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Written by Alan Pong, Greeniac168   
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Tuesday, 16 June 2009

You Have Performed a Benchmark Review of Your Utilities—Now What?
My last article explained how to benchmark your utility bills so that you can determine if your building is energy efficient or not. People often assume that their building’s HVAC system was designed by an engineer to operate efficiently so what need is there to benchmark energy usage? In California, buildings are required to be designed per Title 24, where a professional licensed engineer certifies that the design, size, type of equipment, and envelope of the building has the ability to use the minimum energy as defined in Title 24. That minimum is approximately 50,000 BTU per square feet per year or to put it into a metric most of you would see on your utility bill it should operate about 15 kilowatt hours per square feet per year (kWh/sq.ft./year). That is the basic metric I identified in my last article about how to benchmark your utility usage.

In my experience, over 90% of buildings, regardless of age, are consuming energy levels much higher than the 15 kWh/sq.ft./year. The reason for this is that Title 24 just says that the design could be efficient but does not require it to operate at the 15 kWh/sq.ft./year level. There are many problems in today’s buildings often stemming from installation problems, operation, poor controls, deferred maintenance, and many other items that are preventing the building from operating at an optimal Title 24 design.

By knowing your building’s benchmark consumption you can quickly identify if there is a problem, and if so, a detailed energy audit is the answer to most facilities’ energy problems. A problem in the industry is that the term “energy audit” is used to describe many types of audits and many will not provide the necessary information to make a sound business decision to improve your energy usage. Most so-called energy audits are often mere cursory surveys or low level computer simulation models. The only way I know of properly performing a true detailed investment grade audit that will provide results is to have a detailed team of technicians and engineers reverse engineer the complete building.

A quality audit should have a professional, licensed engineer, and team of skilled technicians, who should start with the installation of data loggers on the HVAC equipment to trend temperatures, pressures, events, kW, and comfort levels. These trend logs key the auditor into the opportunity areas for savings. An experienced professional engineer, doing a proper audit, will notice abnormalities in the system operation from an efficiency standpoint. This will allow the engineer to focus on the best approaches to quantify and qualify the energy waste that was identified by subtracting the EPA’s energy star building guidelines from the facilities actual energy usage in kWh/sq.ft./year.

No computer model can recreate an existing building and find all of the many problems causing energy waste. A quality audit will not use information assumed by rather real data measured, logged, and physically inspected. This is accomplished by having skilled technicians physically check all of the systems and by putting trend loggers on equipment to determine the operating profile of each fan, pump, chiller, coil, motor, control, etc. A trend log for a fan, for example, would continuously record supply air, outside air, return air, and mixed air temperatures to determine whether the economizer cycle is functioning, heating and cooling are occurring at the same time, or if there is deferred maintenance required on the unit.

Each piece of HVAC equipment should be trend logged in this fashion over a time frame of four to six weeks or longer if necessary. The data is then used by an engineer to analyze the operating conditions and perform engineering calculations to determine energy saving potential. Trend logs can provide a continuous understanding of how the system is operating over time and, as an example, can be used to measure things like the return air, mixed air, cooling supply, heating supply, average zones, and outside air temperatures in order to identify energy waste in the HVAC systems, etc. Current sensors can be trended to measure the fan power and run hours of the air conditioning systems, as another example. From this data, an engineering model can be programmed to calculate the total annual gas and electric use for that specific fan system. It is very accurate because it uses real data from that fan—not assumptions.

By modeling a piece of equipment, such as a fan, pump, chiller, etc., using real data measured, a very accurate comparison can be seen that defines exactly what has to be corrected or modified to acquire the projected cost reduction. Additionally, it shows that the cost reduction can be achieved at no change in comfort level.

A quality audit is an invaluable tool in analyzing energy cost reduction opportunities so that a strategic energy plan can be managed. Some of the key benefits are as follows:

  1. An audit shows you exactly how to get the energy savings projected by benchmarking your usage against the EPA Energy Star Building benchmark.

    a.     If the EPA benchmark is 16 kWh/sq.ft./year, and your facility is using 26 kWh/sq.ft./yr., the audit shows you at a minimum where the 10 kWh/sq.ft./yr. of waste is.

    b.     The audit shows you how much of the savings are lighting and how much is HVAC.

    c.     The audit calculates the cost to achieve the savings, so a simple payback can be analyzed and prioritized.

  2. The audit lets you know exactly how much potential savings is cost effectively available so that you can have a meaningful discussion with any utility or energy service company about energy projects.

    a.      Most facility managers don’t know where the opportunities are, or what paybacks are realistic, so anything the utility or energy Service Company (ESCO) tells them is difficult to evaluate.

    b.      Not knowing where you could be in kWh/sq.ft./yr., versus where you are now, is the biggest mistake you can make when trying to negotiate energy projects.

These type of audits involve a good deal of labor, and it is not uncommon for most quality audits to take over 500 engineering hours to complete and thus they are not free! Audits for both lighting and HVAC, combined with the detail discussed above, typically cost about $.10 to $.25 per square foot when performed by a professional engineer (P.E.). If a P.E. does not perform the audit, it will usually not be very beneficial. I stress this because you will undoubtedly be offered, at some point, a “free audit” by utilities or ESCOs, as an enticement to get you to do business with them. Many times, to get the “free audit” you will be required to sign a letter of intent that generally requires that you pay for the audit if you do not enter into a contract to perform energy work with the utility or ESCO, based on the findings of the audit.

This is a very dangerous situation to get into, because a “free audit” is a marketing strategy to lock you into bundled services. Remember that anything that has value is seldom free. “Free” is always a marketing enticement and should be viewed with skepticism. The value of a professional audit is that it defines exactly the best value from a capital investment in the form of simple payback analysis.

