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3. Moving forward on a retrofit - the key principles
Do it now
Some building owners may be tempted to postpone an energy retrofit until other building repairs are completed or equipment absolutely has to be replaced. But a well-planned energy retrofit can actually help make other necessary building repairs or upgrades more palatable. By blending energy efficiency improvements with other less cash-flow positive actions, you can lower the overall financial impact of a building upgrade package. Really, it comes down to a question of who you want to pay. Do you want to pay utility companies for energy that is being wasted or do you want to spend it on yourself, by putting the money directly into your business through energy performance upgrades. Either way, you are spending these dollars. You might as well spend them on yourself.
Waiting can also be costly. Many Toronto high-rises have chiller units with CFCs that must be replaced by 2010. Many of these chillers will have already experienced a significant decline in efficiency — from 80% to 40% or less — with age. Add to that the fact that this equipment is dollar sensitive (must be imported from the U.S.) and you have a perfect storm of circumstances that calls for earlier replacement. But remember, don't just look at one piece of equipment — use this as a starting point for a full building review to maximize your investment.
For more on how to plan a successful retrofit, take a look at the presentations from the TowerWise Power of Green Seminar held in November 2010. An important element in planning your retrofit is to involve building managers and maintenance staff, both to get their input and to ensure they have the skills and knowledge to keep building systems well tuned.
...and calculate your savings
Below are some tools for calculating the financial returns from a building retrofit
- An overview of payback measures. [PDF file] This chart explains measures such as IRR and NOI and their strengths and weaknesses for measuring financial returns. If you're not already familiar with these measures, read this before using the calculators below.
- Financial return and building value calculators. The financial return calculator will show you three common measures: internal rate of return, return on investment, and simple payback. The building value calculator will show you the increase in building value that results from increased cash flow.
- EnergyStar Cash Flow Opportunity Calculator. [Excel file] Calculate the cash flow benefits of a retrofit and the cost of waiting for lower interest rates.
Communicate
One of the keys to a successful retrofit is good communication. The behavior of building residents has a huge impact on energy consumption. Without their buy-in any energy efficiency program risks failing — or at the very least underperforming. Lever the residents' interest in energy conservation and environmental issues through resident communication and education programs that provide them with opportunities to contribute to the plan. Stress the advantages:
- better building comfort (fewer drafts and cold spots, better lighting, better air quality)
- protection against rising utility costs (the emphasis here should be on reducing exposure to rising costs rather than on net savings given the odds that prices for gas and electricity will continue to increase)
- making the most of already necessary changes, like the need to change old chillers or boilers
- for condo residents, improved resale values and a better building reputation (faster sales)
In condominiums in particular, there can be resistance to the idea of an energy retrofit based on the perception that benefits will not be shared equally. This is an understandable, but unfortunately shortsighted, response to the benefits of greening your building. Here are some common objections and responses:
Residents with larger families will get more of the benefits
Not really. Utility costs are often common costs in condominiums that are reflected in monthly fees. Everyone will benefit equally if these costs are contained by reducing consumption. Right now, you are all paying for energy that is simply being wasted.
I may not be here long enough to see any payback
A good energy retrofit will help protect the capital you have invested in your condominium by ensuring the building's systems are in good operational order and by keeping operating costs under control. A green building is a comfortable, cost-efficient building, which will make it more attractive to buyers and will protect your investment.
Building operations staff can also have a significant effect on the success or failure of any retrofit. With their help, energy consumption can be reduced and the retrofit goals can be achieved. Educate staff on the energy efficiency measures being undertaken, provide training on new procedures and processes and on new equipment and communicate regularly on the progress of the plan implementation. Solicit their input into the plan at all stages. See the Protecting your savings section for more on staff training and monitoring.
Mobilize the finance
The up-front costs of an energy retrofit can often be the biggest barrier to improving building efficiency and reducing long-term costs. Fortunately, there are a growing numbers of ways to finance a retrofit that allow you to leverage the savings such actions can deliver:
- Institutional financing. Major banks are becoming more comfortable with the concept of financing energy retrofits, but it remains relatively difficult to get bank financing for this purpose. However, some condominium finance specialists are more open to such loans, so don't give up if your bank says "no." Search online for "Condo finance" or check the TEAAC member list for companies involved in this area.
- Energy Service Contracts. Many Energy Service Companies will guarantee a level of improvement in energy efficiency for a building. They will finance the up-front costs of the retrofit in return for a share of these savings. However, most ESCOs only deal with large projects.
Tower Renewal Program. The City of Toronto's ambitious Tower Renewal program is examining how to leverage existing City and Provincial programs and private finance to aid with much needed upgrades to aging slab towers. You can get more details at Tower Renewal.
Videos on finance issues for energy retrofits
Make green energy part of the package
There are an increasing number of financially attractive green energy options available for high rises, including geothermal and solar hot water. Or you might want to consider making your current gas usage much more efficient with a combined heat and power (CHP) system. Click here for more details on these options and incentives.
Take advantage of incentives
There are both natural gas and electricity conservation incentives available for gh-rise retrofits, but its best to look at these programs as the icing on the cake rather than the cake itself. A good energy retrofit plan should be financially feasible without major incentives. When researching incentives consider:
- Does the incentive allow you to go beyond your original plans?
- Does it fill an important gap (e.g., assistance with planning)?
- Are you comfortable with the technical requirements of the incentive offer, including reporting requirements?
- Do you understand the timeframe for approvals and payments? Does this fit well with your plans?
» Next step: Protecting Your Savings
