business case for energy efficiency retrofit renovation smr 2011

8/13/2019 Business Case for Energy Efficiency Retrofit Renovation Smr 2011

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B U S I N E S S C A S E F O R E N E R G Y E F F I C I E N T B U I L D I N G

R E T R O F I T A N D

R E N O V A T I O N

Expected nancial benetsare one of the key reasonsfor the dramatic growth ofgreen buildings over the last

ve years. Owners are interested innancially lucrative properties andexpect paybacks from their greeninvestments in the form of decreasedoperating costs, increased build-ing values, improved ROI, increasedoccupancy and higher rental rates.

These ndings are indicativeof the trend that green buildingsare increasingly being preferredby consumers. The reason for thispreference can be explained by sev-eral advantages green buildingshave over conventional buildings,including:

VALUE OF GREEN BUILDING: InGregory Kats 2010 Greening OurBuilt World , he reports that greenbuildings cost on average $3$9

per square foot more than conven-tional buildings, but provide a netpresent value of $24 per squarefoot when energy and watersavings and other benets areconsidered, such as productivity,health and well-being. 20

ENERGY SAVINGS: Green build-ing can be 25%30% more energyefcient than conventional build-ings. Kats reports the 20-yearpresent value of energy bene-ts from a typical green buildingis $5.79 per square foot, and thepaybacks exceed the additionalcost of green by a factor of four tosix. 21

Financial Benets Expectedfrom Green Upgrades

McGraw-Hill Construction 59 www.construction.com SmartMarket Reports

Sidebar Data : Business Benets of Green and Energy-EfficientRetrot and Renovation Activities CONTINUED

20 Kats, Gregory. Greening Our Built World: Costs, Benets and Strategies. Island Press. Washington DC. 2010. Page 9. ; 21 Ibid. Page 9.; 22 Ibi d, Page 28.; 23 Norm G Miller & Dave Pogue. Journal of Sustainable Real Estate.Green Buildings and Productivity. Vol. 1. No 1. Fall 20 09.

WATER SAVINGS: Through strat-egies such as efcient water andplumbing xtures and waterreuse, green buildings can reducewater use by 39% and offer higherwater savings than conventionalbuildings. 22

HEALTH, WELL-BEING AND

PRODUCTIVITY: Green build-ings offer improved indoor airquality and increased daylight-ing versus conventional buildings.More benchmarking and measure-ment are needed, but based ona 2009 CBRE/USD study, bene-ts of $153.61 per square foot andan estimated net present valueof $100 per square foot in produc-tivity and health benets areestimated. 23

REPUTATION: As evidencemounts that employees preferworking for corporations with acommitment to corporate respon-sibility and sustainability, greenbuildings can serve as a marketdifferentiator and provide rmswith the ability to attract andretain quality talent.

Business Benets Expected Across theIndustry by B uilding Owners

2010 2009

Decreased Operating Cos ts

8.0 % 8.5 %

Increased Building Values

4.8 % 6.8 %

Improvement in ROI 4.1 %

19.2 %

Increased Occupancy

5.3 % 2.5 %

Rent Rise

1.0 % 1.0 %

Higher ROI expected in 2009 Studyversus 2010 Study due to t he inclusion ofsome Class B upgrades to Class A buildings,where ROI improvement would besignicantly greater.

Sources: Green Building Retrot and Renovation SmartMarket Report ,McGraw-Hill Construction, 2009; The Business Benets of Green Building S martMarket Report ,McGraw-Hill Construction/CB Richard Ellis, 2010.

Note : Surveys include similar populations of commercial ofce building owners.


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R E N O V A T I O N

Close to 80% of buildingowners agree that a highup-front investment is notnecessary to green an exist-

ing building36% strongly agree.This bodes well for the receptive-

ness of owners to investments ingreen and energy efciencyas longas they are supplied with intelligencethat aligns with their business deci-sion process.

Key Findings fromOwner Data

Owners consistently reportincreases in ROI, occupancy andrent premiums from green build-ings. This intelligence can beimportant when trying to inu-ence the market.

Owners are motivated by protmeasures, not just operationalcost savings. Therefore, argu-ments that reect those needs willhelp draw owner attention.

Tools that help owners measureand benchmark business andhuman benets would beextremely valuable and market-able. Owners can use thisinformation to make better invest-ment decisions.

