Residential & Commercial Buildings

The Commission has compiled this research report in order to assess the state of building efficiency and contribute to the development of a set of effective policies for expanding energy efficiency in residential and commercial buildings.


Residential and commercial buildings account for about 40% of total energy consumption in the United States. Increases in average home sizes and commercial building space, population, and electronic devices have driven up energy usage in buildings despite efficiency improvements. This report examines energy efficiency policies that can help mitigate this escalating demand and associated costs while also promoting economic growth.


The investment opportunities for residential and commercial buildings are vast. A McKinsey & Company report estimated that in the commercial sector, an investment of $125 billion in energy conservation measures over the 2009 to 2020 period would reap energy savings of $290 billion, and a $229 billion investment in the residential sector would save $395 billion. Current investments, around $18-20 billion in 2010, are driven by utility efficiency programs, Energy Savings Performance Contract financing in government buildings, and federal stimulus spending. There is a great potential for additional financing vehicles for energy efficiency improvements.


Most buildings fall short of their performance potential. Available technologies, such as lighting and other controls, better windows and cool roofs, and advanced furnaces and boilers, can reduce energy consumption by 30% to 50% compared to the typical building, but they have been poorly diffused thus far. Treating buildings as integrated systems instead of focusing only on the individual components is especially important, and effective operations are needed as well as technology investments.

Human Behavior

Human behavior affects energy productivity in residential and commercial buildings both through occupant behavior and waste and through decisions on energy-using equipment and building improvements.Specific mechanisms that can influence human behavior include building energy use feedback and benchmarking, social norms and marketing, customer tips and assistance, and financial incentives.


Federal, state, and local governments have several important roles in fostering energy efficiency in buildings. As the largest energy consumer, the federal government can demonstrate and help commercialize new technologies and practices in its own operations. As a regulator, federal appliance standards and state and local building energy codes have been very effective in setting a bar for building components and reducing waste. As a source of information, federal Energy Star and Energy Guide labels, and local energy benchmarking and disclosure requirements, have provided consumers reliable information. As a funder and facilitator, states have provided the largest source of investment through rate payer-funded programs, and the federal government has provided critical research support and tax incentives.


Many barriers impede energy efficiency advancements in the building sector, requiring proactive policies to overcome. A few of these barriers are:

  • high initial investment costs and lack of information;
  • split incentives, in which one person makes investment decisions but another receives any energy savings (e.g. landlords and tenants);
  • uncertainty of, and difficulty of measuring, savings; and,
  • regulations and policies that do not value efficiency or are not coordinated.


  • There also are large opportunities to reduce energy use in commercial and residential buildings, including:
  • integrated design incorporating available cost-effective technologies;
  • building energy management, benchmarking, and disclosure;
  • programs based on research on influencing behavior; and,
  • financing based on improved projection of savings and assurance of repayment, and more effective energy standards and codes.


Policies to reduce building energy consumption in the United States have been in place since the 1970s, but there is still a large potential for greater energy efficiency gains. Emerging technologies can be better integrated into commercial and residential buildings, consumers and companies can adopt more energy-saving behaviors, and the government can provide leadership. Advances in energy efficiency will save money, create jobs, improve energy security, and improve the environment.


View a printable version of the Building report and two page summary.