Written by: Sormeh Konjkav
While Waypoint Energy prides itself in communicating efficiency in the commercial real estate (CRE) market in the right way to the right people at the right time, we also acknowledge that there’s always more to learn. If you’ve done any research looking into energy efficiency trainings, chances are you’ve come across Mark Jewell’s “Learning to S.E.E. (Sell Efficiency Effectively)” workshops.
For many of us, selling energy efficiency is preaching to the choir. We understand the inherent value of energy efficiency for commercial buildings, it’s in our blood. But convincing folks outside of the energy-bubble of its value? A bit more challenging. Rachel Christenson and Mark Jewell launched Selling Energy in its current form in 2011 with the goal of transforming the way companies in the energy efficiency and renewables industries go to market with their products and services. Selling energy efficiency to CRE decision makers takes a certain skill, and a few staff from Waypoint decided to hone that skill at one of the S.E.E. training courses in San Francisco last month. Below are a few selected tips and tricks that we found most interesting.
Understand and Communicate the Value of What You’re Selling: Before focusing on how to sell, you need to know what you’re selling by understanding all the benefits of EE. This goes beyond assumed direct benefits such as dollars, kilowatt hours, and therms, known as utility-cost financial benefits. Energy efficiency can result in non-utility-cost financial benefits, external benefits including improved occupant health and productivity, improved tenant retention and attraction, increased property value, and overall increased asset value. Additionally, EE can result in “stickers” such as increased ENERGYSTAR ratings or LEED certification that improve status, considered as non-financial benefits. Emphasizing these additional benefits can ultimately resonate more with decision-makers based on their sector-specific and role-specific values.
Leverage the Most Appropriate and Compelling Financial Metrics: One of the practices most stressed was the idea of migrating away from “popular” metrics seen in financial analyses (i.e. Simple Payback Period (SPP), Return on Investment (ROI), and Internal Rate of Return (IRR)) and towards “proper” metrics (i.e. Present Value (PV), Net Present Value (NPV), Modified Internal Rate of Return (MIRR), and Savings to Investment Ratio (SIR)). SPP - and thus ROI which is the reciprocal of SPP - rejects the time value of money, ignores cash flows after payback, and uses only first year cash flows ignoring irregular cash flows in later years and treating them with identical risk. IRR, also known as the discount rate, assumes an equal cash flow during an investment, which can result in a false estimation of benefits.
Jewell instead recommends using the PV, which considers how much future cash flows are worth in today’s dollars, and NPV which considers the PV of outflows over inflows. MIRR corrects the shortcomings of IRR by taking into account the finance rate and reinvestment rate, SIR is deemed as a proper measure of ROI as it accounts for the PV over the lifetime of a project. Though many decision-makers are familiar with the popular metrics in financial analyses, it is important to understand why other metrics may draw more accurate and honest conclusions.
Anticipate and Address Myths and Objections: “Projects have to have a simple payback of less than two years… My tenants pay for energy, so I have no benefit... We don’t have the budget…” There are a handful of myths and objections that arise when selling efficiency, but rather than hanging up the phone and assuming a lost cause, these statements must be anticipated and instead countered with math and motivation. Perhaps other financial benefits or metrics (e.g. NPV and SIR) have the potential to outweigh utility cost savings, maybe certain long term cost savings may outweigh short term savings, or perhaps the building has a good ENERGYSTAR rating is because its HVAC system is top notch while its lighting efficiency is lacking. The point is that there are a variety of oft-heard oppositions that can be overcome by creative logistics and innovative incentives.
The Mark Jewell workshop proved to be a useful training for the Waypoint team, strengthening our skills in selling energy efficiency and adding great talking points for use when making the case for it to commercial buildings. Waypoint will utilize these fresh insights to overcome some of the current barriers to efficiency in the CRE industry, for example when crafting the business case for energy efficiency to building ownership in our Utility Connect Programs. If you are interested in learning more, email firstname.lastname@example.org.