The New York Times’ Thomas Friedman has written repeatedly about the economic challenges facing our country as we struggle to make the transition to an economy based on developing and implementing green and sustainable technologies.

Hurt in our pocketbooks, we’ve recently had an impassioned awakening of desire to drive real efficiency and productivity. We need our businesses to be more competitive and our governments less expensive.

What Mr. Friedman clearly points out is that this is not just a “nice to have.” Some businesses can make do with less, but many governments at the municipal, state and federal levels, and some large for-profit corporations, are finding the gap (and the margins) between the prior business model and today’s business model too large to manage in a lower-revenue world.

The social and technical investments required to retool the economy – to become a generator of green jobs and technologies – are large. Unfortunately, the gap between what the U.S. and countries like China are spending is large and growing (see chart below).

Why is China’s larger investment in this area a competitive issue for the U.S.? Innovation in this area – in terms of design, build, delivery and implementation – is like an engine. Right now, China’s innovation engine is being fed a lot more fuel than ours.

The gap in investment is extreme when considering the average compensation paid to those doing the work in China; Chinese scientists, entrepreneurs, engineers, and marketers today are still being paid a fraction of what their U.S. counterparts are. That means not only is the U.S. spending less, but we also have disproportionately fewer new products, businesses and projects underway because our projects are more costly. China has more raw investment dollars, is paying more people to do work in these areas and is spawning more projects, technologies and businesses.

What makes this situation even more worrisome, however, is the learning that China’s innovation engine is generating right now. Chinese scientists, entrepreneurs, engineers and marketers are learning what works and what doesn’t work far faster than we are. They’re learning this on the basis of having more projects, developed and implemented faster, fueled by more investment.

Some might argue that the quality of U.S. innovation work is better, a point that may be debatable. However, our innovation engine is sucking wind compared to the supercharged Chinese green technology economy. We’re working hard on selective parts of the glittery future promised by wind, solar, hydrogen and other forms of alternative energy, but we’re not keeping pace.

What isn’t getting enough play in our green technology economy is work we can and need to undertake right away: A serious coordinated effort to deploy network-based portfolio-management energy efficiency strategies and measures across our buildings and fleet transportation systems as rapidly as possible.

Here’s one specific area for consideration. United States commercial real estate (all buildings except residential housing and goods-producing industries like manufacturing, agriculture and construction) consumes energy at a substantial and growing rate. It will grow at two-thirds the rate of gross domestic product through 2025, according to the Annual Energy Outlook 2005 published by the U.S. Energy Information Agency. In 2003, the commercial building sector, which is made up of 4.9 million commercial buildings covering more than 71.6 billion square feet of floor space, consumed 17,548 trillion BTUs of energy. Estimating a conservative nominal energy cost of $10 per MMBTU, the energy bill for commercial buildings in the U.S. exceeds $175 billion annually.

What is absolutely criminal is that today, somewhere between 20 percent and 40 percent of that energy is wasted, even from buildings built within the last 10 years. This energy is wasted, or lost, because the many systems, subsystems and components that make up buildings degrade over time. A motor bearing fails, a steam trap sticks, a blower gets clogged, a thermostat isn’t accurate. These failures may individually be so small that people in the buildings don’t notice them as they go about their business. Failures begin from the moment that a building enters operation, and these failures pile up over time, leading to successively larger and larger energy losses.
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In most facilities, maintenance staff work on the most egregious failures when they detect them, but the reality is that maintenance only detects and addresses some fraction of failures. The energy performance of most buildings today, even new ones, relying on alert maintenance staff and manual controls, is well below optimal.

New approaches to smart building facilities portfolio management enables digital readouts on zones, nodes and systems within wired buildings that can tell maintenance the energy (and air quality, safety, carbon footprint, etc.) impact of each failure on a real-time basis. These readouts – like giving each building an MRI every 15 minutes – can help maintenance staff to rapidly staunch energy losses and conserve most of the energy loss potential identified. These technologies and approaches are available now.

So here’s the quick calculation. Start with the $175 billion in annual energy costs for the U.S. commercial real estate. Conservatively, 30 percent is available to conserve. The savings potential therefore approximates $50 billion annually. In addition, this means that our utilities no longer need to generate that 30 percent of power demand. This “found capacity” approximates more than 5,000 trillion BTUs of energy.

To be sure, going after energy savings in commercial real estate has some implementation challenges. For example, most tenants in commercial real estate space pay for their own utilities. They’d be the ones capturing the energy savings benefits. However, the landlord would need to authorize and front the (relatively nominal) investment in upgrading building systems, and at the moment, doesn’t have a mechanism or incentive to recover this investment. We’d need to develop new gain sharing and capital investment partnership approaches; perhaps tenants would pay more to the landlord in rent for a certain period, or utilities (spared the burden of capital investment in generating and transmission capacity) could make some additional investment in the landlord’s facilities infrastructure.

The point is, the prize is worth exploring some new arrangements. In addition to freeing up power generation capacity and creating funds to substantially green commercial real estate, $50 billion annually would go a long way toward closing that green technology economy investment gap the U.S. currently has with China. Colleagues working in transportation and fleet management tell me that tens of billions of dollars in energy efficiency savings are available in that domain as well. This is investment that in any individual project begins paying hard-dollar returns within three to six months. But we only get the social and “big E” economy returns if we start implementing in a significant way, in large swaths of our building and fleet portfolios, now.

Here’s the bottom line: We need to get started implementing as fast as possible. If we don’t, this year’s money – and as importantly, what we might learn through these implementations – is gone forever. China won’t wait.

Evan Smith is a leadership, innovation and sustainability consultant. He is a founding member of Metamorphosis Management Group and is part of the Team Carbon consortium, which is focused on bringing rapid-cycle, results-focused innovation to government and corporate clients.