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By Karen Kroll
August 2008 -
Energy Efficiency Article Use Policy
Replacing aging chillers, boilers, and other energy-hogging equipment is often at the top of the priority list for facility executives. The challenge, of course, is that doing so usually requires a significant capital outlay. With the economy tight, getting approval to spend those dollars can be challenging, even if the new equipment will pay for itself by cutting the building’s ongoing energy bills.
That’s where the Energy Efficiency Building Retrofit Program (EEBR) can help. The Clinton Climate Initiative (CCI) — a project of the Clinton Foundation — runs EEBR, which was launched in May 2007. The program is bringing together facility executives, global energy service companies (ESCOs), and five of the largest financial institutions around the world to finance investments in energy-efficiency projects.
Here’s how the process can work: A facility executive connects with an expert from an ESCO, who identifies the upgrades that will reduce the building’s energy consumption by 20 to 50 percent. In an energy performance contract, the ESCO guarantees the savings, says Mike Taylor, head of CCI initiatives with Honeywell, one of the participating ESCOs. That allows the organization to tap into financing from the banks and financial institutions participating in the program, and use the savings in energy bills to repay the loan. As a result, facility executives can retrofit their buildings without an up-front outlay of funds.
Allegheny College in Meadville, Penn., will be working with Siemens to identify and implement between $3.5 and $4 million in upgrades, says Larry Lee, associate vice president for finance and planning.
“We have a fixed budget for completing items such as lighting retrofits and replacing inefficient air handling units,” he says. With this program, those items can be given the go-ahead based on the energy savings they’ll generate.
Working with CCI also offers facility executives “access to a tool chest of people and body of information that they wouldn’t otherwise get on their own,” says Mark Lonkevych, vice president of marketing and strategy with Constellation Energy’s projects and services group. Experts with CCI check to ensure the ESCOs participating in the program have successfully completed other energy efficiency projects. Local energy service companies and contractors also will be invited to participate, according to CCI.
The efforts of the EEBR are important, given the amount of energy required to operate most buildings. Despite the media attention focused on the amount of energy used by America’s cars and trucks, commercial and residential buildings actually account for about 40 percent of the primary energy use in North America, says Dan Williams, director of global product strategy and systems marketing with Carrier Corporation, one of the ESCOs to initially partner with the EEBR.
Moreover, buildings are responsible for 40 to 70 percent of the greenhouse gases emitted in developed cities, says Wes McDaniel, vice president of the energy solutions division of TAC, another ESCO that has partnered with the EEBR. “If you can reduce that number — and, in most buildings, you can reduce it 20 to 30 percent economically — you can have a huge impact on the world.”
Initially, the EEBR focused on municipal buildings, signing up 16 mayors from the world’s 40 largest cities (C40). North American cities include Chicago, Houston, New York and Toronto. Other members include Bangkok, London, Mexico City, Mumbai and Tokyo. Administrators in these cities are evaluating their buildings for their retrofit potential. CCI employees also help the municipalities connect with the ESCOs involved in the program.
Other partners of EEBR include five financial institutions: ABN AMRO, Citi, Deutsche Bank, JPMorgan Chase and UBS, which are financing the first generation of retrofit projects. Each has committed $1 billion to the program. Local banks in each of the cities also will be invited to contribute to the funding pool, CCI says.
Additionally, the U.S. Green Building Council is providing technical expertise and systems to CCI, says Michelle Moore, senior vice president for policy and public affairs.
It’s important to note that while the initial focus of the EEBR was municipal buildings, it now covers other types of facilities.
“There’s been a significant movement to expand the reach of CCI,” says Clay Nesler, vice president of global energy and sustainability with Johnson Controls, Inc. For example, a number of colleges and universities, through the American College and University Presidents Climate Commitment (ACUPCC), are partnering with CCI, says Lonkevych. Additionally, several commercial property companies, including GE Real Estate, are partnering with the EEBR.
“CCI is a facilitator, a broker that has brought together local and state governments, ESCOs, manufacturers, financial companies, and private developers, as well as colleges and universities,” says Larry Wash, vice president of services and contracting with Trane. While CCI can’t close deals, it was able to create momentum for these projects, and foster a dialog that turned into action, he says. Capitalizing on the star power of former President Bill Clinton, who established the William J. Clinton Foundation, is a huge spark for beginning that dialogue.
