30 Energy Terms Every Facility Manager Needs to Know

A fee on commercial electricity bills based on the highest rate of power drawn (measured in kilowatts, kW) during a billing period — typically the peak 15- or 30-minute interval. Demand charges can account for 30–70% of a commercial electricity bill.

The standard unit of electrical energy equal to consuming 1,000 watts of power for one hour. A kilowatt-hour is what appears on every commercial utility bill as the measure of total energy consumed.

A unit of power equal to 1,000 watts, measuring the instantaneous rate at which electrical energy is being consumed or generated. On commercial bills, kW appears in demand charges — the peak power draw during a billing period.

A ratio expressing how evenly a facility uses energy over a billing period, calculated as: (Total kWh consumed) ÷ (Peak kW × Hours in period). A load factor of 100% means consistent energy use; a low load factor means high peaks relative to average consumption.

A measure of how efficiently electrical power is being used, expressed as a ratio between 0 and 1 (or 0%–100%). It is the ratio of real power (kW, doing useful work) to apparent power (kVA, total power drawn from the grid). Most utilities require commercial customers to maintain a power factor above 0.85–0.95.

A utility pricing structure where electricity prices vary by time of day — typically higher during peak demand hours (afternoons on weekdays) and lower during off-peak periods (nights, weekends). Also called TOU rates.

A utility tariff provision that sets a minimum monthly demand charge based on a percentage (typically 70–90%) of the highest peak demand recorded in the prior 11–12 months. Even if current-month demand drops significantly, the customer still pays based on that historical peak.

The highest instantaneous power draw (measured in kW) recorded during a billing period, typically measured over 15- or 30-minute intervals. Peak demand is the basis for demand charges on commercial utility bills.

A federal tax deduction under IRS Section 179D that allows building owners and (in some cases) designers of energy-efficient commercial buildings to deduct up to $5.00 per square foot for qualifying energy efficiency improvements in HVAC, lighting, and building envelope systems. Enhanced by the Inflation Reduction Act (IRA) of 2022.

A federal tax credit allowing businesses to deduct a percentage of the cost of qualified energy property (solar, fuel cells, battery storage, CHP systems, etc.) directly from federal taxes owed. Under the Inflation Reduction Act (2022), the base ITC is 30% for most clean energy technologies through 2032.

A federal tax credit that provides a per-kilowatt-hour (kWh) tax benefit for electricity generated from qualified renewable energy facilities, including wind, solar (large projects), geothermal, and other clean energy sources. Under the IRA, the 2024 base PTC is approximately $0.03/kWh, indexed to inflation.

The Modified Accelerated Cost Recovery System — the IRS's standard method for depreciating business assets. Most commercial energy equipment (solar, HVAC, LED lighting, battery storage) qualifies for 5-year or 7-year MACRS, allowing accelerated tax deductions compared to straight-line depreciation.

A financing mechanism that allows commercial property owners to fund energy efficiency, renewable energy, and water conservation improvements through a voluntary assessment attached to the property — repaid over 5–30 years via the property tax bill. Available in 38+ states as of 2024.

A tax incentive allowing businesses to immediately deduct a large percentage of the cost of qualifying business assets (including energy equipment) in the year they are placed in service, rather than depreciating over multiple years. Under current law (post-2022 phase-down), rates are 60% in 2024, 40% in 2025, and 20% in 2026.

The suite of energy tax incentives created or enhanced by the Inflation Reduction Act (IRA) of 2022 (P.L. 117-169), including expanded Investment Tax Credits, Production Tax Credits, new credits for battery storage, advanced manufacturing, clean vehicles, and bonus adders for domestic content, energy communities, and low-income projects.

The system that regulates indoor temperature, humidity, and air quality in commercial buildings. HVAC encompasses heating equipment (boilers, furnaces, heat pumps), cooling equipment (chillers, DX units, rooftop units), ventilation (fans, air handlers, ERVs), and their controls.

A refrigeration machine that removes heat from water (or a water-glycol mixture), producing chilled water used to cool air in commercial buildings via air handling units and fan coil units. Chillers are rated in tons of refrigeration (TR) or kilowatts (kW) and are common in mid-to-large commercial facilities.

A computerized control system that monitors and manages a building's mechanical and electrical systems — HVAC, lighting, fire safety, access control, and more — from a central interface. Also called a Building Management System (BMS) or Building Control System.

Software and hardware systems used to monitor, measure, analyze, and control energy consumption across a facility or portfolio. An EMS collects data from meters, utility bills, and building systems to identify inefficiencies, track progress against targets, and automate demand response.

An electronic device that controls the speed of an electric motor by varying the frequency and voltage of the power supply. VFDs allow fans, pumps, and compressors to operate at partial load instead of on/off cycling, dramatically reducing energy consumption at reduced loads.

An electrically-powered device that moves heat from one place to another — from outdoors to indoors for heating, or from indoors to outdoors for cooling. Heat pumps can be 200–400% efficient (COP of 2–4), meaning they deliver 2–4 units of heat energy for every unit of electrical energy consumed.

A self-contained commercial HVAC unit installed on a building's roof that provides heating, cooling, and ventilation to a defined building zone. RTUs package the compressor, condenser, evaporator, and air handler in one unit, making them the dominant HVAC solution for small-to-midsize commercial buildings.

The process of replacing older, less-efficient commercial lighting (fluorescent, metal halide, incandescent, HID) with LED (light-emitting diode) fixtures or lamp replacements. LED technology uses 50–75% less energy than fluorescent and 80–90% less than incandescent lighting.

The practice of measuring and tracking a building's energy performance over time and comparing it against similar buildings or industry standards. Many cities and states mandate annual energy benchmarking for commercial buildings above certain size thresholds, with results disclosed publicly.

A metric measuring how much energy a building uses per square foot of floor area per year, expressed in kBtu/sq ft/year. EUI normalizes energy use for building size, enabling comparison across buildings and over time. Lower EUI = more energy efficient.

New York City's landmark building emissions law, enacted in 2019 as part of the Climate Mobilization Act. LL97 caps annual greenhouse gas emissions for most NYC buildings over 25,000 sq ft, with limits tightening in 2024, 2030, and beyond. Non-compliant buildings face penalties of $268 per metric ton of CO₂e over the cap.

Boston's building performance standard, updated in 2021, requiring commercial and multifamily buildings over 20,000 sq ft to reduce GHG emissions on a schedule toward net-zero by 2050. Buildings must meet interim emissions standards in 5-year compliance periods, with penalties for noncompliance.

A systematic evaluation of a commercial building's energy use, conducted according to ASHRAE (American Society of Heating, Refrigerating and Air-Conditioning Engineers) standards. ASHRAE defines three audit levels: Level 1 (walkthrough), Level 2 (detailed energy survey), and Level 3 (detailed analysis of capital-intensive projects).

A voluntary U.S. EPA energy efficiency program that provides performance ratings and certification for commercial buildings (scores 1–100), homes, appliances, and industrial equipment. Buildings scoring 75 or above on the ENERGY STAR 1–100 scale can apply for ENERGY STAR certification.

EPA ENERGY STAR Portfolio Manager is a free, secure online tool that enables commercial building owners and managers to track energy and water consumption, calculate ENERGY STAR scores and EUI metrics, benchmark against similar buildings, and generate reports for mandatory disclosure programs.