An owner who invests in greenbuilding is committed to doing soin the future, suggesting that themost signicant hurdle is gettingan owner started.

Building owners see govern-ment incentives as less importantthan market incentives. There-

Owner Perspectives

The majority of owners express condence that green upgrades are acost-effective way to improve the performance of existing buildings.

SmartMarket Reports McGraw-Hill Construction 60 www.construction.com


BUSINESS OPPORTUNITIES:

The research also demonstratesthat owners are seeking to differ-entiate their properties and bemore competitive in the market-place79% of owners expect toattract new tenants, and 64%expect higher tenant/customerretention and renewal.

They key research in the data sec-tions on pages 1639 conrm thesendings, illustrating a commitmentof C-suite executives to sustainabilityand green building practices acrossall industries.

fore, nancial benets becomeextremely important.

Benets: Financial andHuman FactorOwners expect a number of key ben-ets from investments in green andenergy efciency renovations andretrots to the buildings already intheir portfolios.

FINANCIAL BENEFITS: Theresearch ndings illustrate themotivations of cost savings andnancial benets behind greenupgrade investments93% ofowners expect to decrease opera-tional costs, and 71% expect to seeincreased return on investment.

Expected Benets from Green Features(According to Building Owners)

Decreased Operating Cos ts

93 %

Attracting New Tenants

79 %

Increased ROI

71 %

Increased Building/Asset Value

64 %

Higher Tenant Retention/Renewal

64 %

Increased Payments from Tax Incentives

36 %

Greater Occupant Productivit y

36 %

Increased Rents

21 %

Source: The Business Benefits of Green Building SmartMarket Report , McGraw-Hill Construction / CB Richard Ellis , 20 10

CONTINUED


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R E N O V A T I O N


Sidebar Data : Business Benets of Green and Energy-EfficientRetrot and Renovation ActivitiesOwner Perspectives CONTINUED

SOFT BENEFITS: Human factorbusiness benets, such as lowerhealthcare costs and absentee-ism and higher productivity, arebeing tracked by a large portionof commercial building ownersas they relate to impacts of theirbuilding upgrades. In fact, therates are signicantly higher thanfor executives across the industry(see page 36).

There is some variation in thetypes of benets being measured.Commercial property owners aremore often tracking customer-related factors such as retention andturnover (43%) and customer loyalty(36%), with negligible numberstracking other soft benets, such ashealthcare claims, absenteeism orworker productivity.

These soft benets may beextremely hard for commercial build-ing owners to measure, since theyoften have multiple rms leasingspace in their buildings. However,this information would be invalu-able in attracting and retaining ten-ants and at justifying higher rentalrates. Therefore, it may become criti-cal over time for owners to work withtenants to measure these factors.

Triggers and Obstacles

TRIGGERS: The survey results

show that the primary driverscausing owners to invest in greenfeatures are reduced energy (79%)and competitive advantage (72%).

OBSTACLES: 43% of building

owners cite that high initial invest-ment is a challenge to investing ingreen building retrots. However,more than half of all owners do notsee any obstacles to investing ingreen.

43 %YES

57 %NO

Commercial Building OwnersEngaged in Measuring Soft Benets ofUpgrades to Buildings

Source: The Business Benets of Green Building SmartMarket Report ,McGraw-Hill Construction/ CB Richard Ellis, 2010.

Major Triggers to Green Renovation Work(According to Building Owners)

Reduction in Building Energy Needs

79 %

Competitive Advantage from Green Features

72 %

Operating Expense Savings

65 %

Increase in Energy Prices

50 %


This nding is very different from the

challenges corporate owners (seepage 31) have in implementing sus-tainability, which may suggest thatit is easier to make the business casefor specic building upgrades.


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R E N O V A T I O N

Building managers have acritical role to play in theactivities that are encour-aged and adopted in

commercial ofce buildings. As theinterface between owner and theoccupants, building managers arefaced with the challenges of operat-ing and maintaining energy-efcientand green features of the building, aswell as communicating those bene-

ts. They can be an important playerin convincing owners to invest ingreen.

Key Findings fromBuilding Manager Data

Building managers are mostconcerned with cost savings.Therefore, an emphasis onenergy, water and operationalcost savings will be particularlycompelling to them.

Building managers are focusedon selecting and installing greenbuilding products and services.

