Building Energy Efficiency Opportunity Report

Building Energy Efficiency Opportunity Report September 2013

Building Energy Efficiency Opportunity Report TABLE OF CONTENTS Introduction 3 Building Efficiency Opportunities 4 #1: High Potential Buildings Can Save 14x More Energy than Low Potential Buildings 4 #2: ENERGY STAR and EUI are Weak Indicators for Energy Efficiency Savings Potential 5 #3: End Uses that Consume a Small Proportion of Energy Can Offer Large Savings 7 #4: Increasing Payback Thresholds Can Help Stakeholders to Capture Additional Cost- Effective Savings 11 #5: Efficiency and Carbon Savings Are Not Necessarily Equal 13 Methodology 14 Building Portfolio 15 Size and Use Types 15 Current Fuel Type Consumption 16 More Information 17 About Retroficiency 17 Automated Energy Audit 17 www.retroficiency.com Page 2

Building Energy Efficiency Opportunity Report INTRODUCTION Buildings account for more than of energy consumption in the United States. While 30% 50% is routinely wasted, often little action is taken to reduce it. So the question becomes, how can we help organizations realize deeper energy savings at a lower cost and at scale? With greater access to meaningful insights from data, all industry participants and stakeholders can be smarter and more effective in how they answer this question. This report provides findings (sometimes counterintuitive ones) about where energy efficiency opportunities can exist across a large portfolio and recommendations of how to achieve such savings. These findings demonstrate that in order to meet and exceed our energy efficiency goals, we must Find better ways to target the right buildings Engage customers with opportunities that are relevant to them Comprehensively evaluate buildings to make recommendations that will convert projects Track for new opportunities over time as building conditions change and technologies evolve With real data from a sample of 500 building energy audits, this is one of the most comprehensive reports on building energy efficiency of its kind (that we know of). We hope this report continues to magnify the discussion about finding new ways to drive energy efficiency in buildings. Bennett Fisher CEO and Co-Founder Retroficiency www.retroficiency.com Page 3

Average Energy Savings (%) Building Energy Efficiency Opportunity Report BUILDING EFFICIENCY OPPORTUNITIES The following section highlights five key findings and related recommendations about energy efficiency opportunities in buildings, based on data from 500 randomly selected energy audits completed on Retroficiency s Building Efficiency Intelligence platform. For more information on the basis for these findings, please see the Methodology and Building Portfolio sections of this report, which begin on page 14. Finding #1: High Potential Buildings Can Save 14x More Energy than Low Potential Buildings Utilities, energy service providers, and building owners and investors face the challenge of implementing energy efficiency across large portfolios of buildings. According to our analysis, where they start their process can be a key factor in their success: The top 20% of buildings have an average energy-saving opportunity of 41%. The buildings with the least potential for savings (the bottom 20%) offer an average energy savings of 3%. Energy Savings Potential of Buildings (Mid-Term Package) 45% 35% 30% 25% 20% 15% 5% 0% 41% 24% 16% 3% 0% 20% 21% 41% 60% 61% 80% 81% 100% Percentile Rank of Buildings by Savings Potential Often, simple rules of thumb are used to estimate energy savings in buildings at the early evaluation stages. Stakeholders need to understand the variance in savings across their portfolio when developing an outreach strategy. Recommendation: Since the savings potential is not likely to be equal across a portfolio, organizations can benefit from prioritizing buildings with the greatest efficiency opportunities to meet goals and maximize their return on investment. www.retroficiency.com Page 4

Energy Savings Potential (%) Building Energy Efficiency Opportunity Report Finding #2: ENERGY STAR and EUI Are Weak Indicators for Energy Efficiency Savings Potential When tasked with determining where to focus efforts across a portfolio of buildings, utilities, energy managers, and service providers often use industry standard benchmarks to compare buildings on a normalized basis. Two commonly used metrics are ENERGY STAR and EUI. ENERGY STAR aims to rate building performance while factoring in use type, size, location, and other operational and asset characteristics. EUI is more basic, in that it measures energy consumption per square foot. It is best applied when comparing buildings of the same use type. While both ENERGY STAR and EUI have strengths in that they are often readily accessible and provide well-recognized starting points to compare buildings, our analysis suggests they should not necessarily be used to prioritize buildings based on their energy efficiency savings potential. The following two scatter plots show the relationship between each metric and the estimated energy savings. ENERGY STAR scores had a -0.11 correlation coefficient with the energy savings estimates from each audit. While a negative correlation is expected, since the energy savings potential should decrease as ENERGY STAR scores increase, this correlation is very low. Energy Savings Potential vs. ENERGY STAR Score (Mid-Term Package) 70% 60% 50% Education Hospital Hotel 30% Office 20% Retail 0% 0 20 40 60 80 100 ENERGY STAR Score Warehouse (Note: Each dot represents one building.) www.retroficiency.com Page 5

