Market Structure and Energy Efficiency: The Case of New Commercial Buildings

Why aren’t commercial office buildings more energy efficient? Several decades of energy efficiency programs have resulted in some gains, but overall increases in the energy efficiency of buildings have fallen far short of the 30 to 50 percent improvement that many efficiency advocates believe is possible (DOE 2000). The purpose of our research has been to consider this “why” question by empirically examining the dynamics of new commercial building markets. Our intent is not to provide prescriptive or programmatic answers, but rather to develop knowledge about the market sufficient to support strategic interventions in it. Traditionally, energy efficiency research and development (R&D) and demand-side-management (DSM) programs aimed to modify new buildings by encouraging the adoption of better technologies or improved design. Programs were based on a rather simple understanding of the market. Attention centered on building designers (architects and engineers) as key decision-makers in the adoption of more energy efficient technologies and system designs in buildings. The implicit model of the market was inhabited largely by building owners and designers who were assumed to have a great deal of autonomy from outside influence and their social networks when making decisions regarding energy and efficiency. This model overlooked many of the realities of the broader development process. Recent interest in market transformation (MT) has spawned efforts to provide improved models that better reflect market barriers and opportunities for energy efficiency. However, the MT approach still sees the market largely through the lens of energy efficiency—a lens that focuses on a narrow set of concerns. Our current research takes a much broader view. We are interested in establishing a real-world context for energy efficiency by providing a more accurate understanding of how new commercial building markets actually work. To do so, we have used multiple research techniques, including qualitative field observation and interview methods that allow for a more in-depth understanding of complicated market processes. Our research has focused primarily on new office buildings and has been centered in four regional markets: Sacramento, San Francisco, Seattle, and Portland. Our findings, summarized below, identify key dynamics of commercial office building markets, describe how change and innovation occurs in commercial development, discuss the implications for energy efficiency, and suggest next steps