Over three quarters of buildingmanagers have installed energy-efcient features into LEEDcertied buildings. Therefore,

Building Manager Perspectives



knowledge of LEED can be anadvantage in understanding thetechnology demands and needsthat building managersespe-cially those already more receptiveto green or energy-efcientupgradesmay have.

Benets: IncreasedSatisfactionFor building managers, ensuring sat-

isfaction of building occupants is acritical part of their role. Therefore,features that impact this satisfactionare particularly important. Nearly all(97%) report tenants being more sat-ised after green upgrades.

FACTORS AFFECTING SATIS-

FACTION: According to buildingmanagers, many features impacttenant satisfaction, but mostinvolve things noticeable topeople occupying those build-ings. Features that are reportedas having the top impacts include:high-efciency plumbing xtures(85%), green cleaning products(84%) and energy-efcient light-ing (82%).

PRODUCTS: Building manag-ers are focused on selecting andinstalling green building productsand services that improve waterand energy efciency and indoorenvironmental quality. Mostnoticeable upgrades to tenantsand occupants are:

Individual temperature controls

(76%)Low-E window lms (41%)

Low-ow toilets (91%)

Motion-sensitive faucets (67%)

Green technologies must be oper-ated and maintained properly forbenets to be realized. In orderto better operate new technolo-gies, building managers need to beinformed about the green equipmentinstalled in their buildings.

Experts advocate that buildingmanagers need to be included inthe design process in order to famil-iarize themselves with the greenequipment.

Very Satised Somewhat Satised Neutral94 %

3% 3%

Satisfaction of Tenants after Green BuildingUpgrades (According to Building Managers)


Operating Expense Savings

94 %

Increase in Energy Prices

89 %

Reduction in Building Energy Needs

89 %

Competitive Advantage from Green Features

81 %

Major Triggers to Green Renovation Work(According to Building Managers)


CONTINUED


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R E N O V A T I O N


Sidebar Data : Business Benets of Green and Energy-EfficientRetrot and Renovation ActivitiesBuilding Manager Perspectives CONTINUED

Triggers and Obstacles

TRIGGERS

Commercial building managers areprimarily motivated by factors basedon energy, water and operationalcost savings.

OBSTACLES

Building managers also report sev-eral obstacles to green retrot andrenovation of existing buildings, suchas higher rst costs, but at relativelylow levels.

Inuence AgentsIn their green decisions, buildingmanagers are inuenced by severaldifferent agents.

OWNERS: 96% of building manag-ers are inuenced by buildingowners, and 87% nd them veryinuential. This is not surprisingsince commercial building ownersultimately pay for green upgrades.

MANAGEMENT COMPANIES: Property management companies(85%) have strong inuences uponbuilding managers. As a result,commitments that these rmsmake will inuence the retrotmarket.

LEED EBO&M CONSULTANTS: 72% of building managers are

inuenced by LEED consultantsdecisions about what activitiesto engage in. For technology andservice leaders, they may pose aunique point of entry to encour-age increased energy efciencyinvestment.

17 %

13%

2% 17 %

13%

Inuential Very Inuential

Building Owner

9% 87% 96 %

Management Company (e.g., CBRE)

26% 59% 85 %

LEED-EBO&M Consultant

37% 35% 72 %

Tenant Demand

37% 50 %

Public Pressure

15% 2%

Inuence Agents for Green Retrots(According to Building Managers)


13%

TENANTS: Half of building manag-ers are inuenced by tenants,though only 13% nd them veryinuential. The weak inuenceof tenants may be due to the factthat many of them receive fewerdirect nancial benets of greenupgrades. Green lease provisionsand submetering can change thisand give tenant rms the incentiveand ability to be more inuentialconcerning green upgrades.


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ATTRACTING EMPLOYEES: There are a relatively smallnumber of tenant rms thatplace importance on using greento attract new employees ascompared to the other factors. Thecurrent economic downturn may

explain why this measure wasselected by fewer rms than theother three. Employees may beless inclined to insist on workingin a green ofce in a difcult jobmarket.



R E N O V A T I O N

In todays down economy, tenantrms in commercial ofce build-ings have more selection ofspace to lease, and therefore can

have greater inuence on features ofthat ofce space. For owners lookingto attract new tenants, and at higherthan market value, having buildingsthat differentiate them in the marketis critical.

