Going retro. Making energy retrofits pay for themselves

Transcription

1 Energy expenses do not need to be written off as one of the costs of doing business. With some effort, you can manage your organization s energy expenses, add to your bottom line and contribute to a more environmentally sustainable world. Going retro Making energy retrofits pay for themselves

2 Going Retro 2 According to a Sustainable Development Technology Canada report (Geared for Change, 2009), an estimated 13% of all of Canada s greenhouse gas emissions are caused by commercial buildings. A direct way to change that impact is through energy efficiency initiatives. Without spending a dime, you can begin to make a real difference simply by changing how your business uses its energy. When you are ready to look at more significant ways to save money through energy efficiency, you may even consider undertaking a more comprehensive energy retrofit of your premises. Start with low-cost energy efficiencies Since energy represents about 30% of the operating expenses in a typical office building, according to a CB Richard Ellis and EMEA Research Report (Who Pays for Green? The Economics of Sustainable Buildings) and much more in energy-intensive businesses such as manufacturing, it makes sense to begin by undertaking low-cost improvements to how your business uses energy. The first thing you should focus on is your building s performance and energy management the free stuff you can do with no money down and then you can look at retrofits and technical solutions, says Chris Rickett, senior project manager for Partners in Project Green in Toronto. An initiative of the Toronto and Region Conservation Authority, Partners in Project Green is working with the approximately 12,500 commercial and small businesses in a 12,000 hectare area called the Pearson Eco-Business Zone in and around Toronto s Pearson International Airport to increase awareness about energy efficiency options. Sometimes people run to the technical solutions first, which we encourage them not to do. We try to help them look at managing better before they start spending any money, adds Rickett. Ramp up to higher energy efficiency gains Once you have worked through the low-cost options, you can look into smaller retrofits that will maximize your energy savings and help you analyze where your best investments can be made in higher energy efficiency gains. The Energy Star Building Program in the U.S., a rating program that Natural Resources Canada has adapted for businesses and homes, recommends taking a sequenced approach to energy efficiency retrofits. In other words, start working on achieving smaller energy efficiencies first. This way, you can build a culture of success for the larger energy efficiency work that follows. Undertaking a combination of smaller energy retrofits can have a big impact on your energy costs and facility comfort levels. Energy Star estimates that energy use can be reduced by as much as 30% to 50% by undertaking a combination of relatively low-cost energy efficiency work such as: > Resealing your window and using natural ventilation; > Cleaning your ducts; > Upgrading your air distribution systems by replacing fans and adding room sensors; > Upgrading your heating and cooling systems (HVAC); and > Retrofitting your lighting system, taking advantage of natural lighting and using energy efficient bulbs. [Source: Energy Star chart located at cited in Energy Efficiency and Real Estate: Opportunities for Investors, a report by CERES/Mercer Larger energy retrofits involve making a building envelope more energy efficient by re-cladding the entire building, replacing or converting air and water distribution systems, replacing all heating and cooling systems or using cool roofing, and/or installing renewable energy generation such as solar, wind or geothermal.

