Trends in Building Energy Efficiency - PACEworx News · Trends in Building Energy Efficiency . Investment, ... Johnson Controls, Inc. has made forward-looking statem ents in this

2010 Energy Efficiency Indicator ResultsGlen Ponczak VP, Investor Relations Clay Nesler VP, Global Energy & Sustainability

12 November 2010

Trends in Building Energy Efficiency Investment, Technology and Finance

2

Forward-looking statement

FORWARD-LOOKING STATEMENT

Johnson Controls, Inc. has made forward-looking statements in this document pertaining to its financial results for fiscal 2011 and beyond that are based on preliminary data and are subject to risks and uncertainties. All statements, other than statements of historical fact, are statements that are, or could be, deemed "forward-looking" statements and include terms such as "outlook," "expectations," "estimates" or "forecasts." For those statements, the Company cautions that numerous important factors, such as automotive vehicle production levels, mix and schedules, energy and commodity prices, the strength of the U.S. or other economies, currency exchange rates, cancellation of or changes to commercial contracts, changes in the levels or timing of investments in commercial buildings as well as other factors discussed in Item 1A of Part I of the Company's most recent Form 10-k filing (filed November 24, 2009) could affect the Company's actual results and could cause its actual consolidated results to differ materially from those expressed in any forward-looking statement made by, or on behalf of, the Company.

Contact: Glen L. PonczakVice President, Investor RelationsOffice of the Chief Financial [email protected]

Johnson Controls

Johnson Controls profileThree world-class businesses

3

Johnson Controls$34.3B

Interior Experience$16.6B

Building Efficiency $13B

Power Solutions$4.9B

FY2010

Delivering world-class technologies that differentiate vehicle interiors and increase consumer demand

Providing the highest quality, lowest cost automotive batteries to help customers grow their market shares and to power the vehicles of tomorrow

Providing HVAC and control systems to improve energy and operational efficiencies and reduce greenhouse gas emissions in buildings

Fiscal 2011 outlook*

Johnson Controls4

Consolidated net salesApprox $37B (up 9%)

Building Efficiency global market recovery and market share growthModestly higher vehicle productionGrowth in emerging markets across all three businesses

EPS Approx $2.30 - $2.45(up 16 – 24%)

Improvements in all businesses as volumes / markets recoverCost savings initiatives / operational excellenceInvestments in innovation, emerging markets, Building Efficiency sales force

Segment income margin Up 60 - 80 bps Strong earnings expansion across all three business units

Net financing chargesApprox $165 - $175 million

Comparable to 2010

Capital expendituresApprox $1.2 billion

Reinvest in the businessesVertical integration and AGM capacity expansion in Power SolutionsCapacity expansion in emerging markets Automotive new business launches

Net debt-to-capitalizationApprox 15%

Free cash flow generation approximately $1.2 billionAcceleration of pension contributionsCapacity to increase investment in growth initiatives and strategic acquisitions

*Guidance announced 10/12/10

2011Strategies, opportunities, guidance

October 12, 2010: Strategic Review and 2011 Outlook meeting

In-depth review

-Business unit markets and forecasts

-In-depth review of growth strategies

-2011 sales and income forecasts

-Mid-term sales and income forecsts

Slides, webcast archive

Go to:

www.johnsoncontrols.com

“Investors”

Events calendar

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About Johnson Controls

Building Efficiency Power Solutions Automotive Experience

6

130,000 Employees Multi-industry Founded 1885

>200 million vehicles1/3 of world’s automotive batteries1 million building efficiency customers

Agenda

What is the Energy Efficiency Indicator?

Who did we survey?

What are their priorities and concerns?

What are their investment plans and financial criteria for making energy efficiency investments?

What practices and technologies are most common?

7 Energy Efficiency Indicator – North America 2010Copyright 2010 Johnson Controls, Inc.

What is the Energy Efficiency Indicator?

A global survey of decision makers responsible for commercial buildings and their energy use

Examines trends in energy efficiency priorities and practices

Founded by Johnson Controls and the International Facility Management Association (IFMA) in 2007

4th annual survey completed for North America in March 2010

Additional surveys underway in China, France, Germany, India, Poland, Spain, and the United Kingdom, with results to be released at events throughout the summer of 2010


RESPONDENT PROFILEEnergy Efficiency Indicator

2010 North America Results


Who we surveyed: 2 qualifying criteria

1. Must have capital- or operations budget responsibility for their organization’s facilities.

2. Job responsibilities must include reviewing or monitoring energy usage,

and/or

proposing or approving initiatives to make organization’s facilities more efficient.

Energy Efficiency Indicator – North America 2010Copyright 2010 Johnson Controls, Inc.

