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 lensof 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 newcommercial 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 understandingof 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.

Beginning in the summer of 2000, California experienced energy supply problems, sharp increases in electricity and natural gas prices, and isolated blackouts. In response, California's state government implemented an unprecedented energy conservation effort to mitigate projected electricity supply shortages during the summer of 2001. Ultimately, significant electricity demand and consumption reductions were achieved. This paper considers the response of commercial and institutional organizations to the California energy situation and offers a description of three factors that shaped these responses: (1) concern about energy problems; (2) operational conditions; and (3) institutional capacity for action. A matrix of possible combinations of concern, conditions, and capacity offers a heuristic for use in exploring how to best tailor and target policy interventions to the circumstances of particular subgroups of organizations.

Beginning in the summer of 2000, California experienced serious energy supply problems, sharp increases in wholesale (and retail) electricity and natural gas prices, and isolated blackouts. In response to the rapidly worsening electricity situation in California in late 2000, the state set, as an initial goal, the reduction of the state's peak demand for the summer of 2001 by 5,000 megawatts. To meet this goal, the governor and legislature took a variety of steps to enhance supply, encourage rapid voluntary reductions in demand, and provide incentives for actions that would result in load reductions. Three bills-Assembly Bill 970, Senate Bill X1 5 and Assembly Bill X1 29-allocated roughly $950 million for consumption and demand reduction programs. The governor also enacted a variety of additional measures, including the "Flex Your Power" (media awareness and direct business involvement) campaign, requirements for retail sector outdoor lighting reductions, and toughening of energy efficiency building codes. There were, in fact, significant reductions in electricity demand in California during the summer of 2001 and the large number of expected supply disruptions was avoided. To understand the nature of these demand reductions and the motivations for consumer response, Washington State University (WSU) undertook a study for the California Energy Commission (CEC) focusing on conservation behavior in the residential, commercial, and agricultural sectors. The research presented in this report represents an exploration of the response of commercial and institutional organizations to the California energy situation and the unique set of influences that existed during this time. These influences included informational messages and media attention, program interventions, price changes, and external triggering events (e.g., blackouts). To better understand the effects of these influences on organizational response to the energy situation, we conducted 84 semi-structured interviews with members of commercial and institutional organizations (many of which participated in three different California Energy Commission Programs) and with 21 key informants representing program managers, administrators, and aggregators as well as a small number of energy service providers and utilities. Separate reports examine the consumer response in the residential and agricultural sectors.