3 Going Retro 3 Green roofs can also increase the energy efficiency of the building envelope. In a study by the National Research Council of Canada, a vegetated roof in Ottawa reduced the average daily energy demand for air conditioning by more than 75% during the summer compared with a regular, black-topped roof. Where s the money? Large-scale energy retrofits offer large-scale energy cost savings, but where does the money come from? Most energy retrofits pay for themselves over time and can even make money. Still, many organizations have difficulty finding the money to make the retrofit investment in the first place. The good news is that energy retrofits may not cost as much as you might expect. This is because there are a number of financial incentives across Canada ranging right up to hundreds of thousands of dollars that are available to support businesses working to become more energy efficient. A good source of information about federal government incentives for commercial and small business retrofits, as well as energy efficient equipment, calculation tables and case studies, is the Office of Energy Efficiency (OEE) website operated by Natural Resources Canada (NRCan) at The website also has details about NRCan s ecoenergy Retrofit program. The program is offering a financial incentive of up to 25% of project costs to a maximum of $50,000 per application and $250,000 per corporate entity until March 31, This program is available to small- and mid-sized industrial companies to support implementation of energy saving projects. You can also find an extensive list of national sources for industrial and commercial incentives within the Energy and Water Efficiency Financial Assistance Directory, posted on the Partners in Project Green website at Provincial and municipal governments across the country offer their own energy efficiency and renewable energy incentives to businesses. One of most recent examples is Ontario s Feed-in Tariff (FIT) program, the first comprehensive feed-in tariff program for renewable energy in North America. As part of FIT and its related microfit program, businesses and homeowners that generate renewable energy can sell it back to the provincial power grid at a fixed price. Rooftop solar power producers, for example, can be paid up to 80.2 cents per kilowatt hour (kwh), while wind power producers can be paid up to13.5 cents per kwh, according to the Ontario Power Authority. Many regional and municipal power utilities also offer energy efficiency incentives. Canada s largest utility, Toronto Hydro, has the Business Incentives Program (BIP); Nova Scotia Power has its Smart Lighting program; and B.C. Hydro offers its Power Smart program. Look for other energy providers such as Enbridge Gas in Ontario, which offers grants, incentives and technical support to help businesses become more efficient through the testing and replacement of such things as boilers. As well, a number of industry associations also offer sector-specific energy efficiency incentives. A simple web search should lead you to more information about the incentives and resources in your part of the country. Loans, mortgages and lease financing You also can talk to your financial institution about options for variable rate or fixed rate term loans or, if you own your premises, commercial mortgages. Bridge financing may also be an option. To help you replace equipment and machinery with more energy efficient units, leases are also available at fixed or floating rates, or through a revolving lease line. Your financial institution will evaluate your eligibility for these options based on your cash flow, your credit rating and the maximum life of the asset you re seeking to finance, and can customize a loan to meet your needs. Every loan transaction is unique. We never take a one size fits all approach to how we structure a loan, the rate we lend it at or the conditions the loan includes, explains Randy Hansuld, senior account manager, public sector, RBC business financing. We re very happy to be lending to energy retrofit projects, and we re expecting to work with many more such projects as awareness grows about the

4 Going Retro 4 money these investments can bring back into a business over the long term. Paying it forward The payback period on your retrofit can be calculated by using a simple formula: Costs (minus any incentive dollars received) annual savings = payback However, the true benefits of an energy retrofit involve more than the initial investment; the long-term energy cost savings and environmental impact should be taken into account too. I think sometimes people get stuck on the simple payback approach. How many years it will take to pay off their investment, says Chris Rickett of Partners in Project Green. If companies are only looking at the fastest payback for the buck, it really takes a lot of options off the table that could save them significant money. Randy Hansuld of RBC agrees: As a business, what you should understand is the improvement you are going to see in your net income cash flow as a result of doing a retrofit, because ultimately you will be paying a lot less money for energy usage costs for running your business. That s really where your payback is. Is retro fit for you? If you think you can t benefit from or afford an energy retrofit, consider these five questions: 1. Do you know what portion of your present energy bill goes toward heating/air conditioning and lighting, as compared to the cost of operating your equipment? 2. Are you concerned about energy price volatility and its impact on your bottom line? If oil prices rise into triple digits, consider the impacts on your business, including your supply chain. 3. Are you eligible for incentives through government and utility incentive programs that support energy efficiency and retrofits? There are thousands of dollars in incentives available to entice organizations like yours to become more energy efficient. A good place to start is NRCan s Office of Energy Efficiency website. 4. Have you conducted an energy audit of your premises? An energy audit can help you find opportunities to reduce your energy bills, save money and increase your competitive advantage. The Canadian Industry Program for Energy Conservation (CIPEC) of NRCan s Office of Energy Efficiency offers the Energy Savings Toolbox a free, step-by-step reference guide to help you do-it-yourself. Order a free copy on CD by ing cipec.peeic@nrcan.gc.ca. 5. When next replacing your company machinery or equipment, will you consider looking for energy efficient products? Will you use the opportunity to make energy efficiency upgrades to your premises? Outdated machinery or equipment can put a strain on your plug load, while older lighting, heating and cooling systems can add unnecessary costs to your operating budget. Adding up small change Here are some of the little things you can do to lower your energy consumption and related costs: > Turn off unessential equipment during non-working hours. Compressors, exhaust systems, pumps any equipment left running when it is not in use increases your energy costs. > Reduce after-hours lighting. You can significantly decrease costs by only keeping lights on where required for safety and security reasons. > Replace conventional T12 or T8 fluorescent tubes with newer, high-performance T8 ones, which are 50% more energy efficient and work well in meeting rooms or common areas. Monitors are responsible for 75% of the energy a computer requires. Shutting down just one computer monitor overnight can save approximately 500 kwh/year. For a business, that could translate into cost savings of approximately $25 per monitor per year. > You can reduce 25% of the energy photocopiers require by using energy efficiency settings during working hours and shutting down photocopiers overnight. Turning off one photocopier overnight can save approximately 1,250 kwh per year. For a business, that could translate into cost savings of approximately $100 per photocopier per year. [Source: B.C. Hydro, U.S. Department of Energy