Below are some key inuence fac-

tors for tenants, and the advantagesthey see with regard to green build-ing upgrades.

Key Findings fromTenant Firm Data

Tenants nd that a green ofcecreates a good public image anda favorable client impression.Owners can attract more tenantsby marketing these benets ofgreen buildings.

Tenant rms report betteremployee health and increasedproductivity as a result of greenfeatures. Employers can save onhealthcare costs by investing ingreen.

Green features are inuencingtenant leasing decisions. Ownerscan capitalize on this trend byinvesting in these green features.

Tenant Perspectives



Benets: Importance ofGreen Buildings

COMPANY PUBLIC IMAGE:

Factors around companyimageboth internally andexternallywere of the highest

levels of importance to tenantrms. Therefore, in inuencingtenant companies, emphasis onthese factors will be of utmostimportance.

Importance of Green Ofce for TenantsSource: The Business Benets of Green Building SmartMarket Report , McGraw-Hill Construction/ CB Richard Ellis, 2010.

Agree Strongly Agree

Green Ofce Creates a Good Public Image

42% 20% 62 %

Important for Employees to Work in a Green Ofce

46% 61 %

Green Ofce Creates Favorable Client Impression

40% 19% 59 %

Green Ofce Attracts Prospective Employees 26% 34 %

15%

8%

CONTINUED


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R E N O V A T I O N


Sidebar Data : Business Benets of Green and Energy-EfficientRetrot and Renovation ActivitiesTenants Perspectives CONTINUED

Important Very Important

Healthy Indoor Environment

24% 66% 90 %

Daylight and Views

32% 48% 80 %

Recycling Program

27% 38% 65 %

Lighting Controls and Sensors to Conserve Electricity

33% 31% 64 %

Energy-Efcient Practices and Products

33% 29% 62 %

Convenient Access to Public Transportation

28% 33% 61 %

Commitment of Building Management to Sustainability

32% 25% 57 %

Water-Efcient Practices and Fixtures 33% 24% 57 %

Green Cleaning

30% 20% 50 %

Importance of Green Features for TenantDecision on New Lease or Renewing ExistingLease (According to Tenant Firms )Source: The Business Benets of Green Building SmartMarket Report ,McGraw-Hill Construction/CB Richard Ellis, 2010.

Benets: BusinessImpacts from Greenand Energy-EfcientUpgradesAs mentioned previously, greenbuildings can provide soft benetssuch as improved employee pro-ductivity and satisfactionthat canhave signicant nancial rewardsfor employers who are incurring sig-nicant healthcare costs for theiremployees.

PRODUCTIVITY IMPROVEMENT

LEVELS: 10% of tenant rmsreport an increase in the produc-tivity of their employees as aresult of working in a building withgreen features, while 34% statethat they do not know if there wasan increase, again pointing to ameasurement challenge for thesesoft benets.

HIGHER PRODUCTIVITY

FACTORS: Tenants that reportan increase in productivity areimpacted by factors aroundcomfort (better airow, daylight-ing, temperature). These factors allmake people happier in the work-place, and therefore, make theiremployers (the tenant rms) havea more satised and productiveworkforce.

LEASING DECISIONS: Factors

that impact productivity alsoplay an important role for tenantsduring leasing decisionsa crit-ical nding for owners as theyare looking to attract and retaintenants. In particular, healthyenvironment and daylighting arecritical factors in their leasingdecisions.


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R E N O V A T I O N



The people who work inofce buildings are theones ultimately affected bythe environment of those

spaces. Over time, the industry hasbecome more aware of the impactsthat green and energy-efcientfeatures can have on improving thequality of the working experience.

Key Findings from

Building Occupant DataPeople who work in buildingscare about features that affecttheir health. Employers can gainlarge business savings if they cancapitalize on this.

People are satised by featuresthey notice. Therefore, it isimportant for building managersto communicate and engage thepeople working in their buildingsto reap the benets of green

improvements.People working in Class A LEEDbuildings are more satised withgreen products as comparedto non-LEED buildings. Again,this is likely due to the fact thatmanagers and owners of LEEDbuildings communicate moreoften with building occupants totout their green activities.

Though currently not a signicantinuence on an owners decision-making process, the opinions andpreferences of building occupantscan place pressures on leasingrms and indirectly impact anowner. Therefore, tapping into thisconsumer mind-set to reveal largerattitudes and preferences of thepublic at large could benet an ownersignicantly.