Additionally, the audit defines the scope of work required to achieve specific results that can be competitively procured in an unbundled format. If for example, you knew that your existing energy usage was 26 kWh/sq.ft./yr., and an audit calculated a 10 kWh/sq.ft./yr. savings for a three year payback, you could effectively negotiate with a utility or ESCO, your existing HVAC contractor, or lighting contractor competitively and unbundled. If the ESCO was proposing that you sign a letter of intent for seven year payback projects, undefined in scope until they performed their “free audit,” you would not commit to this because you would know it was not the best payback on your investment.

After you have completed a professional audit and subsequently know how much energy reduction opportunity is available for a cost effective payback, the next step is to implement the projects defined. There are many ways to do this, but the most effective way to implement an energy project is through a performance contract.

A performance contract is defined as a contractual obligation where there is a defined consequence to not performing. I suggest energy performance contracts be kept very simple. The reason for this is that the energy cost reduction process is complex and difficult to understand, and what you want as a facility manager is the result without putting a lot of time and effort into managing the process. With a performance contract the responsibility of achieving the result should rest with the contractor.

Energy cost reduction in facilities is not a new concept; it has been around since the 1973 oil embargo. In all that time, however, the industry in general has not produced very impressive results; if they had, there would not be such a large opportunity to reduce usage now. But it hasn’t been accomplished very successfully because it is difficult to do. This does not mean that it can’t be done, and there are certainly plenty of success stories to prove it, including the EPA’s Energy Star Building history, but you must be careful to get the results you want and expect. The method to do this is the performance contract.

Focus on what you want to achieve and specify a consequence if it’s not achieved. For example, if your audit defined a 10 kWh/sq.ft./yr. energy cost reduction for a three year payback, you would expect the following financial results:

10 kWh @ $.10/kWh = $1.00/sq.ft./year energy savings.
   sq.ft./yr

For a 100,000 sq. ft. facility the savings would be $100,000 per year.

If the payback was three years, the project would cost $100,000 x 3 years = $300,000.

So you invested $300,000 and you are expecting $100,000 per year in cost reduction for three years.

Assume, however, that you did not get the $100,000 per year savings, but $50,000 per year instead. That would mean that over the three years you would have a shortfall of $150,000 for savings not achieved.

Under a properly written performance contract, it would be the ESCOs or contractors obligation to refund the $150,000 to you if all other contractual obligations were met.

A performance contract has two distinct advantages:

  1. It tends to focus the contractor on achieving results and not promising more than can be delivered.

  2. It allows the facility manager to be assured that the investment objectives presented to upper management will be achieved one way or another.
A few things to consider when putting a performance contract together are as follows:

  1. Make sure energy savings are not achieved at the expense of lighting level reduction or comfort. A good way to achieve this is to specify a minimum lighting lumen level required at work stations and use ASHRAE (American Society of Heating Refrigeration and Air Conditioning Engineers) comfort standard 62-84 at design outside air conditions.

  2. Use the kWh and Therm savings specified in the audit, at the utility rates applicable at the time of the audit, as the performance goal. Make the monthly utility invoice the vehicle to determine savings. If you don’t get the savings on the invoice, it doesn’t do you much good. Sometimes you may need to correct for weather changes, but using 30 year weather averages for the audit will usually get you close enough, in the audit calculations, that you will not have to correct for weather when making monthly savings comparisons.

  3. Be very aware of assumptions made in the audit process, because a performance contract will tie directly to those assumptions. For example, assuming the facility is used between 7:00 a.m. and 6:00 p.m. five days per week, and if after the energy work is complete the schedule is changed, a correction will need to be made on the calculations before the monthly savings can be determined.

  4. HVAC maintenance will be very important in achieving energy savings. If new equipment on control system strategies and calibration are not maintained, it could void the guarantee on the performance contract. Make sure you provide for how this will be handled and monitored.

  5. Verify that the performance contractor has experience in this type of contract. Check references carefully, paying close attention to paybacks promised and delivered. Make sure that the contractor has a long history of delivering energy savings promised, and in the range that you are expecting. Some very large ESCO’s today have trouble providing good references. If you are looking for a 2 or 3 year payback, make sure you can talk to several references where they have done this before. Some ESCO’s specialize in Government work. Governments typically accept 10 to 15 year paybacks on energy projects. This is usually far too long for non-government facilities, so make sure your contractor has experience on fast payback projects.
The above items should assist you in writing a successful performance contract. Additionally, remember contractors and ESCOs that have lots of experience in reducing energy costs will not hesitate to back-up their projects with performance contracts and guarantees. Be very wary of contractors and ESCO’s that hesitate.

Energy cost reduction in today’s environment of deregulation is achievable, but it must be approached by dealing in facts. This will prove difficult from the standpoint that you will have to sift through lots of marketing and advertising strategies to sort fact from fiction.

To recap, remember the most important thing to know before you talk to anyone about energy savings is your current energy benchmark in kWh/sq.ft./year. Compare your current energy use to the EPA Energy Star Building Benchmarks to determine how much energy you could save.

Realize that 90% of the time, you can save the energy difference identified for a 2 or 3 year simple payback. If the paybacks being proposed to you are longer than 2 or 3 years, the audit has probably missed a large amount of operating savings and is more focused on large equipment change-outs. This is the wrong approach. You want to do the fast payback items first, and then look further out to equipment changes.

Use performance contracts to simplify your efforts, and put the responsibility on the people doing the work. Make sure there are real consequences for not performing. If you follow these guidelines you should be able to ensure that you optimize your buildings energy usage and see clear results on your utility bills.

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