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Today’s building owners and facility managers are facing internal pressures to cut budgets and reduce consumption due to the rising cost of power and impending legislation that requires a reduction of greenhouse gas emissions. On top of this, many are dealing with aging infrastructure and seeking ways to make the most of what they already have in place rather than rebuilding. One way to determine how to achieve these goals is through an energy audit where an organization can determine the type and amount of savings—in energy and cost—that they can achieve through equipment retrofits and changes to operational procedures.
Financing an Energy AuditWhile energy audits are a good starting point, once the audit is complete, organizations need to ensure that they have a funding strategy in place that provides an avenue to complete retrofits to achieve energy savings—something that most don’t take into account when planning an energy audit project.
Performance contracting, a financing means commonly seen in the public sector that can also be mirrored for private companies, is an option that is receiving increased interest. Performance contracting provides funding for energy conservation measures (ECMs) by using guaranteed energy savings determined through the energy audit over the course of several years to pay for the project. At the time the energy project is completed, an organization walks away with solutions, most commonly through retrofitting energy systems, to increase efficiency and lower energy costs. These retrofits can include installation of high-efficiency lighting; replacement and redesign of aging heating, ventilating, and air-conditioning (HVAC) systems; and installation of a computer-controlled building management system. With a performance contract, upgrades of interrelated systems are bundled together into one comprehensive project that provides a customized solution based on the facility’s needs, maximizing the savings possible and allowing the cost of improvements to be a manageable expense.
When the installation is complete, maintenance and labor costs will decline, and utility savings will begin to be realized through the operation of high-efficiency energy equipment, allowing the organization to finance the energy audit and resulting retrofit with those achieved savings. In addition, many energy service companies guarantee the estimated amount of energy savings they calculate in an energy audit. If these savings are not realized, the energy service company that implements the performance contract is obligated to write a check to cover the shortfall. This guarantee not only reduces the facility manager’s risk and facilitates the procurement of the capital necessary to pay for the project—it also provides assurance that the energy service company will have impetus to ensure the system runs as efficiently as possible, providing organizations with an assured return on investment.
The Energy AuditThe energy audit determines the type and amount of savings to be expected if the organization were to conduct a building equipment retrofit at the end of the audit. While these savings can take many forms, a well-designed and installed energy conservation project will generate utility bill savings, save labor, and lower repair costs.
While there are a number of techniques that may be used to estimate savings, the important factors to consider are accuracy and verifiability. Since the facility relies on the savings produced to meet the annual payments for the project, it is recommended that the bulk of the savings guarantee is based on actual energy bill savings, which are measurable and verifiable. Furthermore, the facility operators should receive regular savings reports that compare the expected payment without the energy conservation improvements to the actual invoice.
In addition, operational savings should be carefully considered and recognized if they can be substantiated. These savings fall into five general categories: equipment replacement savings based on life cycle costs, repair cost savings, maintenance contract savings, in-house labor savings, and productivity savings.
It is important to note that operational savings are rarely guaranteed and may not be budgeted dollars. They can be real, but it is important to carefully study the savings to understand which will really save currently budgeted dollars.
Finally, diligent monitoring is essential to a successful project. Experience has shown that in many cases, regardless of the ECMs applied, the energy efficiency of the facility may return to its original level over time. This occurs when technicians bypass problems rather than fix them, or when changes are made in an effort to quickly resolve occupant complaints without keeping in mind the long-term schedule needed for the building, among other causes.
For the energy conservation project to remain successful for many years, remote monitoring and/or active user involvement is needed. Facility staff can often be trained to monitor the technology, eliminating the need for costly maintenance contracts.
ConclusionWhile energy audits can provide companies and organizations with insight into current energy costs, it is important to evaluate the overall financial strategy of the energy audit to ensure your organization can achieve cost and energy savings. Through financing methods such as performance contracting, companies have the option to improve the operations of their facilities while meeting financial goals, government emissions mandates, and combat the cost of rising energy prices—at no additional cost to the company.
Author’s Bio: Kevin Vaughn specializes in federal energy solutions.
