Property developers and building owners have typically been slow to integrate a strategy of energy efficiency into their core business plans, but looming rises in the electricity price could change all that.
These increases are likely to move the issue of energy efficiency from being an added extra to an element of business that delivers real financial value.
A 20 09 global study by United States publishing house McGraw Hill revealed that green buildings reduced operating costs by 13,6% and increased valuation by 10,9%.
Green buildings also recorded a 6,4% higher occupancy rate and a 6,1% superior rental income.
In South Africa the benefits of adopting energy-efficiency initiatives are even higher because of the massive impending hikes in electricity tariffs.
Electricity prices are expected to quadruple in the next three to four years. Energy costs as a percentage of operating expenses will rise from 27% in 20 09 to about 50% by 20 15.
The tariff hikes announced by the National Energy Regulator of South Africa will significantly increase the return on investment of implementing energy-efficiency initiatives in existing buildings, from 19% based on current electricity tariffs to 47% after the increases in 20 14.
Even the more altruistic initiatives are becoming financially beneficial.
Furthermore, improvements in available and accessible energy-efficiency technology, as well as the continued lower costs thereof, will ensure that more and more interventions will be adopted by local property developers and building owners.
South African building owners who implement energy-efficiency strategies will be rewarded by government, which is offering incentives to encourage consumption reduction.
Government offers tax rebates on money spent to install energy-efficient equipment and has capital available to invest in energy-efficient projects.
Importantly, it will also consider imposing penalties on building owners if they do not reduce their consumption below set targets.
South African building owners often face financial challenges when attempting to raise capital to implement energy-efficiency strategies.
Most buildings already have significant amounts of debt on their balance sheet, so owners are often unwilling to increase it. Energy-efficiency projects also compete with other internal projects that might seem more important or offer a more attractive return on investment.
Accessing funding from government requires an advanced knowledge of the process and can be resource intensive, a factor most companies want to avoid.
Other incentives, such as carbon credits, require significant upfront capital to develop the project and clients are unlikely to spend the money if they are unsure of the benefits.
Derik Coetzer is a director at Energy Partners, a firm that consults on efficiency issues