Similarly, CCI has been able to leverage the purchasing power of the organizations participating in the EEBR, and then approach manufacturers to promote energy efficient technology, Williams says. The approach shortens the time required by manufacturers to achieve economies of scale in the production of energy-efficient products, which should lead to lower prices. Carrier Corp., for instance, is participating in the EEBR on both the performance contracting side, and as a manufacturer of energy efficient products, says Williams.
Through its efforts, CCI has been able to draw attention to the significance of commercial buildings’ energy use and level of greenhouse gas emissions. While many building developers pay attention to the expected energy consumption of a building under construction, building retrofits and efficient operation are less glamorous, and often overlooked. Equally important, CCI developed a mechanism for financing these projects, reducing what had been a significant obstacle in gaining approval for many projects.
“CCI is about expediting the process and getting everyone to buy in and start rowing in the same direction,” says Peter White, director of the Johnson Control’s CCI program in North America. While many municipalities typically require 12 to 18 months to launch energy-efficiency projects, some have gotten off the ground in six to nine months, he says.
For example, Houston and Chicago already are working on projects via their performance contracts, says Taylor. “In the U.S., a lot of private work is starting to ramp up,” he says. Usually, the contracting organization needs several months to choose the ESCO with which it will be working, and a few more months to complete the energy audit. Once that’s completed, work can begin on the retrofit projects.
A number of energy audits and the development of project plans also are starting up in Asia, says White.
But the use of energy performance contracts appears to be moving more quickly in North America than in other parts of the world because performance contracting has been available in the U.S. since the early 1980s, McDaniel says. The companies involved have histories of working on performance contracts.
Facility executives interested in learning more about EEBR, and in determining whether their facilities qualify for the program, can talk with a representative of one of the ESCOs or other partners, such as the Building Owners and Managers Association (BOMA) International, that are working with CCI.
Projects need to be registered and qualify with EEBR. Not every project will be a good fit, however. The initiative is focusing on facilities where energy use could be improved through more efficient equipment, but whose current equipment still functions. The goal is to prompt facility executives to accelerate their move to more efficient equipment by enabling them to access it on a cost-neutral basis.
“The push is to put more efficient products in at a faster rate than would happen otherwise,” says Jim Macosko, global project manager with Carrier.
Training also is important, says Lee. “Often, systems get incorporated, and then get out of kilter because they’re not operating properly.” Because the CCI approach requires continued measurement of the energy saved, the equipment has to function optimally on an ongoing basis.
At the same time, the projects have to make financial sense. That usually means that the buildings, or groups of buildings, need to be at least 100,000 square feet, McDaniel says. It would be difficult for buildings that are any smaller than that to achieve the savings necessary to make the investment worthwhile, he says. Facility executives whose buildings are not part of any organization already partnered with CCI, such as the C40 or BOMA, can e-mail CCI (email@example.com) to get information and see how they can get involved.
The first step in EEBR retrofit projects is to establish a baseline of current energy use and emissions, Lonkevych says. The ESCO evaluates the building’s operation, financial structure, and any deferred maintenance that needs to be attended to. It then develops a plan of action for energy-efficiency upgrades and operations that facility executives will be able to sustain. Finally, once all the projects are implemented, the baseline is recalculated. “We take responsibility that it works like we said it would. If not, we write a check,” McDaniel says.
Most projects involve traditional energy efficiency measures, such as replacing energy hogs and aged equipment, says Sam Choy, global marketing director for energy and environmental solutions within the energy and environmental solutions group of Siemens Building Technologies. For instance, the contractor may install more efficient air handling systems or boilers, or a new lighting control system that will ensure that the lights remain off when the facility is unoccupied. Facilities that haven’t been reviewed in several years may offer surprisingly large savings, experts say.
At the same time, the EEBR offers facility executives the opportunity to bundle several energy projects into a single endeavor that can be financed and will pay for itself. So, rather than focusing on the low-hanging fruit, organizations have a mechanism for financing and undertaking broader, deeper projects, says Nesler.
On a wider level, participating in this program can help the organization help the environment. In other words, facility executives can take action to improve both the company’s bottom line, and the world around the building, says Danilo Elez, global business development leader for Trane Building Services. “It’s something that people can be very proud of,” he says.
Karen Kroll, a contributing editor for Building Operating Management, is a freelance writer who has written extensively about real estate and facility issues.