The Lessons of Lamborghini Applied To Energy in Buildings

Lamborghini underwent an interesting paradigm shift with their latest new model, the limited edition Gallardo LP 570-4 Superleggera  and the lessons of their design considerations are relevant to what is going on around energy usage in buildings. The "Eureka" came when they finally understood that investment in more horse power was running smack into the wall of diminishing returns as it was becoming exponentially more expensive as it became less and less effective, while reducing weight was so much more effective that at that level of performance carbon fiber became a totally affordable option by comparison in seeking to raise performance.

In buildings the reverse paradigm shift needs to happen. We have been overemphasizing energy efficiency, without looking into energy production sufficiently. Often because energy efficiency investments tend to be smaller, and more easily justified, and no one seems to realize that in the process we cheat ourselves out of the investment decision to produce energy in the first place and become at least somewhat energy independent. Simply put, since money tends to have some resource constraints (costs and availability), by nickel and diming ourselves into a stupor with more and more energy efficiency, we will ensure that we will never invest in energy production and energy independence because the more efficient we become at burning fossil fuel, the lower are the returns on investing in renewable production. So energy efficiency is the lullaby which will make us once again the perfect little victims for the next energy price spike. Still the energy efficient buildings which do not invest in renewable production will eventually be worth less than the equivalent buildings which do because of the rising value of eliminating recurrent subscription costs of energy.

Seen in this light, energy efficiency is not a worthwhile goal unless it is truly the only option, and the basic make or buy decision of renewable energy production versus the alternatives should be considered first, lest we cheat ourselves out of ever making it. The way current policy and incentives reward energy savings on a par with renewable energy causes a metastatic cancer in our energy posture as a country, in which we continue to tinker with becoming simply more efficient addicts to fossil fuel consumption without ever making the switch to energy independence through renewable energy production. The way out of this delusion is to ask which building is worth more, this energy efficient building, which shaved 25% off their energy bills or the equivalent building next door which is e.g. 50, 60 or 70%% energy independent. Now it all comes down to a real estate decision, not an energy saving decision, and if you think you are in the real estate business, that is likely to be your better investment posture. And again, decision made, you can improve on it with energy efficiency.

Or, to put it differently, energy independence produces a higher property values than energy efficiency, and the order in which we consider these options matters a lot. As soon as some of the market adopts an energy production posture building values of those that don't will be depressed. Every investment in energy production is a direct price hedge, while energy efficiency for fossil fuels only attenuates the price risks. Politically the upshot is that the national interest in energy security coincides with a maximal use of renewable energy at the building level, and current incentives produce wildly suboptimal results. For real estate owners it is hard work to make the right energy decisions in spite of incentive systems which are very seductive, and make the wrong investment decisions seem plausible.