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Who we surveyed

11

By Role By Region

By Industry Sector

1435 total respondents in North America

PRIORITIES AND CONCERNSEnergy Efficiency Indicator



Energy efficiency remains a strong business priority

65%... are paying more attention to energy efficiency than last year

84%... Say energy efficiency is a priority for new construction and retrofit projects


…yet enthusiasm has dipped since 2009

14

77%

88%93%

84%

51%57% 58%

52%

40%

50%

60%

70%

80%

90%

100%

2007 2008 2009 2010

Consider energy efficiency a priority in current/planned construction or retrofit projectsEnergy management is extremely or very important to our organization


Reducing energy costs is the key driverPublic imaged is also notably high

15

40%

0% 20% 40% 60% 80% 100%

Energy cost savingsEnhanced public image

Government/utility incentivesGreenhouse gas reduction

Attracting, retaining customersAnticipated regulation

Existing legislationAttracting, retaining employees

Investor reporting demandsAttracting tenants

Extremely significant Very significant Somewhat significant

Not very significant Not at all significant Not Applicable

How significant an influence are the following in your organization's energy efficiency decisions?


Real estate leaders believe energy prices will climb again after falling in 2009

16

Average expected change in energy prices

during 2010 = 7% increase

0%

20%

40%

60%

80%

100%

Cum

ulat

ive

Dis

tribu

tion

Do you believe the combined price of the energy that your facilities use will. . .

64% believe prices will increase over the next 12 months


Incentives drop in importance while carbon emission concerns become stronger

17

12% 13% 9%

26% 30%22%

37%36%

31%

14% 12%

16%

8% 5%

9%

3% 4%12%

0%

20%

40%

60%

80%

100%

2008 2009 2010

Don't know

Not at all significant

Not very significant

Somewhat significant

Very significant

Extremely significant

How influential are government/utility incentives in your organization's

energy efficiency decisions?

7% 5%

15% 20%

35% 37%

21%23%

17%11%

5% 4%

0%

20%

40%

60%

80%

100%

2009 2010

Don't know

Not at all significant

Not very significant

Somewhat significant

Very significant

Extremely significant

How significant are greenhouse gas emission reductions in your organization's energy

efficiency decisions?


Despite lowered legislation expectations, more organizations setting carbon goals

18

11% 16% 9%

28%35%

27%

37%

34%

38%

0%

20%

40%

60%

80%

100%

2008 2009 2010

Somewhat likely

Very likely

Extremely likely

How likely is significant legislation mandating energy efficiency and/or

carbon reduction within the next 2 years?

76%85%

75%

11%

12% 12%

14%

8%

9%

10%

11%

12%

13%

14%

15%

16%

2007 2008 2009 2010

Does your company/organization have a publicly stated carbon-reduction goal?


Many lack carbon strategies; those with strategies choosing building efficiency first

1%

1%

1%

2%

3%

4%

4%

5%

38%

0% 5% 10% 15% 20% 25% 30% 35% 40% 45%

Supply chain carbon reductions

Carbon offset purchases

Real estate portfolio consolidation

Alternative transportation fuels

Energy efficiency in vehicle fleet

Renewable power purchases

Onsite renewable energy

Telecommuting, virtual meetings

Energy efficiency in buildings

What is your organization's top strategy to reduce its carbon emissions?

40% either don’t know or have not yet prioritized among strategies


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INVESTMENT PLANS & FINANCIAL CRITERIAEnergy Efficiency Indicator



The recession had a mixed impact on investment

21

As a result of the recession…

41% invested less,

27% invested at historically consistent levels, and

32% invested more in energy efficiency

…over the past 12 months


Overall rebound in plans to invest in energy efficiency

22

57% 56%

46%

52%

64%61%

55%

60%

40%

60%

80%

2007 2008 2009 2010

capital expenditures operating expenditures

Percentage planning to make energy efficiency investments over the next 12 months with…


Construction and retrofit starts plans also increasing

23

16%

22%22%

30%

0%

5%

10%

15%

20%

25%

30%

35%

40%

2009 2010

new construction retrofitsPercentage currently undergoing or planning to undergo

over the next 12 months


Investment criteria also holds steady;44% require less than 3 year payback

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83% 83%87%

43% 44% 44%

5% 6% 4%

0%

20%

40%

60%

80%

100%

2008 2009 2010

Less than 10 years

Less than 3 years

Less than 1 year

What is the longest payback period you would allow for a significant energy

efficiency investment?


15%

44%

14%

27%

0%

20%

40%

60%

80%

100%

2008 2009 2010

How does that compare to what would have been allowed 5 years ago?

Don’t Know

Allowed longer payback 5 years ago

Allowable payback hasn’t changed

Will allow longer payback today

25

Limited internal capital is the greatest barrier to energy efficiency

3.2Average maximum payback period for energy efficiency

44% require a 3 year payback or less

3%

3%

4%

5%

5%

6%

16%

21%

38%

0% 10% 20% 30% 40%

Other (specify)

Inability to finance (credit rating, collateral, balance sheet)

Dedicated attention, ownership

Buy-in from senior leaders

Landlord/tenant split incentives

Technical expertise

Uncertainty of savings/ROI

Insufficient payback/ROI

Lack of capital budget

What is the top barrier to capturing energy savings for your organization?


