analysis of complex data, said the researchers at Hanbat National University in South Korea.

“Quantum reinforcement learning [can] handle high dimensional control problems more efficiently than conventional approaches,” the researchers said in their report, published in the journal Energy and AI.

Smart HVAC systems use data about occupancy patterns to help building operators reduce energy consumption by linking temperature settings to where people are. Other variables like weather and heat loads add complexity to the calculation. When data about indoor air quality gets added to the mix, the complexity increases further.   

“Advanced HVAC control methods … struggle with the complexity of real world building dynamics,” the researchers said. 

Developers of traditional smart systems have had some success switching from a rules-based computing approach to one that leverages machine learning, the researchers said. They’ve found that ML is better at adapting to real-world conditions, but quantum processing can improve the systems even more.

“Quantum reinforcement learning … leverages quantum computing principles to handle high dimensional control problems more efficiently than conventional approaches,” they said. 

Absent the quantum component, ML based systems can take time learning how to optimize the system, resulting in start-up periods in which conditions can be uncomfortable for occupants. 

“During the initial learning period, a purely reinforcement learning, or RL-based HVAC agent, can perform suboptimally, causing occupant discomfort before it converges to an optimal policy,” they said. 

Traditional computing also has a harder time managing different temperatures in different spaces. “A [quantum] based controller could … manage multi-zone environments more effectively than classical RL methods,” they said. 

The paper doesn’t address what it would take to commercialize quantum computing in HVAC systems or how much it would affect the cost of systems, but the findings point in a direction developers can take systems going forward. 

“The promising performance [can provide] better solutions for the optimization challenges present in HVAC control and management [and] influence future designs of smart HVAC systems [and] encourage the development of more adaptive algorithms that can cater to varying environmental and usage patterns,” the researchers said, “and ultimately contribute to the advancement of smart building management systems.”  

The research was conducted in residential buildings and it’s not clear how much results would differ in other types of buildings, they said.

“The reliability and generalizability of the results to different building types or climate conditions are not yet fully verified,” they said.

Generative AI models are able to produce effective retrofit decisions but do less well identifying which ones can produce the best result most quickly and at the least cost, according to analysis by researchers at Michigan State University. The study, “Can AI Make Energy Retrofit Decisions? An Evaluation of Large Language Models," is one of the first to examine how large language models, or LLMs, perform in determining efficient and effective building energy retrofits. 

Identifying the optimal retrofit solution can be critical from a cost standpoint. Light to medium retrofits can unlock between 10% and 40% in energy savings, or $0.49 to $1.94 per square foot of savings on average, according to JLL research published last September. Despite these savings, these actions aren’t being implemented at the scale required to meet decarbonization targets because of their capital-intensive nature, the report says. Decision-making complexity and the inadequacy of data and tools are also problem, according to the report.

To determine the potential of generative AI in addressing these limitations, MSU researchers tasked seven LLMs with generating energy retrofit decisions under two contexts: a technical context focused on maximum CO2 reduction and a sociotechnical context focused on minimum packback period. 

The AI-generated retrofit decisions were evaluated based on whether they matched the top-ranked retrofit measure or fell within the top three or the top five measures. The researchers then used a sample of 400 homes from ResStock 2024.2 data, spanning 49 states, to evaluate LLM performance based on accuracy, consistency, sensitivity and reasoning.  

Researchers evaluated each LLM by issuing prompts, which included an overview of 16 potential retrofit packages and building-specific information. The overview described each retrofit measure’s features like heat pump efficiency, whether insulation is upgraded and whether major appliances are electrified, alongside associated costs. 

Once fed these potential scenarios and building specific information, the LLMs were assigned the role of a “house retrofit specialist” tasked with evaluating multiple buildings, comparing costs and efficiency across all packages, and identifying which retrofit delivered the greatest CO2 reduction and which provided the lowest payback period. 

The study found that while LLMs are capable of producing effective retrofit decisions, they struggle to pinpoint the best one. The models are also notably stronger at identifying retrofit packages in a technical context that minimizes CO2 reduction than in sociotechnical contexts that minimize payback years. 

“This difference likely reflects the relative clarity and consistency of technical optimization objectives, which are more easily captured by model reasoning, whereas sociotechnical considerations involve trade-offs between economic, behavioral, and contextual factors that may be more difficult for LLMs to interpret and prioritize accurately,” the researchers said. 

