How to Sell Energy Efficiency

How to Sell Energy Efficiency PRESENTED BY SCOTT JASINSKI THE SMART ENERGY DESIGN ASSISTANCE CENTER (SEDAC) OF THE UNIVERSITY OF ILLINOIS ChicaGO Green 2011 Conference

How To Sell Energy Efficiency: I. Introduction II. Building Basics III. Economic Motivation IV. Available Funding V. Other Motivations VI. How SEDAC May Be Able To Help You VII. Questions

I. Introduction Presenter Bio: Scott Jasinski Energy Engineer at the Smart Energy Design Assistance Center at the University of Illinois. B.S. in General Engineering from the University of Illinois Urbana-Champaign with a minor in business. Work experience with the following types of buildings: schools, municipal buildings, commercial businesses, high rise condominiums, hotels, among others.

What is SEDAC? Smart Energy Design Assistance Center at the School of Architecture s Building Research Council (BRC) of the University of Illinois Urbana- Champaign Program sponsored by the Illinois Department of Commerce and Economic Opportunity (DCEO). Funded through the Energy Efficiency Portfolio Standard which requires utility companies to reduce demand. Program targets Illinois businesses (commercial and industrial), municipalities, federal facilities, schools, and colleges.

II. Building Basics Energy costs represent, on average, 28% of total operating expenses in commercial office buildings. 30% of energy consumed by commercial buildings is used unnecessarily or inefficiently. Together with these figures, almost 10% of operating expenses are wasted. ENERGY CONSUMPTION BY SECTOR (2009) INDUSTRY 31.8% TRANSPORTATION 28.6% RESIDENTIAL BUILDINGS 21.4% COMMERCIAL BUILDINGS 18.1% 2009 data from the Office of Energy Efficiency and Renewable Energy

Building Basics Most buildings will have profitable opportunities to lower their energy consumption by 30%. Further, if the building uses more energy than the average building this opportunity increases Even buildings that use less energy than the average will still have promising opportunities for energy savings.

Building Basics Benchmarking Identify major energy costs/users: Depends on function of building o Office Lighting o Restaurant Kitchen o Grocery - Refrigeration o Gas Station/convenience store Parking lot lighting Utility rates electric often costs more than natural gas in dollars per unit of energy Identify whether energy or cost is more important Clients usually care more about dollars than energy use Clients usually care about services heating / cooling comfort, etc. Compare vs. similar facilities Know how well the building performs

Benchmarking Benchmarking Metrics: 1. Energy Use Intensity (kbtu/ft 2 /yr) Most accurate metric Requires more calculations/information 2. Energy Cost Intensity ($/ft 2 /yr) Quick and easy Less accurate for comparison purposes

Benchmarking ENERGY STAR Target Finder

Building Basics SEDAC Experience Existing Building Potential (Based on 338 facilities) 31% Energy Savings 30% Energy Cost Savings Average Savings of $52,000 per year New Construction Potential (Based on 44 facilities) 38% Energy Savings 37% Energy Cost Savings Average Savings of $55,000 per year

Identifying The Motivation Of The Client Reasons a Client May Pursue Energy Efficient Strategies: Financial Gain / Economics Comfort / Productivity Emerging Technologies Social Concern (building codes, etc) Environmental Concern Certifications

III. Economic Motivation Since 2000 the price of electricity has increased by 38%. $0.14 Illinois Electricity Prices Dollars per kwh $0.12 $0.10 $0.08 $0.06 $0.04 $0.02 $0.00 1970 1975 1980 1985 1990 1995 2000 2005 2010 Electricity price in the commercial sector Electricity price in the industrial sector *Based on Table 9.9 from http://www.eia.gov/state/

Economic Motivation Dollars per Therm Since 2000 the price of natural gas has increased by 39%. Illinois Natural Gas Prices $1.40 $1.20 $1.00 $0.80 $0.60 $0.40 $0.20 $0.00 1970 1975 1980 1985 1990 1995 2000 2005 2010 Natural gas price in the commercial sector (including supplemental gaseous fuels) Natural gas price in the industrial sector (including supplemental gaseous fuels) *Based on Table 9.11 from http://www.eia.gov/state/

Opportunity for Energy Efficiency 50% Energy Cost Savings 30% 15% Moderate Cost Best Practices Capital Intensive, Significantly Beyond Code Intervention Low Hanging Fruit Investment Costs Increased investment but with diminishing returns Typically 15% savings can be from low hanging fruit (lighting, tune ups, air sealing) Moderate Cost, Best Practices can reach 30% savings (tighter control, upgrading equipment at end of life) Capital Intensive has highest potential, most cost (system redesign, complete replacements, envelope upgrades)

Economic Evaluation Methods for Evaluating Energy Cost Reduction Projects: Simple Payback Internal Rate of Return (IRR) Return on Investment (ROI) Net Present Value (NPV) Example Project Cash Flow 0 1 2 3 4 5 Years Which of these does not fit? -100 Simple Payback because this metric doesn t include the lifetime of the measure. 40 20 0-20 -40-60 -80 Cash Flow (x $1,000)