Occupant Perspectives

(LEED Only) Satiseld/Very Satised (Non-LEED) Satiseld/Very Satised

Daylight and Views

73 %

62 %

Healthy Indoor Air Quality

57 %

40 %

Energy Conserving Lighting Controls and Sensors

53 %

44 %

Comfortable Indoor Temperature

52 %

40 %

Energy-Efcient Practices and Products

47 %

35 %

Satisfaction with Green Features (Occupants of LEED versus Non-LEED Buildings)Source: The Business Benets of Green Building SmartMarket Report ,McGraw-Hill Construction/ CB Richard Ellis, 2010.

CONTINUED


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R E N O V A T I O N

McGraw-Hill Constructi on 67 www.construction.com SmartMarket Reports

Sidebar Data : Business Benets of Green and Energy-EfficientRetrot and Renovation ActivitiesOccupant Perspectives CONTINUED

Motivation FactorsGreen features that benet occupanthealth and well-being, such asincreased daylighting and improvedindoor air quality, are consideredimportant by most occupants andare among the top causes of workersatisfaction.

This is reected in motives fortenant rms in their leasing deci-sions, demonstrating a direct corre-

lation between attitudes of workersand of their employers (tenant rms).

ImpactsBetter lighting and air quality alsocan positively impact occupantproductivity. Considering thathealthcare and other workforce costsare a companys largest expense,there is a compelling argumentfor a company to strive to improveoccupant health and well-being andproductivity. Green upgrades can

help play a role in that.

PRODUCTIVITY: 16% of occu-pants report productivity increasesafter a green retrot and renova-tion of their building. This ndingis a bit higher than what tenantrms reportwith 10% expectingproductivity increases.

OVERALL BUILDING SATIS-

FACTION: Occupants workingin buildings that are Energy Starlabeled and/or LEED certiedreported higher satisfaction ratesafter building upgradeswith54% satised and 36% neutral.Only reason reason for the largeshare of neutral responses is thatsome of the upgrades undertakenwere systems related and likelynot as noticeable to tenants. Also,the level of communication aboutupgrades by building managershas been shown to directly corre-late with higher satisfaction levels.

GREEN FEATURE SATISFAC-

TION: A signicant portion ofoccupants of LEED buildings aremore satised with green featurescompared to occupants of build-ings with only the Energy Starlabel.

Particularly noteworthy is thehigher satisfaction with daylightingand healthy indoor air qualitythe two features with the biggest

impact on occupants and tenants.Owners of LEED buildings may ndadditional marketing value fromtheir effortsand their certicationprovides increased opportunity toengage with occupants.


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R E N O V A T I O N

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Mesa County Valley School District 51, ColoradoUPGRADES AND ACTIVITIES ACHIEVING EFFIC IENCIES AND COST SAVINGS


choosing a vendor, setting up thecontract and beginning the formaltechnical energy audit.

The school district selected Trane,a large international energy servicecompany (ESCO) with which theschool district already had a workingrelationship, as a primary contractor.Trane brought in Denver-basedFinancial Energy Management tohandle the lighting retrot, which

was the major component of thedistricts energy efciency efforts.Trane also developed the scope

of work and determined how muchthe school district needed to borrow,then developed the three phases ofwork that would be good paybackinvestments that would t into a 15-to 20-year time frame

Improving Energy Efciency inPublic Schools through Performance

Contracting with Existing Budgets

Mesa County ValleySchool District 51covers 2,200 squaremiles of Mesa County,

Colorado, and includes 43 schoolcampuses and four administrationfacilities. The school district servesmore than 20,000 students. It is thelargest employer between Denverand Provo, Utah, with more than3,200 employees.

The OpportunityThe school district was facing agingsystems in its numerous schools.The systems were becoming increas-ingly expensive and difcult torepair as the frequency of failuresincreased.

Like many school systems, MesaCounty Valley School District facedincreasing energy and operatingcosts along with declining budgets.Many of the buildings had been con-

structed in the 1980s, with inefcientlighting and no exterior windows inthe classrooms.

The First Step: EnergyStar and BenchmarkingIn 2007, the school district decided topartner with the U.S. governmentsEnergy Star program, making afundamental commitment to protectthe environment through continuousimprovement of its facilities energyperformance.

