VP of Energy Solutions
Efficiency Capital Corp.
Savings Pay for Cutting Edge Upgrades
Most people recognize energy conservation is an effective way to reduce building operating costs while improving occupant comfort and reducing the harmful greenhouse gas emissions that contribute to climate change. But according to the Canadian Energy Efficiency Alliance, a third of Canadians blame cost as the reason they don’t invest in high-efficiency equipment and smart building envelope solutions. Energy efficiency is often seen as an expense but it’s actually an opportunity to earn an impressive return on your investment, especially in the face of rising utility costs. Performance contracting is a smart way to take advantage of this opportunity and transfer your risk to the financing company managing your efficiency upgrade.
What is Performance Contracting?
Performance contracting is an innovative way to pay for comprehensive energy efficiency upgrades based on future utility savings, with no upfront investment required. Projects can be financed using a non-debt instrument that doesn’t affect your borrowing power so you still have access to that money for other priorities. According to the Toronto chapter of the Building Operators and Managers Association (BOMA), half of all retrofits on the market fail to achieve their targets, so it’s important to protect your investment. The best contracts include third-party insurance to guarantee the energy savings promised. They also include ongoing monitoring, measurement and verification so you can track the performance of your upgrade and the actual energy savings.
Toronto Atmospheric Fund (TAF), a non-profit climate change agency, has been involved in reviewing and monitoring more than 2,000 energy efficiency projects. Based on this experience, the organization reports energy savings are between 10% and 50%, depending on the age of the building, existing equipment and on the depth of the energy conservation measures. If you don’t want to miss out on those savings, performance contracting can remove cost as a barrier.
Energy Audits Showcase Opportunities
A comprehensive energy audit will reveal what your best conservation opportunities are, including technologies building engineers are flagging as cutting edge. Some companies promote particular products or brands, but what you really need is objective advice about how to approach your upgrade. Your audit should tell you which measures will save you the most energy and reduce the most greenhouse gas emissions, not push the company’s “house brand.”
There are a few key technologies to be aware of though, including variable frequency drives or VFDs, which are also called variable speed drives. This technology dramatically improves the efficiency of motors used to power fans, pumps and compressors. By varying the frequency of these motors, VFDs control the amount of current supplied, which allows voltage to match demand, saving energy when less energy is needed.
Building automation systems (BAS) are another important technology to consider. These systems allow facilities managers to monitor and control building functionality from a central location. A BAS can be programmed to shut off or power-down equipment automatically to promote energy conservation without compromising use requirements or occupant comfort. It can send alerts to facilities managers so equipment failures, leakage, or other anomalies can be identified and resolved quickly. The hard numbers a BAS provides on building performance can also be used as evidence to generate support for efficiency upgrades. Web-based building controls and monitoring can be added to a BAS, making it possible to track energy performance in real time.
Advanced heat pump technology is re-emerging as one of the most energy efficient mechanical systems available. Depending on the type, heat source and operating conditions, heat pump systems can achieve efficiencies three to six times greater than conventional heating and cooling equipment. Ground source heat pump systems, also called geo-exchange, capture and release heat or cooling energy from below the ground’s surface while air source systems harvest this thermal energy from outdoor air. The renewable energy they harvest from air, soil or water provides space heating, domestic hot water heating and space cooling.
The Ontario government’s plan to introduce energy and water reporting and benchmarking (EWRB) regulations for large buildings has created more urgency to act on efficiency opportunities. The new regulation is expected to be phased-in with more details available early in 2017. Energy and water performance will be publicly disclosed and ENERGY STAR Portfolio Manager software will be used to rank buildings against their peers. Property managers can use this information to prioritize investments and once building upgrades are complete, the improved performance will serve as evidence of green leadership. The most efficient buildings will be eligible for ENERGY STAR certification, proving they perform better than at least 75% of similar buildings.
Research is already demonstrating the value of energy efficiency in the marketplace. A 2015 study by TD Economics and Minto showed condominium buyers are willing to pay significantly more for units with LEED (Leadership in Environmental and Energy Design) certification on resale. The average premium paid for LEED Silver is approximately 6%, with LEED Gold units selling for between 12% and 15% more than their conventional counterparts. Reflecting the importance of energy conservation, there are more points awarded for energy efficiency under LEED Certification for Existing Buildings than any other type of measure.
Even in large financial institutions, investment managers frequently overlook opportunities to earn attractive returns upgrading the efficiency of their own buildings. Performance contracting is a de-risked opportunity to capture substantial utility savings with no upfront cost for a better performing building. When it comes to energy efficiency, green leadership just makes sense.
Allison Annesley is VP of Energy Solutions at Efficiency Capital Corp. You can reach her at 416-915-1321, firstname.lastname@example.org . http://efficiencycapitalcorp.comThis article was originally written for Condo Manager Magazine