5 Going Retro 5 From bottom line to front line The bottom line benefits of energy retrofits will be visible in the lower energy costs and maintenance expenses you will see each month. However, you might be surprised to learn how many benefits go beyond the bottom line. A survey entitled The Dollars and Cents of Green Retrofits by Deloitte LLC and Charles Lockwood talked to organizations that had undergone at least one retrofit under the U.S. Green Building Council s Leadership in Energy and Environmental Design (LEED) green building program. Respondents cited people benefits as being among the main impacts of undertaking retrofits, and the results were impressive: > 93% reported a greater ability to attract talent > 87% indicated improved workforce productivity > 81% reported better employee retention > 75% reported improved employee health Financial incentives lower costs, speed up payback To give you an idea of the substantial financial incentives that are available right across the country, here are examples of three Canadian retrofits ranging in cost from $62,500 to $2.6 million that were supported by incentive funding: > Compressor replacement: Abbotsford, British Columbia Dynamic Windows and Doors, a small industrial firm in B.C., undertook an energy retrofit in 2009 to replace three small 30 hp compressors with one larger, 100 hp variable speed compressor. Projected cost savings: $17,156 per year. Projected electricity savings: 285,948 kwh of electricity per year. And while the purchase price was $62,500 for the new compressor, an incentive program from B.C. Hydro s Power Smart program paid almost $47,000 toward the purchase, reducing Dynamic s payback period to about one year. > Boiler, combustion and heating system retrofit: Hawkesbury, Ontario Ontario textiles company Colorama Dyeing and Finishing Inc. undertook three retrofits in 2007, supported by incentives from both NRCan and local utility company Enbridge. The firm s boiler, combustion and heating systems were retrofitted, helping the company with heat recovery and saving 12% to 15% in its natural gas consumption. The three retrofits cost a total of $110,000, 35% of that total was paid for by incentives. [Source: NRCan] > Thermal energy storage retrofit: Bromont, Quebec To meet a corporate headquarters challenge to reduce its annual energy consumption by 4%, an IBM Canada semiconductor assembly plant in Quebec dismantled two existing R-12 chiller units and installed a Novaenergy thermal energy storage (TES) system. This energy retrofit project was completed in 2005 at a total cost of $2.6 million, which both NRCan and Hydro Quebec helped to fund. IBM Canada gained energy savings of $351,000 per year, as well as electrical demand cost savings of $205,500 per year, reducing the payback period to approximately 4.5 years. [Source: CanmetENERGY, NRCan] Lighting is one of the first areas to look at in commercial and industrial office space. Ruth Weiner, manager, environmental standards, corporate real estate, RBC Lighting can account for 40% to 60% of the energy consumption in office buildings, and up to 80% in warehouses. B.C. Hydro [Source: B.C. Hydro]

