Services & Maintenance: Funding Energy Projects
By Ash Awad, P.E.
Published in the March 2013 issue of Today’s Facility Manager
One of the outcomes of the Great Recession is a deeper appreciation for the immense potential of energy efficiency in the United States. It’s rare to find a market opportunity that creates equally positive impacts on the environment as it does the economy. This could be thought of as the “new power” behind building efficiency and energy standards.
The challenge of engineering efficient schools, hospitals, offices, data centers, manufacturing plants, and more is a daunting task. It’s estimated there is approximately 80 billion square feet of non industrial facility space consuming 70% of the electricity in the United States. Studies show that nearly 50% of that energy is wasted, which makes inefficient use of electricity a significant issue for facility managers (fms). By implementing only the energy efficiency measures that pay for themselves, 1.1 gigatons of carbon emissions per year could be prevented. This is the equivalent of shutting down more than 200 coal-fired power plants.
Public officials throughout the United States are acutely aware of this challenge. Federal departments and numerous states have allocated funds and enacted new laws to jump-start energy and operational cost saving improvements in public and private facilities.
While the opportunity to reduce utility consumption exists in all building types, recent funding programs and public policy initiatives have primarily centered on government and institutionally owned assets. Such was the case in 2012 in Washington state where the legislature refunded the Jobs Now Act. This Act directed $78 million to a competitive grant program focused on addressing aging and failing infrastructure in schools, government buildings, and public hospitals by funding energy efficiency systems.
A similar effort has been undertaken in California with a voter approved proposition in November 2012. Prop 39 is predicted to generate a little over $1 billion per year in new revenue for the state, and half of that will be directed to an energy efficiency grant program for updating schools. Adding to the momentum, the Wisconsin Legislature recently amended school levy legislation with the intent of making it easier for schools to fund energy efficiency projects that pay for themselves with savings.
All three of these examples have resulted in a notable increase of energy related projects that address health and life safety needs in facilities while also putting construction trades, engineers, and designers back to work.
Programs like those in Washington, California, and Wisconsin represent catalytic opportunities for public fms to fund performance based energy projects that can provide guaranteed operational cost savings while adding jobs. Typically these projects are designed and delivered in collaboration with local energy efficiency providers to leverage additional local funding resources including utility incentives, low interest loans, and other alternative financing packages.
These types of programs are a welcome start in bringing public facilities up to current energy efficiency standards. But there is much more to be done.
Leveraging A Cleaner Future
Historically, the topic of financing has dominated any policy debate on how to scale energy efficiency. While access to financing is rarely an impenetrable barrier to move an energy efficiency project forward in the non-residential market, that’s not to say there aren’t challenges. To realize fully the power of energy efficiency and on-site renewable systems at a neighborhood or community scale, the market needs policy framework that goes beyond finance and accounting to develop a new ecosystem that encourages deep and persistent utility savings for fms, their occupants, industry players, and utilities alike. This ecosystem would encourage transparency and reward measureable outcomes. [To read about strategies for financing solar energy project, read “Shining Light On Solar Energy Choices.”]
There are three critical steps that, if implemented, could open up the market potential of energy efficiency and resource conservation: performance based outcomes, energy labeling, and pay for performance.
Performance Based Outcomes
As exemplified in Washington, California, and Wisconsin, performance based outcomes are conditional to participation in the programs. State and federal funding of energy efficiency initiatives must be connected directly to expected results. If federal and state agencies provide grants and tax incentives for projects, there should be a performance mandate associated with the funding.
Financial efficiency is as important as energy efficiency. Stakeholders should demand the money is used in the most efficient manner and that the infrastructure improvements are performing as anticipated.
North of Seattle, WA, the Mukilteo School District is a prime example of performance based outcomes. The district was successful in identifying an energy efficiency project that would receive funding through the Washington state Jobs Now Act. As a result, the district was able to supplement and leverage its capital budget for facility upgrades with a $1.3 million Office of Superintendent of Public Instruction grant. The grant produced a 1.5 to 1 matching opportunity, which resulted in $3.35 million for the entire project.
So what was accomplished? At Mukilteo’s Discovery and Olympic View elementary schools, existing heating water boilers were from the original 1960s construction and very inefficient. These boilers were replaced with high efficiency condensing boilers, and new boiler controls were provided to optimize energy efficiency.
At four other Mukilteo school facilities, the original heating hot water piping systems were in a state of failure, including leaking couplers that caused the boilers to operate continuously, year-round. Couplings were replaced to eliminate the leaks and allow for the boilers to be shut off at night and on weekends and holidays. The result was significant energy, water, and chemical savings and reduced water damage potential.
Last but not least, the district’s building energy management control system was replaced to allow for significantly better control of the HVAC and other facility systems.
As a result, the Mukilteo School District has projected a $5,600 annual utility savings (kWh) and more than $77,500 in annual gas savings (Therms). And in addition to enhancing the general fund through electric and gas bill savings, the project stimulated the local economy by maximizing the use of in state labor and by adding a projected 30 to 60 new direct and indirect jobs to the economy.
This approach could become a new norm for the built environment. As this issue develops further, aggressive public disclosure of how a facility performs may become standard. New York City is a leader for such efforts, and other cities and states are not far behind. For instance, the Massachusetts Department of Energy Resources is conducting a pilot of its proposed MPG Rating for Commercial Buildings. As the department likes to point out, the concept “equates building labeling with the familiar car performance rating of miles per gallon (MPG).”
Federal agencies and other state and local governments are also taking action by adopting required policies and volunteer campaigns that leverage EPA’s Energy Star tools to reduce energy use in commercial facilities. Most efforts, however, are still in their infancy. Labeling needs to be a required part of all initiatives.
Pay For Performance
Much of the country’s electrical grid infrastructure is fast approaching the end of its useful life—resulting in the expectation of unprecedented capital investments over the next decade and beyond. Combine this with carbon reduction goals, smart technology, distributed renewable systems, and abundant domestic natural gas supplies and what is left is an antiquated utility business model. The centralized grid is giving way to a decentralized neighborhood scale resource district.
Pay for performance incentive programs are being explored by utilities. This approach treats “a watt conserved” as equal to “a watt generated.” The result is that resources would be measured in real time at the meter versus predicted by the equipment choice. With this approach, performance based incentive programs would transition from an upfront rebate based on deemed savings to an annual payment stream based on actual savings.
The Triple Play
So what does this all mean? Fms have a newfound power to create jobs and help to deliver a beneficial triple bottom line. These actions can and will have a huge impact on communities, the environment, and the economy. So, whether it’s working with energy efficiency companies to win facility improvement grants or collaborating with federal, state, and local agencies to create innovative methods for funding the creation of healthier facilities, the window of opportunity is open now. Fms can take the first step by contacting their state’s energy office or local utilities’ conservation department to see what programs and services are available.
Awad is vice president, energy & facility services for McKinstry, a design, build, operate, and maintain firm specializing in consulting, construction, energy, and facility services.