The accuracy of the models in deciding the best option was as high as 54.5%, with a 92.8% accuracy rate for top-five matching, without fine-tuning. There was also low overall agreement among models, with higher-accuracy models more likely to diverge from others and lower-accuracy models showing greater alignment. 

“Overall, while the decision logic and feature focus of LLMs are generally reasonable, their accuracy, consistency, and contextual understanding must be improved before they can be reliably applied to retrofit decision-making in practice,” the authors said.

A novel geothermal heating and cooling system will keep approximately 68,000 square feet of building space comfortable while significantly reducing energy costs at a 130-year-old elementary school in the Chicago suburbs, Trane Technologies said June 30.

The dynamic closed loop geothermal system in Highland Park, Illinois, which taps “the superior heat transfer properties of flowing water,” has a much smaller surface footprint than some other geothermal designs, making it ideal for suburban schools, Trane says.

North Shore School District 112 combined local, state and federal incentives to offset as much as 50% of the $6.7 million project cost. The system should reduce the facility’s carbon emissions by about 30% while trimming operations and maintenance costs, Trane says.

Education institutions are increasingly interested in geothermal systems, with colleges and universities from Colorado to Vermont studying or actively building infrastructure to more efficiently heat and cool campus buildings.

North Shore School District 112’s DCL system at Ravinia Elementary School is the first of its kind to be deployed in the United States, Trane says. 

DCL systems absorb and reject heat into subsurface water. That water’s depth and flow rate varies from place to place, thus any facility owner considering a DCL system should conduct a geological study to confirm that the local resource is adequate, Trane Technologies Turnkey Project Developer Andy O’Fallon said in an email. 

If it’s not, traditional dry-rock geothermal could be more cost-effective. But those systems typically require more boreholes and have a larger physical footprint.

“The decision to pursue either option depends primarily on the available land area and hydrogeology,” O’Fallon said. “This site does not have land area to accommodate the traditional geothermal option.”

Whereas a similarly sized traditional geothermal system might need 50 wells, the system at Ravinia has just three wells drilled down 10-inch boreholes, O’Fallon said. If the aquifer’s flow rates match “the ideal predicted design,” each well could produce up to 150 tons of cooling and 50 tons of heating at full capacity, O’Fallon added. 

Above ground, the system has more than 50 water-source heat pumps, plus a single-cell cooling tower for backup cooling and an electric boiler for backup heating if needed. The heat pumps exchange thermal energy with a building water loop that runs between 40 degrees and 90 degrees Fahrenheit, O’Fallon said.

The school district already had a working relationship with Trane, which helped overcome officials’ initial hesitation about deploying an unfamiliar technology, James Bock, the district’s director of operations, facilities and transportation, says in a video describing the project.

“We knew, because of our relationship with Trane, [that] they were bringing us something that was definitely worth taking a look at,” he said.

School District 112 deployed the DCL system as part of a bigger renovation project, according to O’Fallon. Other district facilities have had retrofits to improve their sustainability recently, including roof-mounted solar panels and building automation upgrades, he added.

Trane worked with the district’s accounting firm to provide technical documentation it needed to support its application for federal clean energy tax credits, O’Fallon added.

The “One Big Beautiful Bill Act” President Trump signed on July 4 significantly shortens the eligibility window for those credits and adds new restrictions that experts say could make them all but impossible to qualify for.

In the face of aging infrastructure, rising electricity prices and capital costs, energy savings contracts are no longer optional. By combining on-site renewables, real-time monitoring and performance guarantees, facility managers can implement upgrades and achieve up to 60% savings — without any capital expenditure, according to one company providing these financing contracts. 

Given increased demand for electricity and higher transmission, transportation and commodity costs, energy is becoming more expensive, said Patrick Towbin, chief of engineering and construction at Ecosave, an energy service company. 

His company combines financing with energy conservation measures, renewable energy infrastructure and smart building controls to convert large capital costs into fixed operating expenses, and adding an energy savings guarantee to the mix. 

The company’s contracts— like those of other companies— are gaining popularity among public municipalities and private companies, reports show, as they look to save energy through HVAC and other building system retrofits. 

“Federal programs come and go, but the core of our business is saving energy, because energy is costing more and we can do things more efficiently,” Towbin said in an interview. “There is a short-term view that the administration we have now has taken out some of the incentives, but they’ve definitively given a guaranteed runway of two years, which has actually increased the speed of a lot of these projects to actually close.” 

