Even in a Recession, Facility Managers Can Get Approval For Efficiency Projects
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REPORT PREPARED IN CONJUNCTION WITH ALLIANCE TO SAVE ENERGY
You did everything right in preparing a presentation on energy efficiency projects for the boardroom. You translated reduced BTUs into dollars saved. You understand how to get past the hurdle rate to the payback period for new energy efficiency measures. So why aren’t these time-proven methods playing better in the boardroom? Generally, when something as beneficial as energy efficiency doesn’t sell, the problem is not energy efficiency itself. The problem is that energy, which in a typical office building costs about $2 a square foot, seems like pennies compared to other bottom-line issues.
Should facility executives forget trying to get an energy-saving plan through this year? Absolutely not. Facility executives need to show the boardroom how much energy efficiency improvements can address pertinent boardroom issues, especially in the worst of economic times. “Energy efficiency is still a dollars and cents argument,” says Jeffrey Harris, vice president for programs at the Alliance to Save Energy.
One way to get attention in the boardroom is to point to gains in worker comfort, satisfaction, retention and health that may come along with energy efficiency measures. While gathering hard numbers is not easy for those intangibles, the bottom-line cost they represent in the boardroom can be significant.
“In the three-story building where my office is, the utilities cost is about $3 per square foot per year,” says John Conover, president of Trane’s Commercial Systems Business in the Americas, an Alliance associate. “But the cost for my associates, who are essentially white collar labor, is about $400 per square foot per year. We’ve learned from LEED-certified buildings that energy efficiency measures impact productivity because if workers are not complaining about the environment, they have less absenteeism and they learn better. If we improve our productivity by just 1 percent, that’s greater than the total cost of energy.”
Beyond Dollars and Cents
In business presentations, success is in the significant details. The operative word is “significant,” because most facility executives do their technical homework well.
“The question a facility executive needs to ask is, ‘How does what I am proposing address critical items that my organization considers important?’” Conover says. “Go in with the technical facts, but balance them with what the business considers critical success factors.”
For example, the U.S. Green Building Council, an Alliance associate, points out that saving $100,000 in energy in a school system is enough to hire two teachers, buy 200 computers or purchase 5,000 textbooks.
Paul Vitello, director of environmental sustainability at United Technologies Corporation, another Alliance associate, says that it’s important to understand the company’s cultural focus.
“It comes right from our CEO,” he says. “We are to identify waste in any form and then eliminate it.” Vitello admits that quantifying such intangibles as worker productivity in dollars is not easy. But he knows his audience and has already won $96 million for projects, more than half of which are cogeneration projects that typically do not have that magical two-year payback often used in energy efficiency presentations.
In 2004, Nashville Public Schools signed a performance contract with Siemens Building Technologies, an Alliance associate. By mid-February 2009, improvements resulted in nearly $3 million in equivalent annual energy savings.
The first phase spanned five years and included 187 structures and more than 14 million square feet. Joe Edgens, the Metropolitan Board of Public Education executive director of facilities and operations, says he appreciates the millions in energy savings. But that’s just part of the picture. “The schools in the system are better, more comfortable learning environments for our students, teachers and everyone who either works in or visits public education facilities in Nashville,” he says.
For energy-intensive businesses with low profit margins, energy savings can dramatically impact the bottom line. “In the grocery store business up to half of operating costs are utilities,” says Conover. “Most chains operate on a 3 to 5 percent profit margin. So, if the company can save 20 percent on utility bills, it will change the whole complexion of their profit stream.”
Bank of America, Walmart and Home Depot are Alliance associates with declared corporate commitments to sustainability. But each approaches sustainability differently. Facility executives presenting to boardrooms committed to LEED, ENERGY STAR and similar programs still need to identify the subtleties of their corporations.
Home Depot’s corporate position is to market green and sustainable products to customers. The company promotes resource conservation, responsible packaging and a store prototype that uses energy-efficient lighting, vestibules and automatic lumber doors to reduce energy consumption.
Walmart is committed to making every new store 30 percent more efficient than in 2005; existing stores are to reduce greenhouse gas emissions by 20 percent. Eventually, the company wants to be powered 100 percent by renewables.
Bank of America’s 10-year, $20 billion environmental initiative announced in 2007 addresses climate change by championing sustainable business practices. When completed this year, the new Bank of America Tower in New York City is expected to meet LEED Platinum standards.
Despite those successes, corporate boardrooms still think with their bankbooks. When he presents projects, Vitello says he doesn’t start by preaching greenhouse gas reduction.
“I recognize that my audience is business people,” he says. “So I start by talking their language. I say, ‘This project will save X dollars, and, oh, by the way, we will also benefit from greenhouse gas reduction. We can save money, do good for the environment and help our employees stay healthier.’”
Harris says he believes the $787 billion Stimulus Act that President Barack Obama signed into law in mid-February is also a good selling tool. The stimulus package has $43 billion earmarked for energy-efficiency projects, covering renewable energy and improvements in conventional energy elements.
(For more information on the stimulus package, see “First Aid For Buildings.”)
Body of Evidence
A growing number of studies illustrate the wider value of energy conservation. One example is a recently published study by Lawrence Berkeley National Laboratory, an Alliance associate, which suggests that operating buildings more efficiently actually could benefit the health and comfort of occupants. “Indoor Thermal Factors and Symptoms in Office Workers: Findings from the U.S. EPA BASE Study,” by Mark Mendell and Anna Mirer, found that keeping buildings warmer in summer and cooler in winter resulted in far fewer building-related health symptoms, such as respiratory tract, eye and skin irritations; headache; fatigue; and difficulty concentrating.
In summer, in buildings in which the indoor temperature was below 73.4 degrees F, occupants have a 50 percent increase in such symptoms as headaches, fatigue and difficulty concentrating. In winter, buildings with indoor temperatures above 73.4 degrees F were associated with 30 to 80 percent increases in nose, eye and skin symptoms and headaches.
“Our findings suggest that energy efficiency and keeping buildings healthy and comfortable for the occupants are not necessarily in conflict,” says Mendell. Less summer cooling and less winter heating “might reduce energy use in buildings substantially, yet have health benefits for the occupants that we did not expect, and still keep occupants as comfortable as before or even more comfortable.”
Studies like those can help facility executives plan and justify energy-efficiency projects. But winning approval for a project is only the first step. A well-balanced energy management plan includes commissioning, maintenance and recommissioning activities, says Harris.
“Unless you pay attention to quality control and occasionally recommission the project, you will not get the savings you and the boardroom are expecting,” Harris says. “If someone tells you they have a set-and-forget energy solution, that’s a danger sign. In energy conservation, even so-called plug-and-play things like computers have power management settings that can be altered. Lighting and occupancy controls need to be calibrated and recalibrated. Paying attention to quality, during and after installation, is extremely important.”
About the Alliance to Save Energy
The Alliance to Save Energy promotes energy efficiency worldwide to achieve a healthier economy, a cleaner environment and greater energy security. Alliance members — called associates — include prominent businesses, environmental and consumer groups, government entities, and associations.
The Alliance offers programs that focus on energy efficiency in a wide variety of areas, including commercial buildings, windows, codes, schools, data centers and government policy.
Active not only in the U.S. but also on the global scene, the Alliance offers programs targeting areas that range from windows in China to heating and water systems in Eastern Europe.
Among the Alliance’s international activities is the Energy Efficiency Global Forum & Exposition. This year’s event will be held in Paris at the Palais des Congres, April 27-29. More than 100 global public and private sector energy and energy efficiency leaders and experts will offer insights and information.
Learn more about EE Global and other Alliance activities at www.ase.org.