Opportunities in energy efficient real estate and investingi. Scott Kessler

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1 NYSERDA Opportunities in energy efficient real estate and investingi Scott Kessler April 15,2010

2 What is NYSERDA? Mission Public benefit corporation Established by the New York State Legislature in 1975 Use innovation and technology to solve some of New York s most difficult energy and environmental problems in ways that improve the State s economy.

3 System Benefit Charge (SBC) Regulatory Order of the NYS PSC NYSERDA state wide administrator Public purpose goals: energy efficiency, cleaner environment

4 Energy Efficiency Portfolio Standard (EEPS) New gas funding Additional electric funding for: Industrial and Process Efficiency Including Data Centers FlexTech Consulting and Studies New Construction Additional utility based incentive programs

5 State Energy Program (SEP) NYSERDA and ARRA $123 million Funds must be committed by September 2010 Energy Efficiency & Conservation Block Grants (EECBG) $31million total (NYS share tobedistributed bynyserda) NYSERDA will be submitting program to DOE in May NYSERDA will solicit applications from small municipalities and distribute funds Other Funding Streams Weatherization Competitive Grants Research & Development Transportation

6 Focus on Commercial Real Estate

7 Program Goals Drive portfolios to invest in energy efficiency using NYSERDA programs Provide benchmarking tools and support sector-specific needs Identify poor performing properties for program support Track improvement against 2015/2030 and NYSERDA goals Focus on Commercial Real Estate

8 Why Invest in Sustainability? Increase rent /decrease vacancy Enhance green image Decrease operating costs Comply with government mandates Focus on Commercial Real Estate

9 Rent Spreads: Class A & B Office Buildings Class A Rent Class B Rent Source: Office Market Trends New York City, Grubb & Ellis, Q

10 A Comprehensive Approach to Strategic Investments Portfolio-wide approach Improved efficiency Improved NOI Targeted investments Focus on Commercial Real Estate

11 Owners in Program: 32% of NYC Market 139 M SF Participating* of which: 59.5 M SF Benchmarked Portion of NYC Market Benchmarked 14.0% Energy Audit 2.6% Lease Analysis 2.0% Focus on Commercial Real Estate *Not including additional 2M SF in NY State, of which 1 M SF benchmarked

12 FOCUS CRE LEASE ANALYSIS REPORT One New York Avenue Project and Building Overview Project Number of Measures 6 Tenant Opex Clause Breakdown By Rentable Building Area 2.6% Vacancy Cost of Measure Net of Subsidies and Grants $ 2,888,110 Fixed Factor Subsidies and Grants $ 163,139 Annual Cost Savings $ 478,046 Escalatable - Capex Passthrough Escalatable - No Capex 97.4% Owner Financial Results Annual Owner Cash Flow $600 $500 $ Year Composition of Owner Cash Flow 7.9% Current Escalatable Leases Fixed Factor Leases sands Thous $300 $ % 31.1% 1% Electric Rent Inclusion Capex Passthrough $100 Vacancies $0 3.5% New Escalatable Leases Year Returns* Simple Recovery Metric 3Year 5Year 10 Year Metric 3Year 5Year 10 Year Net Present Value Savings $ (2,020,310) $ (1,472,736) $ 315,301 Savings Only 7% 14% 85% Increased Asset Value Total Net Present Value $ 1,170,406 $ (850,000) $ 1,316,322 $ (155,000) $ 5,345,705 $ 5,660,000 Savings and Capex 27% 47% 128% Internal Rate of Return -10% 2% 20% Passthrough Return on Capital -29% -5% 196% * Net Present Value, Internal Rate of Return, and Return on Capital include the capitalized value of cash flow during the last year of each term in their calculations. Tenant Financial Results Returns Metric 3 Year 5 Year Net Present Value $ 525,000 $ 860, Year $ 1,135,000 Implementation Contractor for NYSERDA's Focus on Commercial Real Estate Program: HR&A Advisors, Inc. For more information, call NYSERDA, or FocusCRE@nyserda.org

13 Benchmarking You can t control what you can t measure

14 What is benchmarking? A standardized, comparable metric of whole building energy performance Resolves the building operator s dilmena, is 80 kbtu/sf/yr high or low? Normalizes for weather, occupancy, hours of operation, plug load, and space types

15 Data Needed General Address Year built Meter information Energy Consumption 12 consecutive months for each source (electric, gas, etc.) Space Type Data (Industry Specific) For Office Space: Square Footage Occupancy Number of PCs Hours of Operation % Heated and Cooled

16 NYSERDA Benchmarking Overlay (ie Focus CRE Bx Toolkit) NYC/NYS Comparison Database (Multi-family, Commercial High-rise) Data Quality Assurance Energy Consumption Data Upload Functions Reporting Building Performance and Portfolio Comparison

17 The Focus CRE Benchmarking tool. Web-based data gathering and analysis tool Linked directly to EPA and provides EPA PM score Requires same inputs as EPA PM with easier interface Provides weather normalized source energy and dco2 Meter-level regression ASHRAE IMT

18 Focus CRE enables advanced reporting Report local source energy use and carbon footprint Compare individual building to local peers in NYSERDA dataset Compare buildings within a portfolio

19 CRE Benchmarking Scorecard

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21 Meter level diagnostics (ASHRAE IMT) quickly help Energy Auditor to focus on major issues in building. Energy Use Total 800, , , ,000 0 Broadway Steam Heating Load Cooling Load Base Load Outdoor Temperature Energy Use Total 140, , ,000 80,000 60,000 40,000 20, Heating Load Broadway Electric Base Load Cooling Load Outdoor Temperature