A trend triggered in part by the administration is that solar implementation is becoming more nuanced, he said. “People say [wind and solar] is price competitive, but only because it’s subsidized so heavily by utilities. And now that the subsidy is coming out, we’re looking at the true parity costs,” he said. “The industry has gotten smarter when they apply solar. If you’re in a place that has high power costs and you have sunshine a lot of the time, it makes sense to install it.” 

Like solar implementation, many energy savings decisions come down to data. To capture this data and help inform decision making, Ecosave offers smart building automation systems and a proprietary emissions monitoring software to track building efficiency and energy savings. 

For example, Ecosave can plug into a commercial building and see that its outside air dampers are broken, resulting in wasted energy savings opportunities. 

“You take outside air at 62 degrees, and it helps cool the inside of the building without going through any kind of cooling coils. But because that damper is broken, you can’t do that, so you’re wasting $1,617 every month,” he said. “So, we literally send them an order and say you can fix it, or we can fix it, and it will save you x amount of money and x amount of energy, because we have that kind of data to give them.” 

Energy resilience concerns, driven in part by rising costs and increasing uncertainty over reliability, is also driving demand for upgrades, according to Towbin. 

“What you’re seeing right now is that utilities are becoming less and less reliable, having more and more interruptions, low-voltage events, et cetera,” he said. “So what [companies] are doing is installing their own generation. They’re using all of the heat, and so … energy efficiency has gone up significantly with co-generation and even combined cycle generating plants that are local.” 

Cogeneration, or combined heat and power (CHP), is a type of distributed generation, which unlike central station generation is located at or near the point of consumption. By generating electricity or power at the point of use, the technology allows heat that would normally be lost in the process to be recovered to provide heating or cooling, according to the U.S. Department of Energy. 

“CHP applications can operate at about 75% efficiency, a significant improvement over the national average of about 50% for these services when provided separately,” DOE says. 

Through the company’s long-term contracts, which typically span between nine and 20 years, Ecosave owns the assets and takes responsibility for insurance. At the end of the contract, customers have the option to purchase equipment for fair market value.  

“It’s at the cost of the life of it, so it can be very low,” he said. “The idea is that the value of the equipment, which is still very good equipment at the end of the life of this contract, is basically assumed for a very low cost by the customer. Then they own it and have the option for us to go into a service contract, or someone else can still maintain it if they choose.”

Agencies across the federal government are using energy performance contracts to make efficiency upgrades at facilities with little or no capital expense, according to the National Renewable Energy Laboratory, a division of the U.S. Department of Energy that was renamed the National Lab of the Rockies in December. 

As happens in the private sector, agencies can enter into contracts with energy service companies, or ESCOs, to design, install and finance measures that are intended to pay for themselves over time. In the typical case, the ESCO guarantees the energy savings, using the money saved to pay for the project cost, reducing the financial risk. 

With the federal government’s rollback of energy efficiency programs, working with ESCOs is a way to make needed upgrades without seeking budget funds or looking to Congress for appropriations, the NREL report says. 

There are signs that ESCOs and agencies are increasing their work together. For example, GreenGen, an energy service company, recently hired retired U.S. Army Lt. Gen. Omar Jones IV to its advisory board, a move that marks a push by the company to build its public sector business. 

“GreenGen is experiencing more public sector activity than ever before,” Brad Dockser, founder and CEO of GreenGen, said in a statement. 

If they work with ESCOs, agencies must comply with numerous requirements. The Energy Act of 2020, for example, requires them to conduct what are called EISA 432 evaluations and implement measures that the evaluations identify. EISA stands for the Energy Independence and Security Act, a law enacted in 2007. The statute requires agencies to use performance contracting to address at least 50% of the energy conservation measures, or ECMs, that are identified. 

In other requirements, the agencies must implement the ECMs within two years of the evaluation date and file reports on the efforts and their work under the contracts. They also face energy efficiency rules and cost thresholds for new construction and major renovations, among many others.

More engagement between agencies and energy service companies, or ESCOs, could be in the works. An update to Section 23 of the Federal Acquisition Regulation, released last year in October, encourages agencies to use the contracts to get work done.  

“Agencies should make maximum use of the authority provided in the National Energy Conservation Policy Act … to use an energy savings performance contract (ESPC), when life-cycle cost-effective to reduce energy use and cost in the agency's facilities and operations,” the update says.  

Agencies can contract with energy service companies for up to 25 years to improve energy efficiency at no direct cost to the U.S. Treasury, the update says.