Through the program, the schooldistrict evaluated energy use ofall its schools and established abaseline for measuring future resultsof efciency efforts. The schooldistrict realized that it had somegood, energy-efcient buildings, butthat it also had many very inefcientones that needed considerableimprovement.

Energy PerformanceContracting:Investment SolutionAt that time, Mesa County had beenhit hard by the recession, and theschool district was lacking capitalreserves. As a result, the schooldistrict explored the possibility ofperformance contracting, whichwas attractive because the fundingessentially would come out of the

facilities operating budget over aperiod of many years, reducing oreliminating the need for up-frontcapital.

They consulted with the Gover-nors Energy Ofce, which had aperformance contracting programset up. The program helped themthrough the steps of nding and

Replacing aging lighting, heating, and coolingwith energy-efcient alternatives can generatebig savings, but we lack the capital funds to do

those projects. Energy performance contractingprovides us a way to make those improvements.

Lighting optimization creates a more pleasant environment for students, teachertsand staff to learn and work.

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McGraw-Hill Construct ion 69 www.construction.com SmartMarket Reports

Mesa County Valley School District 51, ColoradoUPGRADES AND ACTIVITIES ACHIEVING EFFIC IENCIES AND COST SAVINGS



R E N O V A T I O N The Results:

Lighting and MechanicalRetrots Lead toSignicant BenetsThe lighting retrot involved all theschool districts buildings, with atotal of about 3 million square feet,and accounted for about two thirds ofthe total project cost. Improvementswere made even to buildings that hadseen lighting equipment upgrades as

recently as four or ve years ago.For example, many buildings hadrecently replaced old T-12 uorescenttubes with more efcient T-8 tubesand had replaced metal halidelighting with uorescents. In thepast ve years, further upgradessuch as installing optical controlsand electronic ballasts have becomemore cost-effective, increasingenergy savings even more.

The mechanical and lighting ret-rot results are expected to provide

electricity savings of over 6.3 mil-lion kWh per year. The total cost ofthe project will be approximately$10 million for lighting and mechan-ical combined, and it is projected tosave a total of $732,828 per year inenergy and maintenance costs. Withutility rebates, the payback time willbe approximately 10 years for themechanical and lighting retrotscombined.

The school district also optedfor the utility provider Xcel Energysself-directed energy efciencyincentive program, which providesa reward for total energy saved.This self-directed approach is moreinvolved but also more lucrative.For this project, the school districtbeneted from a rebate of $804,000.

Number of Schools45Number of Students20,000Number of Buildings79Square Feet of Building Space3 millionESCOTrane CorporationEnergy ConsultantFinancial Energy ManagementTotal Project Costs$10,000,000Payback10 yearsAnnual Electric kWhDistrict-Wide Savings6,367,000 kWhAnnual Natural Gas District-Wide savings15,359 DTHTotal Guaranteed AnnualSavings$732,828Xcel Energy Custom Rebatefor Phase I lighting Retrots(September 2010)$804,000Xcel Energy Custom Rebatefor Phase II and III (Expected)$500,000ENERGY STAR ProgramPartnershipSince September 2007ENERGY STAR Portfolio Man-ager (PM) Score (District-Wide)

86 out of 100Adjusted PM Energy UseReduction through Dec. 201030%Adjusted PM Energy UseReduction by End of Phase IIand III (Expected)45%50%Energy Star Buildings24

s t a t s

Energy EfciencyImprovements Financedby PerformanceContractingBy using performance contract-ing, the school district did not needto provide any up-front nancing.The contractors arrange the nanc-ing and will be paid gradually fromthe energy and operational savings.The school district is guaranteed a

minimum level of energy savings($283,000 per year) and a positivecash ow through this arrangement.The entire retrot will be paid for outof the school districts facilities oper-ations budget, and no capital fundswill be needed.

Eric Anderson, resource conserva-tion manger for Mesa County ValleySchool District 51, recommendsenergy performance contracting asa great way to nance energy ef-ciency improvements at other K -12

school districts as well. He states,Replacing aging lighting, heating,cooling and controls with energy-efcient alternatives can generatebig savings, but we lack the capitalfunds to do those projects. Energyperformance contracting provides uswith a way to make those improve-ments with money we would oth-erwise be spending on high utilitybills.

In fact, schools are one of the sec-tors suited to performance contractsas long-term owners and occupiers(see sidebar on ESCOs on page 22).