22 Tools/Resourcs CUNY Smart Operators for Smart Buildings Property Managers Training in leadership and sustainability Building Engineers Building Operating Certification Courses Building Performance Lab Interns Support for PMs and BEs for benchmarking, surveying facilities, analyzing energy use, etc

23 NYSERDA s Program Structure Project New Audit Identification/ Construction Program Energy Study Program FlexTech/ Technical Assistance Program Project Implementation Existing Facilities Program

24 Ei Existing i Buildings Commercial & Industrial Programs FlexTech, Energy Audit Program E i i F ili i P Existing Facilities Program C t ti P j t Construction Projects New Construction Program

25 Audits and Studies Medium/ Large Customers FlexTech Energy Audit Small Customers

26 FlexTech Objective: Provide cost-shared, shared customized energy studies Feasibility Studies Retro commissioning Energy Master Plans Energy Procurement SBK1 CHP/Renewables Load Curtailment Energy Advisor Consulting

27 Slide 26 SBK1 Emphasize Audits and Rcx here. Bold? first in order? Scott Kessler, 4/13/2010

28 FlexTech Fuel Neutral Cost Share 50/50 energy related portion Incentive Cap $1,000,000 over 5 years Use one of NYSERDA s FlexTech Consultants Use one of NYSERDA s FlexTech Consultants or your own Service Provider

29 Energy Audit Program Eligibility: < $75,000 in Annual ELECTRIC Bills Offer : Fuel neutral energy walk through Cost: Annual Electric Bills Energy Audit Fee < $25,000 $100 $25,000 $75,000 $400 Note: Audit Fee is refundable if audit recommended measures are implemented

30 Energy Audit Program Region 1: C.J. Brown Energy Wayne Balas Region 3: Daylight Savings Frank Lauricella savings.us Region 2: L&S Energy Services Catherine Griffin x302 ema.com Region 4: EME Group Saumya Puthenveettil egroup.com Apply online simple one page application sent directly to regional contractor

31 Existing Facilities and New Construction incentives Pre qualified lf Incentives Small Customers Medium/ Large Customers Performance based Incentives

32 Pre-Qualified Incentives Existing Facilities Program Applicants can receive incentives ($/unit) for pre-qualified electric-efficient measures. Projects can receive up to $30,000 through pre-qualified incentives. Pre-qualified Incentives are available for: Motors Lighting HVAC Commercial kitchen equipment (refrigeration, washers) Interval Meters Chillers VFDs

33 Pre-Qualified Incentives Existing Facilities Program Easy participation process Minimum efficiencies set above standard practice. Check efficiency requirements to determine eligible equipment. Apply within 90 days of project purchase and installation.

34 Existing Facilities Program Performance based Incentives Electric Incentives Demand Response Incentives Gas Incentives (currently unavailable for ConEd customers) Combined Heat and Power (CHP) Incentives Industrial Process Efficiency Incentives

35 Existing Facilities Program Performance based Incentives Program Component Electric Efficiency Demand Response Gas Efficiency (Con Ed firm gas only) Industrial and Process Efficiency Combined Heat and Power Incentive $0.16/kWh $200/kW $2/Therm $0.16/kWh $0.10/kWh + $750/kW

36 Existing Facilities Program Performance based Incentives Incentive is paid based on the energy savings $0.16/kWh in Con Ed territory Cap: 50% of project cost $2 million per site commercial customers All projects require a detailed engineering analysis to substantiate savings Measurement & Verification required for large projects

37 Demand Response Existing Facilities Program Temporarily reducing electric use during an emergency event. Eligibility Registration in NYISO s Special Case Resource or Demand Side Ancillary Services program 100 kw minimum registered load Incentives $200/kW registered with NYISO Cap: 75% of project cost Bonus NYISO will also pay for your commitment Additional incentives through Con Edison Distribution Load Relief Program

38 Existing Facilities Program IndustrialProcess and Efficiency Electric: Savings Measured as Energy Use/Unit Production ($.16/kWh) All projects require a detailed engineering analysis to determine savings Caps: 50% of project cost, $5 million per site per year >500,000 kwh requires M&V Just approved for Natural Gas Incentives details to come Process Examples Increase throughput h t Increases yield Reduces scrap

39 Data Centers Existing Facilities Program Flexibility Incentive $.12/kWh Improvements to IT and computing efficiency Support system efficiency: Process cooling Air flow management Utilization of waste heat Energy savings based on energy use per unit of data processed before and after improvement

40 Objective Transform the way buildings are designed and built Services Technical assistance, computer modeling, commissioning Incentives for energy efficient equipment and systems New Construction Program Green Building planning assistance Bonus incentives for LEED credits

41 Lighting Assistance Commercial Lighting Program Trained Business Partners available All projects receive design QA/QC List of partners available at Lighting incentives available through Existing g g g g Facilities and Multi-family Performance Programs

42 Upcoming Increase in EEPS/ARRA funded programs Benchmarking Program (upon PSC approval of operating program) Multifamily Performance Program (July 1) Gas funding for Con Edison Territory Regional Greenhouse Gas Initiative (RGGI) Green Jobs - Green New York Legislation

43 Further NYSERDA Assistance Scott Kessler (212) ext