Economic Indicators Comparison Cost: $500K Savings: $125K Life: 20 years Simple Payback (SPB) Net Present Value (NPV) Internal Rate of Return (IRR & ROI) Meaning # of years to recoup additional costs from annual savings Total value of project in today s dollars Annual interest yielded during project lifetime Example 4 year simple payback $1,000,000 NPV 25 % IRR Criteria Payback < n years Positive indicates profitable project IRR > discount rate Comment Misleading Ignores financing & long-term cashflows Use when cash is tight Good measure User must specify discount rate Gives scale to project Good measure Longer time horizon Issue if cash flow changes from + to and back to +

Life Cycle Cost Analysis Consider total cost of ownership, not just upfront cost (operating costs usually significantly outweigh first cost) Pay more now, save year after year First Cost Cost Operating Costs Disposal Time

Cost of Doing Nothing Once recommendations have been quantified the forgone savings start to accrue. Previous Example: Initial Cost: $500,000 Annual Savings: $125,000 Lifetime: 20 years Accrued Cost To Date $700,000 $600,000 $500,000 $400,000 $300,000 $200,000 $100,000 $- Cost of Doing Nothing 1 2 3 4 5

IV. Available Funding Utility Based Programs (Private Sector): ComEd Smart Ideas for Businesses Efficiency Program ComEd Smart Ideas for New Construction Program Nicor Gas Commercial Energy Efficiency Program North Shore Gas North Shore Natural Gas Savings Program Peoples Gas Peoples Natural Gas Savings Program Ameren Illinois Electrical and Natural Gas Savings Program

Available Funding DCEO Public Sector Programs: Illinois Energy Now Programs Energy Efficiency Program Retro-Commissioning Program New Construction Incentive Program Energy Efficient Affordable Housing Construction Program Large Customer Energy Analysis Program (LEAP) Biogas and Biomass to Energy Grant Program Solar and Wind Energy Rebate Program Illinois State Board of Education School Energy Efficiency Grant Program

Available Funding Federal Programs : Renewable Electricity Production Tax Credit (PTC) U.S. Department of Treasury - Renewable Energy Grants USDA - Rural Energy for America Program (REAP) Grants USDA - Rural Energy for America Program (REAP) Loan Guarantees U.S. Department of Energy - Loan Guarantee Program

Available Funding Other Incentive Programs and Resources: Chicago Small business improvement fund Illinois Clean Energy Community Foundation Grants Nonprofits only Illinois Solar Energy Association Renewable energy credit aggregation program Illinois Finance Authority Renewable energy and energy efficiency project financing Illinois State Treasurer's Office Ag invest - green energy loans

V. Other Motivations Most clients interested in the economics but sometimes others motivations may be important. Comfort / Productivity Concerns Emerging Technologies Environmental Concerns Building Energy Codes Certifications

Comfort / Productivity Concerns: Example: Concern: Client has an office building with many occupants either too hot or cold. Solution: Testing and Balancing / Commissioning of their system will increase occupant comfort and indoor air quality, while at the same time reduce their energy use.

Emerging Technologies: Examples:

Environmental Concerns: Examples:

Building Energy Codes: Better and better energy codes are coming out New construction and major renovations need to meet code Code enforcement is crucial but needs more support

Certifications: LEED and other Certifications

VI. How SEDAC May Be Able To Help Provide estimated energy savings for various measures. Conduct building energy audits and analysis. Provide over the phone assistance. Retrocommissioning for public facilities

How SEDAC May Be Able To Help SEDAC s clients: Our clients buildings are typically larger than 10,000 ft 2 or spend at least $10,000 in utility costs annually. SEDAC s clients include commercial, industrial, public sector, and non-profit facilites. SEDAC has produced 700 reports and audited over 51 million square feet. Must be in Illinois and have ComEd, Ameren Illinois, Nicor, Northshore, or Peoples Gas as a utility provider.

SEDAC Energy Assessments SEDAC s energy auditing process: STEP 1: Utility bill analysis (electricity and natural gas). STEP 2: Conduct site inspection to determine how and where energy is consumed. STEP 3: Identify energy saving measures. STEP 4: Model the building with computer energy software (Trane TRACE TM or equest TM ). STEP 5: Input energy saving measures into energy model to calculate potential savings. STEP 6: Write a report explaining recommendations and summarizing energy savings. STEP 7: Provide follow up support and assistance.

SEDAC Retrocommissioning (RCx) Commissioning is the process of ensuring that building systems operate as intended Should occur when building is first constructed and delivered to client Redone later in the life of the building (recommissioning) May be done later in the life of a building if commissioning was never done before (retrocommissioning)

VII. Questions Smart Energy Design Assistance Center 1309 S. Halsted St. 1 East St. Mary s Road Chicago, IL 60607 Champaign, IL 61820 (312) 413 8546 www.sedac.org (800) 214 7954