Published in the October 2007 issue of Today’s Facility Manager
Five years ago, the cost side of the energy conservation challenge mattered less. Today, prices fluctuate from day to day (and sometimes even hour to hour), so facility managers practically need to be financial wizards to protect their employers from serious exposure. Further, quasi-private and government agencies are changing the rules of the game every day.
Now, energy efficiency improvements and better building controls and information can not only be used to save money, but they can also earn cash back. Smart facility and building portfolio managers can garner big bucks if they can deliver reliable operations that keep building occupants happy.
Savings Into Earnings
It doesn’t matter for reliability’s sake whether a new power plant is turned on to meet extra demand or unnecessary consumption is shut down instead. That’s why, in most locations, markets now reward facilities for cutting power for approximately 10 to 20 hours each year. Additionally, large end users are routinely paid for every kW they shed when power plants must work overtime during an emergency or blackout situation.
There are also earnings opportunities for businesses that invest in upgraded systems. For instance, large power sales companies will fund upgrades in commercial properties in order to maintain their license to market electricity. So any building that installs new power saving equipment will be able to measure how much that building actually conserves over the years. The building will then register the verified savings in the form of a certificate.
Most power marketers will eventually have to purchase a certain number of these certificates for each unit of power it sells. For instance, Con Edison in New York City could buy certificates from buildings that installed newer, more efficient chillers. However, the building that installed the chiller will still own the savings certificates, even if another entity has helped to defray some of the initial installation costs.
Boosting Energy Efficiency’s Payback
By Steve Kiesner
The nation’s electric power industry is committed to helping facility managers get more from their energy dollars. During the past 15 years alone, electric companies have enabled businesses to save almost 700 billion kilowatt hours of electricity. That is enough to power New York, California, Florida, and Virginia for a year.
Encouraging its customers to use electricity more wisely is a key part of the industry’s strategy for keeping up with growing demand (a demand that’s expected to increase by 40% over the next 25 years). Facility managers who have not contacted their utility lately should do so as soon as possible. There is a great deal of help available. A national list of electric utility energy efficiency programs is available online atwww.getenergyactive.org/wisely/progs.pdf.
For managers with facilities located throughout a state, region, or the country, EEI’s National Accounts Network (www.eei.org/na) can save them time contacting the utilities that serve them. The Network can also help managers take advantage of incentive programs or other services that may be available. There is no fee for working with the National Accounts Network.
Besides efforts of electric utilities, the IRS is offering tax deductions of up to $1.80 per square foot on new construction or renovation projects that save at least 50% of the HVAC, water heating, and interior lighting energy cost of a building that meets ASHRAE Standard 90.1-2001. Managers can earn a partial deduction of 60¢ per square foot by improving one of three building systems—the building envelope, lighting, or the combination of HVAC and water heating. These tax deductions are available for buildings or systems placed in service from January 1, 2006, through December 31, 2008.
Federal tax credits are available for solar energy, microturbines, and fuel cells that meet certain efficiency requirements. More details are available atwww.energytaxincentives.org.
Facility managers should take advantage of any applicable state energy efficiency incentives as well. For more on state programs, visitwww1.eere.energy.gov/femp/program/ utility/utilityman_energymanage.html. Based on the amount of money set aside, the best states for incentives are located in the following parts of the country: Northwest (Washington, Oregon, Idaho, Montana), Northeast (New York, New Jersey, Maine), Upper Midwest (Minnesota, Illinois, Wisconsin, and Iowa), California, and Florida.
America’s focus on energy is more important than ever. Although developing the answers for a more reliable, affordable, and environmentally sustainable future will not be quick or easy, efficiency will be a critical part of the task.
Kiesner is director of national accounts for the Edison Electric Institute based in Washington, DC. For more on his organization’s activities, visit www.eei.org; more information about steps to plan for the nation’s electric future can be found atwww.getenergyactive.org.
Doing The Math
Imagine that Goldman Sachs were to install new, super efficient servers in Manhattan. This move would save them 2,000 kW on a hot summer afternoon. A third party entity might pay them to defray the cost of that investment.
If those servers operate for half the hours of the year, Goldman Sachs would also be able to sell its reduction certificates to its utility (in this case, Con Edison). In some markets, these certificates would earn the company as much as an additional $280,000 annually for the next 10 years.
Yet, in designing these new energy efficiency markets, the devil is in the details. After the completion of the contract, the utility may modify the agreement to its benefit. For instance, Con Edison could specify that, if an end user were to take the dollars to defray the installation, Con Edison would be entitled to the $280,000 per year the certificates will fetch.
This modification in terms would put Goldman Sachs in a difficult position. The company could either accept some support to defray the cost of installing efficiency upgrades or take the cash from selling the certificates.
Because the framework is now so complex and subject to rapid change, market structures must be designed to work in favor of those who make decisions in a facility. So when new market structures are put in place, the facility manager must have the right tools to take best advantage of them.
Real Life Examples
Here are two instances that describe how facility managers are creatively meeting the challenges posed by today’s high energy costs and changing markets.
CB Richard Ellis. Bob Breschard is in charge of several properties for CB Richard Ellis. Breschard surveyed the profitability of his portfolio and determined that energy is an area that can make his company both attractive and successful in even the most competitive commercial real estate markets.
One of Breschard’s facility managers, Vince Fantauzzi, handles more than one million square feet of commercial property in Manhattan. Over the past several years, Fantauzzi aggressively looked for new earnings, occupant enrichments, and operational efficiencies.
In 2002, Fantauzzi’s efforts paid off. Initially, he was able to deliver a $225,000 check just as he sought to renew a contract for the next year. Since then, Fantauzzi has reduced his peak demand charges by nearly 20%, saving close to $2 million over that time.
