FM Issue: Survival Of The Fittest Building
By Henry H. Chamberlain, CAE, APR
Published in the October 2008 issue of Today’s Facility Manager
As the largest controllable operating cost, energy conservation in commercial buildings is hardly a new idea. From the World Wars to the energy crisis of the 1970s, efficiently harnessing the power needed to run commercial buildings at optimum comfort and performance levels has been no small task for facility professionals. Now that challenge is increasingly urgent, as utility costs continue to spike, cities and nations combat escalating climate change concerns, and facility managers (fms) look for the competitive edge in a tightening economy.
Optimizing building performance is a strategic imperative in today’s market; having an energy efficiency plan is becoming compulsory in order for fms and their buildings to stay competitive. The upside is that higher utility costs are helping inspire efficiency and innovation in the commercial building sector, which, according to the U.S. Environmental Protection Agency (EPA), produces 18% of greenhouse gas (GHG) emissions in the nation. Based on that statistic, the evolution in this area can’t come soon enough.
Inspired or not, reducing energy consumption is both an obtainable goal and a business requirement. All that fms need is a plan. The following is a three pronged approach to reduce energy usage in buildings.
First: Make It Easy
The low hanging fruit—those appealing no- and low-cost strategies that every fm can take advantage of—are ripe (and in some cases overly ripe) for the picking. Replacing inefficient lighting, adjusting dampers to within code, installing motion sensors, and implementing green cleaning strategies are among dozens of operational practices available.
The next step for fms is to investigate retro-commissioning. This investment in existing buildings can help determine where inefficiencies exist, and it is often the best place to begin an energy efficiency plan.
“Whereas commissioning is about getting a building to operate as it is designed, retro-commissioning targets what has changed over time,” explains Brenna S. Walraven, RPA, CPM, managing director, national property management, USAA Real Estate Company. “As buildings continue to add heat loads as more people and equipment are packed in per square foot, retro-commissioning shows us how to improve building performance simply by ensuring everything is working optimally. As important, retro-commissioning is almost always paid for through improved operational efficiency.”
Retro-commissioning is also among the key business case solutions for improving energy performance. Al Skodowski, senior vice president and director of LEED and sustainability with Transwestern, has overseen several retro-commissioning building projects in cities like Chicago, Washington, DC, and Seattle.
He emphasizes that retro-commissioning is not as complicated as many people think and that a commission that saves just 5% to 10% per square foot can expect to see an approximate payback within 12 to 24 months, if it is done right.
The key to success, Skodowski stresses, is ensuring the on-site teams are involved throughout the process. “We usually find the original building design works, but over time, there are lots of Band-Aids put on problems because of a lack of understanding of how a system should be run,” he explains. “When you peel away those Band-Aids, you need buy-in from the on-site team to be successful. The commissioning agent should work hand in hand with the engineering staff so the staff understands the design of the system.”
One reason retro-commissioning tends to have a short payback is because the majority of problems tend to be operational and relatively inexpensive to fix or adjust. When systemic design flaws are detected, the fix becomes more expensive.
Fortunately, design problems turn up in a relatively small number of commissions. It also doesn’t hurt that utility companies encourage retro-commissioning, so fms can check to see if their projects qualify for any rebates.
Second: Take It To The Next Level
EPA and its ENERGY STAR® program estimate that no- and low- cost operational practices can reduce energy consumption in commercial buildings by as much as 30%, a significant reduction by any estimation and a goal many fms hope to achieve by as early as 2012. But to make a building carbon neutral or to obtain the type of efficiency that high performance buildings are designed and constructed to achieve, fms in existing facilities need to generate an entirely different level of investment—one that isn’t always easily affordable.
Upgrading or retrofitting for energy efficiency is often necessary in order to achieve considerable improvements. These upgrades are very frequently cost prohibitive.
Government incentives, such as the tax deductions in the Energy Policy Act of 2005 or EPACT (which granted an accelerated deduction of up to $1.80 per square foot for certain energy efficient upgrades and partial credit of up to 60¢ per square foot) are helping, but the incentives are often too limited in scope and the window of eligibility is too short.