Energy Savings Potential (%) Building Energy Efficiency Opportunity Report Because EUI is closely tied to use type, we analyzed just the EUI of offices in our sample portfolio compared with total energy savings. Here, the correlation coefficient is unexpectedly -0.12. In other words, as EUI s amongst offices increase, the energy savings decrease, on average. Offices with high EUIs are likely to have data centers. These data centers may have more limited savings opportunities, or building operators may be hesitant to implement measures for these mission critical loads, leading to the negative correlation we observed. Regardless, prioritizing buildings by EUI may lead to focusing on the wrong buildings. 70% Energy Savings Potential vs. EUI: Offices (Mid-Term Package) 60% 50% 30% 20% 0% 0 50 100 150 200 250 300 350 Energy Use Intensity (kbtu/sqft) This data suggests that if the industry wants to target and prioritize buildings more effectively for energy efficiency (which, as we have seen, is important given the variance in saving opportunities), it will need to use more sophisticated tools such as analytics-based methods. Doing so provides increased probability that the right buildings will move deeper into the efficiency process sooner, resulting in greater savings. Recommendation: Leverage analytics-based rapid energy model approaches to ensure proper prioritization of buildings for further energy efficiency evaluation such as on-site audits. www.retroficiency.com Page 6

Building Energy Efficiency Opportunity Report Finding #3: End Uses that Consume a Small Proportion of Energy Can Offer Large Savings Use type can influence end-use consumption; however, current end-use consumption does not always correlate with savings potential in each case. In our analysis, we compared the current average end-use consumption with the average end-use savings potential by building use type and found the following: Lighting, which is frequently a focus of energy efficiency projects because of its potential to provide a quick payback, often represents a significant portion of the total savings opportunity. Yet, it accounts for a relatively small portion of current end-use consumption across most use types. Near or more than 50% of consumption is dedicated to heating, ventilation, and cooling (HVAC) for most use types (restaurants, however, only have 37% consumption for this end-use group). Altogether, HVAC also accounts for approximately 50% of most use types savings (except recreation and warehouse buildings). Across all use types, the proportion of HVAC savings is not aligned with the proportion of current consumption in some cases it is higher, and it some cases it is lower. One factor driving this is that the amount of HVAC energy reduction can vary significantly when multiple measures are implemented. For example, if more energy efficient lights are installed, these lamps may emit less heat, requiring the heating system to use more energy during colder periods to keep the space warm. If a heating-related measure is done simultaneously, these interactive effects can impact (sometimes significantly so) how much the HVAC consumption actually goes down. Miscellaneous loads, which could include building-type specific activities like cooking equipment, data centers, or other specialized equipment, account for a high portion of consumption in restaurants (43%), offices (), labs (), and recreation buildings (). However, they are not a significant portion of each use type s overall savings opportunity. This could be due to auditors lack of focus on measures to address these loads or because they require longer payback solutions. (See charts on the next page.) www.retroficiency.com Page 7

Building Energy Efficiency Opportunity Report End-Use Consumption vs. Savings Potential (By Use Type) Current Average End-Use Consumption Average End-Use Savings Potential (Mid-Term Package) 9% 6% 14% 3% 37% 16% 50% EDUCATION HOSPITALS 26% 9% 7% 13% 24% 11% 24% HOSPITAL 7% 15% 21% 11% 9% 21% 23% 5% 29% 25% 15% 21% 14% HOTEL 21% 0% 18% 28% 11% 14% 6% 27% 1% 8% 39% 5% 7% SS LAB 22% 11% 6% 8% 18% 35% 2% 16% 9% 3% 23% 15% 17% OFFICE 31% 24% (Chart continues on the next page.) www.retroficiency.com Page 8

Building Energy Efficiency Opportunity Report Current Average End-Use Consumption Average End-Use Savings Potential (Mid-Term Package) 15% 13% 3% 50% PUBLIC ASSEMBLY 26% 4% 9% 46% 9% 7% 8% 2% 12% 9% 5% 14% 44% RECREATION 5% 7% 4% 3% 55% 16% 15% 12% RESTAURANT 17% 1% 12% 43% 4% 13% 17% 9% 3% 16% 1% 16% 34% RETAIL 48% 22% 13% 11% 11% 16% 15% 17% 0% 0% 12% 20% 4% 5% 7% 4% 57% WAREHOUSE 59% www.retroficiency.com Page 9