Another facility manager on Breschard’s team, Lou Trimboli, used direct interval metering data to provide audit quality projections for $700,000 of facility upgrade spending. These upgrades not only enhanced security in the building, but they also paid back on the investment in three years.
As supervisor, Wayne Taub gave Breschard free rein regarding the initiatives headed up by Trimboli and Fantauzzi. Pleased with the results, Taub is now replicating these programs throughout the CBRE New York portfolio and is considering nationwide adoption of them, wherever appropriate.
Cushman & Wakefield. “Good corporate citizenship is a priority for Cushman & Wakefield, a leading global real estate services firm. Giving back to each community has become very important,” says Ray Benemerito, property manager of a Class A building in Manhattan.
“When looking for innovative ways to become smarter about our facility’s overall energy consumption, we saw a way to ‘do well by doing good,’” he says. “We learned that New York City’s energy markets were structured such that our facility could support the energy grid through electricity reductions during peak periods or cuts when the threat of a power outage loomed. This process, also known as demand response, has not only generated significant revenue for our facility, but it has ultimately helped save New York from wider blackouts, despite spotty outages during the summer of 2006.”
Benemerito and his team identified energy reduction strategies to employ during demand response events. As a result, the facility now switches to a steam chiller, raises HVAC set points, turns off escalators and non-essential lighting whenever possible. These techniques reduce enough electricity to sell back excess to the power grid without limiting operations or compromising comfort of occupants.
The facility is so committed to reducing its energy use in an intelligent way, it is in the process of conducting a full property energy audit. This exercise will encompass everything from the assessment of capital improvements to identifying energy tax savings. [For more on this issue, see the accompanying sidebar, “Boosting Energy Efficiency’s Payback” by Steve Kiesner.]
“We are exploring what capital improvements we can make to consume energy efficiently and determine what grant or tax savings opportunities we can leverage to minimize the costs involved in these upgrades,” Benemerito says.
He concludes, “Managing 1.4 million square feet of property comes with a certain amount of responsibility. For me and my facility, it is important to consume energy wisely, reducing that consumption whenever possible.”
Energy usage and cost savings are top of mind these days—especially for anyone in charge of running commercial buildings. Keeping these properties physically comfortable for workers as well as financially solvent for owners are top priorities. Each building community is distinct, and managers should strive to develop energy saving programs that are the best possible fit for the budget and for the people who work inside.
Gordon is president and founder of ConsumerPowerline, a strategic energy asset management firm based in New York, NY.
Landscape Energy Conservation
By Steve Sullivan
Proper landscaping can do much more than beautify a facility with lush greenery—it can save facility managers some green too. [For more on this subject, see the TFM article, “Site Maintenance” by Alan Aukeman, Tom Ryan, and Kimberly Turner, June 2007.] According to the USDA Forest Service, the proper placement of trees around a building can reduce air conditioning needs by 30% and save 20% to 50% in energy used for heating.
Below are some easy to implement tips for smart landscaping. These practices can conserve energy, beautify a facility, and reduce costs.
One way to reduce heating and air conditioning costs is the proper placement of vegetation. The Northeast Sustainable Energy Association suggests planting deciduous trees (such as red maple, tulip poplars, and oaks) on the south and southwest sides of a building to block hot summer sunlight and aid in cooling. In the fall and winter, the bare branches of these trees will allow sunlight to pass through and support heating. Plant these trees at least 15′ to 25′ away from a building for maximum effect.
Additionally, trees can serve as windbreaks to reduce energy costs. In windy climates, a well planned landscape may reduce utility bills by a third. The best windbreaks block wind close to the ground with trees that have low crowns. Evergreens (including white pine, blue spruce, Norway spruce, arborvitae, and American holly) planted to the north and northwest are the most common varieties used for a windbreak.
A windbreak could reduce wind speed for a distance of as much as 30 times the trees’ height. For maximum protection, plant the windbreak at a distance two to five times the mature height of the trees.
It’s easy to forget about a facility’s irrigation and watering; these systems often operate in the evening without supervision. However, over watering not only wastes water but also impacts electricity and fuel costs associated with trimming fast growing turf.
Consider integrating a moisture or rain sensor in the facility’s irrigation system to reduce unnecessary watering and overgrowth. Another strategy would be to use drip irrigation or soaker hoses, which apply water all the way to the roots of the plants. These could be used instead of sprinklers, which can waste 30% to 50% when water hits sidewalks or streets instead of turf. Also, irrigation systems should be checked or serviced twice during the growing season to make sure they are running efficiently.
Ideally, a facility should be on a weekly mowing schedule. This schedule should not be obstructed with over watering, which can over stimulate turf and cause it to grow faster. Avoiding excess mowing can have a significant impact on fuel consumption.
Keeping mower blades sharp and equipment properly maintained can have a significant impact on energy consumption too. Sharp blades eliminate the need for multiple mowing passes and excess fuel consumption. Additionally, inefficient motors or other parts can result in fluid leaks and increased emissions of pollutants.
Facility managers should be diligent about maintaining equipment throughout the year and consider having aging equipment thoroughly serviced at the beginning of the growing season.
Weeds are annoying not only because they detract from the beauty of a facility, but also because they require constant trimming and expenditure of time and energy. Instead, proper and judicious use of herbicides can keep weeds at bay.
The best time to apply herbicide is in the late spring. The herbicide must contact the leaves and stems of weeds as well as the roots. A minimum of two herbicide applications per season could reduce spring dandelions up to 80%. Facility managers should be sure their grounds maintenance personnel are trained and certified in the proper application of herbicides.
Sullivan is a certified horticulturist with Brickman, a commercial landscape management firm headquartered in Gaithersburg, MD.