Oct 31 2007
The current BusinessWeek article "Little Green Lies" questions the notion that saving energy and going green can be profitable. In the mea culpa piece, an Aspen environmental executive complains in a "confessional mood" that he succeeded in doing "sexy" projects but finds it almost impossible to "green" his company, Aspen Skiing Company.
"Whatever disappointing results Aspen Skiing Company has experienced are a result of their misunderstanding of the economics of energy efficiency and their confusion in evaluating costs and benefits of the variety of initiatives they have undertaken," says Jerry Jackson, Ph.D., an energy economist and Texas A&M professor.
So where are Aspen Skiing Company and like-minded organizations going wrong? Jackson, author of the forthcoming Wiley Finance book, "Energy Budgets at Risk (EBaR) (TM), A Risk Management Approach to Energy Purchase and Efficiency Choices," says "sustainability managers who grab any green project they can get are operating with a 1980's mentality. Projects that get approved may be "sexy" but are often the worst options available. Aspen Skiing Company's $1 million expenditure to build a solar-energy farm with a 6.5 percent return is an incredibly costly way to achieve green goals when attractive energy-reducing efficiency projects are available in existing buildings. It's like buying a Prius when your attic is uninsulated."
What is the answer? "It is easy," say Jackson who teaches a course on energy risk management and the analysis of energy efficiency investments at Texas A&M University. "Applying modern financial risk management principles to energy efficiency and green investment decisions, balances both investment costs and green objectives, in most cases with increased cash flows." A significant advantage of the facility energy risk management approach is that CFOs are used to dealing with financial risk management and understand "at risk" measures.
Dr. Jerry Jackson is an internationally recognized energy expert with over thirty years experience addressing difficult energy industry issues. In addition to his Texas A&M position, he is president of Jackson Associates, a consulting and research firm he established in 1982. His previous positions include head of the Applied Research Division at the Georgia Tech Research Institute and economist at the Federal Reserve Bank of Chicago. Additional information is available at http://jjacksonconsulting.com/ . He can be reached at [email protected] or 919-204-7821.