Average Energy Savings (%) Building Energy Efficiency Opportunity Report When it comes down to just building size, however, the relative size of end-use savings differs by a few percentage points. HVAC (combined) represents the greatest relative difference of end-use savings across small, medium, and large buildings (defined here as less than 25,000; 25,001 100,000; and more than 100,000 square feet), but it is not a significant one. Smaller buildings have an average HVAC savings of 59%, while medium and large buildings offer 51% and 49%, respectively. End-Use Savings Potential by Building Size (Mid-Term Package) 100% 90% 80% 70% 60% 50% 30% 8% 6% 6% 9% 8% 8% 7% 28% 33% 30% 14% 21% 24% Hot Water Miscellaneous Ventilation Lighting Cooling Heating 20% 37% 0% 22% 18% <25K 25,001-100K 100,001+ Square Footage Recommendation: Conduct a comprehensive evaluation to uncover all the saving opportunities that exist in a building. www.retroficiency.com Page 10

Average Energy Savings (%) Building Energy Efficiency Opportunity Report Finding #4: Increasing Payback Thresholds Can Help Stakeholders to Capture Additional Cost-Effective Savings One commonly used metric to evaluate the benefits of a building energy conservation measure (ECM) is simple payback period (total cost of measure / annual savings). Payback periods provide an easy-tounderstand framework to compare multiple potential projects for implementation. Most building owners or facility managers have a certain payback threshold, which they are not willing to exceed for a building retrofit project. These thresholds may be as short as a few months or as long as several years. Based on our analysis of the incremental savings that buildings should expect to receive when evaluated by use type under Retroficiency s short-, mid-, and long-term measure packages, annual building savings can significantly increase if owners or managers are willing to raise their payback thresholds. As payback thresholds increase, estimated savings increase as well. More importantly, this analysis also reveals that different building types, on average, may receive different incremental benefits from moving from short- to mid- to long-term payback thresholds. For example, the slope of the education and retail lines are steeper when moving from the short- to mid-term package versus moving from the mid- to longterm package. This means that as paybacks get longer, the rate of increase in savings potential decreases. The converse is true for hotels and labs. Longer-term projects tend to accelerate the rate of energy savings, as the slope of the lines for these use types is steeper as it goes from the mid term to long term than from the short term to mid term. Total Energy Savings by Use Type 35% 30% 25% 20% 15% Education Hotel Lab Office Recreation Retail 5% 0% Short Term Mid Term Long Term Savings Package (Position of axis points reflect differences in package payback lengths) www.retroficiency.com Page 11

Building Energy Efficiency Opportunity Report A related question worth exploring is how much more could I save if I increased my payback threshold by one year? For every one year increase going from the short-term to mid-term package across all building types, buildings could save an incremental 3.4%/year of energy, on average. For every one year increase from the mid-term to the long-term package, buildings could save an incremental 2.1%/year of energy, on average. How can decision makers and service providers who support these decision makers justify increasing their payback thresholds? We propose a few strategies: Do not look at each ECM recommendation by itself, but rather bundle several measures together for each project and consider the aggregate payback of a project s collection of measures. Combining several measures into a single project may allow for deeper savings while still meeting payback requirements. Simple payback period provides one way to evaluate projects, but it is not the only way. Other calculations such as project net present value can better take into account the full lifecycle savings and costs of a particular measure, as well as the total absolute savings of a measure. Would you prefer to get $1 today or wait until tomorrow to get $100? Assess retrofits in the context of long-term capital planning. The cost of replacing your boiler may not make sense today if you were to evaluate just on total energy savings in the future. But what if you planned to replace that same boiler in three years because you expected it to be at the end of its life then? If you look at the incremental savings you could get over this three-year period versus the cash you would have to outlay today, it may indeed make it a worthwhile investment. Recommendation: Consider bundling measures for a single project and potentially leveraging more sophisticated financial calculations. www.retroficiency.com Page 12

Energy Savings Potential (%) Building Energy Efficiency Opportunity Report Finding #5: Efficiency and Carbon Savings Potential Are Not Necessarily Equal Many organizations also aim to decrease emissions from carbon dioxide (CO2), a major greenhouse gas, which contributes to climate change. Burning fossil fuels for energy is a primary source of these emissions; commercial buildings account for 18% of the total annual CO2 emissions in the United States. 1 Decreasing building energy use often correlates to decreased carbon emissions. While our analysis demonstrates this is a strong relationship for some buildings, it is not a 1:1 relationship in each case. Energy Savings Potential vs. CO2 Savings (Mid-Term Package) 70% 60% Buildings with lower CO2 savings than energy savings (on a percentage basis) 50% 30% 20% Buildings with higher CO2 savings than energy savings (on a percentage basis) 0% 0% 20% 30% 50% 60% 70% 80% 90% CO2 Savings Potential (%) Why does this occur? The amount of carbon emissions a particular building is responsible for is driven by the building s fuel mix (e.g., electric or gas) and power source (e.g., a coal-fired power plant versus solar). So, for example, a building may save electricity from a lighting retrofit, but changing its lights may cause the space to require more gas heat. This shift in fuel mix could limit or negate potential carbon reductions. Recommendation: Determine whether you want to optimize for energy savings or carbon savings at the onset of an energy audit. 1 U.S. Dept. of Energy, Buildings Energy Data Book, http://buildingsdatabook.eren.doe.gov/tableview.aspx?table=3.4.1. www.retroficiency.com Page 13