Capital budgets and incentives are primary funding source; Use of financing is rare


52%

20%

14%

9%

8%

7%

5%

3%

3%

1%

1%

0% 20% 40% 60%

Facilities capital budget

Grants or tax credits

Energy savings performance contract

Energy or climate set-asides in capital budget

Power purchase agreement (PPA)

Traditional debt financing

Shared savings agreement

Utility on-bill financing (OBF)

Capital or municipal lease

PACE/tax lien financing

Energy efficient mortgage

Which options will your organization consider to pay for energy efficiency and renewable energy projects over the next 12 months? (Select all that apply)?

N = 1427

PRACTICES & TECHNOLOGIESEnergy Efficiency Indicator



Most popular efficiency measures implemented over the past 12 months

72% switched to more energy efficient lamps, ballasts, or lighting fixtures

63% educated facilities operations staff

61% educated building occupants

56% adjusted HVAC schedules/setpoints

40% installed occupancy or daylight sensors


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Most popular efficiency measures are lighting retrofits and operational changes

72%

63%

61%

56%

40%

36%

33%

30%

29%

28%

27%

25%

25%

19%

19%

0% 10% 20% 30% 40% 50% 60% 70% 80%

Switched to energy efficient lamps, ballasts, or fixtures

Educated facilities operations staff

Educated building occupants

Adjusted controls to reduce time that heating/AC runs

Installed occupancy or daylight sensors

Replaced inefficient equipment before end of useful life

Upgraded existing building management system

Increased frequency of monitoring consumption

Negotiated energy contracts with suppliers

Attended or sent staff to energy management seminars

Installed or adjusted lighting timers

Increased preventive maintenance schedules

Installed variable speed/variable frequency drives …

Installed energy-saving glass in windows

Participated in demand response programs

Which measures has your company adopted to reduce energy costs?

Note: The 15 most popular measures of 33 included in the survey are listed above


29

Green buildings are accumulating;Renewable energy on the radar

33% seeking green building certification for new construction projects

12% have at least one green certified building, up

from 8% in 2009

31% considering solar PV, 20% considering

solar thermal, 14% considering geothermal in new construction and retrofit projects


Green building goals staying constant

31

34% 38% 33%20% 17% 18%

48% 45% 52%

59% 64% 60%

12% 14% 13%18% 16% 20%

5%3% 2% 3% 3% 2%

0%

20%

40%

60%

80%

100%

2008 2009 2010 2008 2009 2010

don't know

no goal for green buildings

green elements, but not certified

certified to a recognized green standard

What are your goals with respect to green buildings?

New Construction Retrofit Projects


Consideration levels for renewable energy technologies fall in 2010


31%

20%

14% 13%

7%5%

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%2008 2009 2010

Which renewable energy technologies is your organization considering or utilizing in construction or retrofit projects?

High expectations for lighting and smart building technologies


51%

44%

38%

28%

22%

18%

6%

3%

0% 10% 20% 30% 40% 50% 60%

Lighting technologies

Smart building technology

Solar photovoltaics (PV)

Electric and plug-in electric vehicles

Nuclear power

Concentrating solar power (CSP)

Stationary electric energy storage

Carbon capture and storage for power plants

Which technology do you expect to have the greatest performance-price ratio improvement over the next ten years (select up to 3)?

Observations & Conclusions

Efficiency spending is starting to reboundEnergy cost concerns, public image, and climate leadership goals are driving investment

Buildings efficiency is top carbon strategy Despite lowered legislation expectations, more organizations setting voluntary GHG goals

Capital availability remains a strong barrierOrganizations rely primarily on internal capital budgets for efficiency & renewable energy investments, vs. seeking external financing


Johnson Controls Institute for Building Efficiency

The Institute for Building Efficiency is an initiative of Johnson Controls to provide information and analysis of technologies, policies, and practices for efficient, high performing buildings and smart energy systems around the world.

The Institute for Building Efficiency supports efforts to create sustainable and highly efficient buildings by:

Developing a global body of research and reference material.

Creating partnerships with external institutions focused on EE.

Engaging and collaborating with external experts on market research and analysis.

For more information visit www.InstituteBE.com

Existing Building Retrofits

Green Buildings

Smart Grids & Smart Buildings

Renewable & Distributed Energy

Clean Energy Finance

Carbon Management

Energy & Climate Policy

Documents

Trends in Building Energy Efficiency - PACEworx News · Trends in Building Energy Efficiency . Investment, ... Johnson Controls, Inc. has made forward-looking statem ents in this