6 Going Retro 6 Lighting the way For RBC in downtown Vancouver, undertaking a lighting retrofit made a lot of sense, even though the bank is only a tenant in the building, not its owner. We re in a longer-term lease in this location, so we knew we would benefit from any energy cost savings for a long time, explains Ruth Weiner, manager, energy and environment, corporate real estate, RBC. At the same time, the area we looked at for energy savings is sub-metered by the building s landlord, so we were being billed directly for the electricity we were using. As a tenant, RBC could work to lower its heating and cooling usage through better energy management techniques, but the bank couldn t physically retrofit the building s HVAC systems. What the bank could retrofit, however, with the cooperation of its landlord, was the lighting in the atrium, which houses a branch and various corporate offices. That was our first step: identifying what we were paying for and could control directly, and lighting was the obvious example. Our next step was to have a lighting retrofit audit conducted, rather than a full energy audit, adds Wiener. You should start by working on the areas you can control. It makes the most sense to put your audit brainpower and dollars to work on something you have the ability to change. A lighting audit identifies every single lamp, fixture and lighting configuration in your building, where there is recessed or surface lighting (or a combination of the two) and how all lighting is being used now and will be used in future. The audit can include additional energy saving suggestions, such as the addition of occupancy sensors. It then provides a comprehensive before and after comparison, showing you, down to the wattage of an individual bulb, what your energy consumption and energy cost savings will be. Costing varies for lighting retrofits due to a wide variety of factors. If your lighting retrofit involves converting T12 or older T8 fluorescents to newer T8s, for example, new ballasts ( reballasting ) will be required, as well as relamping with the new lights. If existing T8 ballasts can be converted and used with more energy efficient T8 lamps, only relamping is required. RBC found that for retrofits needing only relamping, costs were in the neighbourhood of 80 cents per square foot, with energy savings of approximately 16 cents per square foot. Naturally many factors can impact the business case (ceiling height, location of building, fixture type, etc.); however, a five-year payback is typical. RBC found that with reballasting and light level adjustment as well as relamping, costs would be around $2.70 per square foot, but energy savings would increase to about 60 cents per square foot. Costs per square foot can be a little less for larger office spaces than smaller retail spaces. You can also lower some costs if you can coordinate relamping, for example, to coincide with regular lighting maintenance. Any energy efficiency incentives or utility rebates will also lower your total retrofit cost. A lighting professional will be able to assess your situation and ballpark feasibility. Then the lighting audit will nail down the costs/savings (i.e. the business case). To date, RBC has completed numerous retrofits across Canada. The most recent 19 projects across branches and offices resulted in an estimated energy savings of 463,000 kwh per year. The already noted Vancouver retrofit alone is saving over 513,500 kwh per year. Under RBC s energy plan, similar lighting efficiencies will be implemented in 200 Canadian bank branches over the next few years. The estimated payback period for RBC for the overall lighting program is projected to be 3.4 years. The key objectives RBC had in mind for its Vancouver lighting retrofit were reducing its energy consumption and energy costs as well as reducing its operational and maintenance costs. The immediate added benefit was enhanced lighting consistency and visual comfort levels for staff and customers. Often there are areas that are under- or over-lit lighting can become a bit of a mish-mash over the years, notes Weiner. When we change out the lamps, we clean the lenses and fixtures and take care of flickering issues. When completed we hear comments that everything seems so much brighter to

7 Going Retro 7 everyone, even though the company is using less energy. There are definite benefits for the people working in that new environment. Working toward a new business climate Energy consumption, particularly through the burning of fossil fuels, is a major contributor to increasing levels of carbon dioxide (CO 2 ). Approximately 77% of global greenhouse gasses (GHGs) are made up of CO 2, and two of the largest global sources of CO 2 emissions are electricity and heat (32%) and transportation (17%), according to the World Resources Institute (WRI). In its 2006 report entitled Hot Climate, Cool Commerce: A Service Sector Guide to Greenhouse Gas Management, WRI stresses that high energy users and GHG emitters, such as manufacturers and utilities, aren t the only sectors impacting climate change. The report points out the numerous ways that companies in the service sector, for example, are contributing to GHG emissions. Energy use in distribution centres, retail stores and offices also causes GHG emissions, as does business travel, employee commuting, the use of company vehicles, business meetings and conferences, and product distribution. One way any business can offset its GHG emissions is through greening up the power it uses for its buildings and operations. Bullfrog Power is a renewable energy provider that offers 100% green electricity generated by wind and hydro facilities to businesses and residents in six provinces: Prince Edward Island, Nova Scotia, New Brunswick, Ontario, Alberta and British Columbia. For each unit of renewable electricity purchased by a customer, one of Bullfrog Power s certified green power sources generate an equal amount of renewable electricity that is fed into that customer s local or regional power grid, helping to shrink the customer s electricityrelated emissions footprint. RBC is one of Bullfrog Power s customers and now has over 100 branches that are Bullfrog-powered across Canada. RBC estimates that in 2009 alone, it has reduced its GHG emissions by approximately 3,300 tonnes through the purchase of over 9,800 megawatts of certified emission-free power. Another way businesses can lower their GHG emissions is by investing in GHG offsets projects that reduce GHGs. Through a carbon offset program Air Canada began in 2007, the airline s customers have sponsored the planting of more than 2,700 trees to help counter the CO 2 emissions created by the flights they take. The airline estimated in mid-2009 that this program has offset approximately 13,500 tonnes of CO 2 emissions, or the equivalent of taking more than 3,300 cars off the road in one year. For more information and advice on greening your business: > Contact an RBC Royal Bank account manager at ROYAL 2-0 > Visit us online at rbc.com/business-advice > To learn more about how RBC is greening its business, please visit The material in this white paper is intended as a general source of information only, and should not be construed as offering specific tax, legal, financial or investment advice. Individuals should consult their own professional advisor before taking any action based upon the information contained in this brochure to ensure that individual circumstances have been considered properly and it is based on the latest available information. Registered trademarks of Royal Bank of Canada. RBC and Royal Bank are registered trademarks of Royal Bank of Canada. VPS (03/2010)