Building Energy Efficiency Opportunity Report METHODOLOGY The Building Energy Efficiency Opportunity Report is based on results from a sample of 500 randomly selected building energy audits processed by Retroficiency s Automated Energy Audit (AEA) solution from March 2011 through March 2013. AEA is a cloud-based software solution that facilitates energy audit data collection, energy model creation, measure evaluation, and reporting for a scoping analysis and ASHRAE Level I, II, and III on-site audits. For each building used in this study, building asset data including use type, size, and energy system details was collected through on-site walkthroughs, phone interviews, and/or asset databases and entered into AEA. AEA s physics-based hourly energy model calculated savings for the ECMs recommended in each audit. AEA performs detailed simulations of how each building consumes energy and determines how thousands of ECMs will impact that usage. These measures include those that AEA automatically recommends from its database and others that its users identify and model, based on their knowledge of the buildings. AEA leverages an extensive cost database or applies costs supplied by its users to determine short-, midand long-term measure packages, which are generally optimized for a defined simple payback period. Unless otherwise noted, the building audit results provided in the report are from AEA s mid-term packages, which typically have a payback period of 3 5 years, depending on user preferences. www.retroficiency.com Page 14

Number of Buildings Number of Buildings Building Energy Efficiency Opportunity Report BUILDING PORTFOLIO Size and Use Types The buildings included in this report range in size from small buildings of less than 5,000 square feet to large buildings of more than 2 million square feet. Nearly all of these buildings are located in North America. We selected buildings that represent 10 common use types, reflected in the second chart below. Building Sizes 110 100 90 80 70 60 50 40 30 20 10 0 108 96 85 89 56 66 <10K 10,001 25K 25,001 50K 50,001 100K 100,001 250K 250,001+ Square Footage 150 Building Use Types 100 149 50 0 102 82 44 37 27 19 17 15 8 Use Type www.retroficiency.com Page 15

Energy Use Intensity (kbtu/sqft) Building Energy Efficiency Opportunity Report Current Fuel Type Consumption The building use types represented in our portfolio sample exhibit varying energy consumption profiles by fuel type. Most of the building use types consume significantly more electricity per square foot on average than they do for gas, as seen through EUI. In labs, for example, EUI ranges from 155 kbtu/square foot for electricity to 81 kbtu/ square foot for gas. Education, recreation, and restaurant buildings, however, demonstrate a higher average gas EUI than electric EUI. Average Electric & Gas Use 160 140 120 Electric Gas 100 80 60 40 20 0 Building Use Type www.retroficiency.com Page 16

Building Energy Efficiency Opportunity Report MORE INFORMATION For more information about Retroficiency s Building Energy Efficiency Opportunity Report, please contact info@retroficiency.com. Retroficiency report contributors: Mike Kaplan, vice president of marketing Melissa Makofske, marketing manager Bill Hines, energy analyst Cover photos courtesy of Maryette Haggerty Perrault ABOUT RETROFICIENCY Retroficiency enables utilities and energy service providers to drive energy efficiency savings at scale. Its Building Efficiency Intelligence platform develops deep building insights that enable fast, cost-effective, and accurate building targeting, customer engagement, project conversion, and dynamic tracking for new opportunities. Retroficiency is trusted by some of the largest utilities and energy service providers in the world. Since our launch in March 2011, Retroficiency s platform has been used globally to evaluate more than 350 million total square feet of building space and identify more than 1.5 billion kwh of savings. Automated Energy Audit Automated Energy Audit (AEA) a Building Efficiency Intelligence platform application dramatically streamlines and standardizes the on-site energy audit to convert real building projects for maximum savings. AEA improves building asset data collection, energy conservation measure evaluation, and report generation, which enables users to develop comprehensive, accurate energy audits in up to 50%-80% less time and expense of today s methods. AEA can start with limited building information to perform an initial scoping analysis. As more data is collected, it supports ASHRAE Level I, II, and III audits. AEA comprehensively evaluates thousands of measures in minutes and optimizes recommendations for customer-specific financial thresholds or energy reduction goals. Connect with Retroficiency: Blog http://www.retroficiency.com/blog/ LinkedIn http://www.linkedin.com/company/retroficiency-inc. Twitter https://twitter.com/retroficiency Facebook https://www.facebook.com/retroficiency Copyright 2013 Retroficiency www.retroficiency.com Page 17