Since the current initiative expires at the end of 2008, it is difficult for fms to include these incentives in long-term capital budget planning. Currently, there is legislation in Congress—the EXTEND the Energy Efficiency Tax Incentives Act (S. 822, H.R. 1385)—which, if passed, would delay the current EPACT deadline until the end of 2012. It would also increase the deduction to $2.25 per square foot or 75¢ per square foot for partial credit—making it a much more practical incentive.
At USAA Real Estate, Walraven has taken advantage of incentives and believes they are critical for the private sector to attain the next level of energy efficiency. Walraven acknowledges, “We realize [incentives] won’t be around forever, but because there are so many steps involved, they need to be around longer than a couple of years. This is not just important for commercial real estate but for the economy as a whole, as these upgrades and retrofits create jobs.”
Another area where the business case will soon get a boost is with Energy Performance Contracting (EPC). While this strategy has been around for more than 20 years, it is a complex process that often took 18 to 36 months to implement.
The Buildings Owners and Managers Association (BOMA) International and the Clinton Climate Initiative (CCI) have collaborated to create a simplified EPC model that will allow fms to use a streamlined version of the same investment and delivery vehicle to perform major energy retrofits on existing buildings. In other words, the new EPCs will use the savings generated through energy efficiency to pay for building retrofits over a defined lease term. Ultimately, fms will not have to invest large amounts of capital, yet they will end up with a high performance asset.
To get the contract model to its current state, the BOMA EPC was first tested in a pilot project involving two USAA Real Estate buildings in California and Virginia. Consequently, Walraven has firsthand knowledge of the program’s evolution and its emphasis on the practical approach.
“It can be used regardless of budget or investment, as no capital outlay is required,” she explains. “The projects more than pay for themselves through the savings created when the cost is amortized.”
Walraven believes the new model will allow for three things: reduction in operating costs, replacement of inefficient equipment with state-of-the-art equipment, and perhaps the biggest boon of all, a strategy to improve employee satisfaction rates.
Scheduled to debut shortly (the tentative launch is for some time in the fourth quarter of 2008), the standardized EPC has been vetted by top real estate companies, energy service companies, legal counsel, and other experts. Eventually, the BOMA EPC may be used in public and private buildings worldwide.
Third: Benchmark, Benchmark, Benchmark
The third element of the energy conservation strategy is to benchmark for performance. As utility prices climb, fms should objectively know how well their buildings are performing—even if they just begin collecting data this year.
ENERGY STAR has had several organizations with more square footage join in the first six months of 2008 than in all of 2007. One reason for the spike may be the popularity of the program’s Portfolio Manager benchmarking tool.
Walraven’s company is a six time ENERGY STAR Partner of the Year and Sustained Excellence winner. Part of her success is the objectiveness of benchmarking through ENERGY STAR’s Portfolio Manager.
“It allows us to have a more sophisticated, objective assessment of our performance,” says Walraven. “If your occupancy goes from 50% to 100%, your energy costs very easily could double. Does that mean you’re doing a poorer job of running the building? Probably not, but how can you tell?”
She continues, “Because energy costs are affected significantly by changes in occupancy, weather, and other factors, ENERGY STAR helps measure performance more objectively by normalizing for those factors and distilling performance down to a two digit number between 1 and 100. If your ENERGY STAR rating is going up, performance is improving; if it’s going down, you know you need to assess operations closely since something may be wrong.”
Michael Zatz, manager of the ENERGY STAR Commercial Buildings Program at the EPA, also sees consumer demand as motivation to benchmark. “Consumers are beginning to demand that corporations become more energy efficient,” states Zatz. “We’re seeing that most of the big commercial real estate players are actively working on improving energy efficiency; it has almost reached a tipping point.”
Although benchmarking is not a magic pill, it may just be the best way to find that prescription. If an fm benchmarks across a portfolio, he or she will know exactly how to invest resources in the right places.
“Most organizations don’t have unlimited capital or human resources to put into energy efficiency in buildings,” explains Zatz. “You need to find the buildings that will give you the biggest bang for your buck. Benchmarking your entire portfolio means you don’t run the risk of putting those limited resources into some of your better performing buildings rather than into the ones that need it the most.”
A little knowledge and business savvy will go a long way as fms continue to transform the existing building stock into a fleet of efficient, high performance buildings. The tools and insights gained from a challenging market cycle today will help them drive value and stay competitive in the future.