Even though there are slight risksinvolvedfor example, if the energysavings does not pan out in the endAnderson states that most schoolshave similar kinds of buildings withsimilar kinds of challenges and canreplicate the success other schoolshave achieved. n

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University of CaliforniaENERGY EFFICIEN CY PROGRAMS SYSTEM-WI DE AND AT UC DAVIS CAMPUS


Using Paybacks to Fund EnergyEfciency in Higher Education

In 2008, the University of Cali-fornia initiated a $280 millionstrategic energy plan encom-passing 900 energy efciency

projects across the universitysystem. The goal of the program isto reduce system-wide energy con-sumption by 10% or more by 2014,using the year 2000 as the base-line measure. According to Dirk vanUlden, associate director of energy

and utilities at the university, the pro-gram achieved about 70% of its goalby the end of 2010, including a grosscost avoidance of $21 million and aGHG emission reduction of 93,000metric tons.

Students DrivingSustainabilityThe energy efciency program ispart of the university s Sustain-able Practices Policy, which wascreated in 2007 as a re sponse

to demands from students, whoinsisted that the university hadsocial responsibilities beyondeducating students in a class-room. The strategic energy planwas formed as one response tothese demands.

Using Contractorsto Identify EnergyEfciency ActivitiesContractors and subcontrac-tors were the key individuals whoroamed all the campuses, look-ing for opportunities to conserveenergy and maybe rebuild somesystems to make them more ef-cient, according to van Ulden.After originally recommending

3,000 projects , the team ultimatelysettled on 900 activities basedon a projects abilit y to delivermaximum returns in a rea sonabletime frame.

Self-Funding ProgramEnabled Initial andOngoing InvestmentThe University set up the require-ment that the strategic energy planbe a self-funding effort, though itwas predicated on an initial loan. In

this case, $280 million was borrowedto pay for the improvements, withthe loan repaid from the savings gen-erated by the projects. In order toguarantee that this nancing modelwould work, the University deter-mined that the bond debt service for

individual projects could not exceed85% of the avoided energy costs. VanUlden explains: For every $100 thatwe saved, the project could not costmore than $85.

The fact that the project is self-funding was critical for its adop-tion. The UC campuses were able tocapitalize on their ability to borrowmoney at a low rate and make thenecessary improvements without

competing with any other programfor limited scal resources.

Strategic Partnershipswith Utilities byLeveraging System-WideActivitiesAnother critical component thatallowed the university to createaggressive goals is its relationshipwith the utilities. Utilities had workedwith individual campuses in the paston efciency projects, but the sys-

tem-wide effort meant they couldcreate a uniform incentive programacross the board.

The advantages to this approach,described by van Ulden, loweredadministrative costs for the utilitiesand increased the incentive structurefor the university. The standardizedapplication process for each proj-ect allowed the utilities to offer anamount per kWh saved that is 50%60% above what they would givenormal customers. These savingshelp enable quicker payback of thedebt incurred by the initial projects,reducing their overall cost.

The Challenge of Takinga System-Wide ApproachOne of the challenges the programfaced, according to van Ulden, wasgaining buy-in from all 10 campusesand ve medical centers that

The lighting in the parking structures at UC Davis provided an opportunity toimplement cutting edge technology.

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University of CaliforniaENERGY EFFICIEN CY PROGRAMS SYSTEM-WI DE AND AT UC DAVIS CAMPUS



R E N O V A T I O N comprise the UC system. Each has

a unique identity as an institution,and they typically operate autono-mously. In addition, some campuseswere concerned about the impactof the project on their debt ceiling.However, because their campuseswould accrue the 15% cost savingsexceeding the cost of investment, itwas easier to persuade them to getinvolved.

Before the system-wide strate-gic energy plan was introduced,the UC Davis campus already hadenergy efciency initiatives in placeto exceed efciency code require-ments by at least 25%. Therefore,they were engaged by the programfrom the start, but they still foundsignicant advantages in participat-ing in the system-wide approach. Forexample, Sid England, assistant vicechancellor for UC Davis, states thatthe emphasis on a reduced carbon

footprint, rather than just operatingcost savings, came largely from thisinitiative.

Implementing NewTechnologiesThe program helped the Universitysystem achieve goals beyond reduc-ing its operating costs and carbonfootprint. Van Ulden also believesthat the university can help leadmarket transformation through theirimplementation of new technologiesin the commercial buildings sector.

In order to meet the stringentrequirements for payback on invest-ment, van Ulden says that their strat-egy is to consider the overall paybackof a combination of projects, withadvanced technologies consideredalong with very cost-effective pro-grams to achieve the 85% avoidedenergy costs.

UC Davis has taken the lead onthese projects. The campus Cali-fornia Lighting Technology Centerhelped UC Davis achieve the aggres-sive goal of reducing the energy usedfor lighting by 60% over the next veyearsresulting in 32 million kWhper year and over $3 million in sav-ings, and a carbon footprint reduc-tion of approximately 6.5%. The costof $39 million requires a longer pay-

back than most of the UC efciencyprojects, approximately 15 years, butwill help demonstrate the efcacy ofthe new technologies.

One lighting project they pursuedwith unexpected benets was to rettheir parking garages with bi-levellighting that gauges the occupancyin the building and reduces light-ing in an unoccupied garage to 50%.The technology also proved to be anunexpected security asset. Accord-ing to England, If theres anybody in

the parking structure moving around,the lights start popping up.

Efciency Projects withthe Greatest ReturnSince the strategic energy plan hasbeen implemented, certain technolo-gies and systems have emerged thatoffer high returns for investment. Theuniversity reports that HVAC systemsand retrocommissioning are theefforts that yield the greatest returns,with paybacks in retrocommission-ing in one to three years.

In particular, van Ulden cites proj-ects that improve the energy perfor-mance of laboratories as having thegreatest impact, since laboratoriesare such intensive energy users. n

s t a t s

University of CaliforniaStatewide Energy Partnership

UC System10 campuses and 5 medicalcenters

Total Building Square FeetApproximately 10 millionCost of Energy EfciencyImprovement$80 million as of 12/31/2010

Project Start Date

1/1/2009Project Completion DateIn progress

Scope of ImprovementsLighting, HVAC control upgrades,motor, chiller and boiler replacements

Products and TechnologiesT-8 uorescent lighting (latestgeneration), LED and inductionlighting, demand control in lab-oraties, CAV to VAV conversions,central plant upgrades

Process Improvements

Increased building occupantawareness, automated control sys-tems, continuous commissioningCost Reductions and Paybacks(as of December 2010)Energy savings (cost): 7%

Energy Use Reductions:155 million kWhs and 8 million therms

Energy Savings (Use): 8%Payback: Less than 7 years

UC Davis CampusInvestment$44,000,000

Partnership Incentive$10,145,965

Cost Reductions and PaybackskWh Savings: 34,846,232Therm Savings: 2,364,940Energy Savings (Use): 18%kWh Savings: $2,981.830Therm Savings: $2,152,832Payback: 6.7 years

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R E N O V A T I O N


Data Section I(pages 1015):The data used to track the retrot andrenovation market activity were com-piled from the McGraw-Hill Construc-tion (MHC) database of constructionprojects. Through the Dodge Net-work, MHC publishes approximately700,000 reports annually, coveringall project types (e.g., nonresiden-tial, residential, nonbuilding). From

this pool of projects, MHC draws theConstruction Activity Service (CAS)Database, which pulls project infor-mation on a monthly basis from theDodge Network data on projects thathave started construction. This data-base of start projects goes back to1967. These data are used for analyti-cal purposes, and they form the basisfor all of the analysis of market activ-ity represented in this section.

Data Section II

(pages 1639):In 2009, Siemens and MHC publishedthe Greening of Corporate AmericaReport, which featured marketresearch conducted in February andMarch 2009. Respondents included203 corporate executives fromrms with annual revenues of $250million and above, which representover 75% of the then $36 trillion U.S.equities market. These rms includea diverse range of sectors, includingmanufacturing, pharmaceutical,construction, computer technology,retail, real estate, insurance,energy and natural resources. 78%of the respondents were C-levelexecutives (e.g., CEO, CFO) and theremaining 22% were respondentsholding responsibility in the area ofcorporate sustainability. The surveyinvestigated the broad patterns ofcorporate sustainability.

The same sample formed thebasis for a new research survey con-ducted in December 2010 presentedand analyzed in this report. MHC con-ducted this study to assess behav-ior, opinions and perceptions amongupper management in corporateAmerica of sustainability and energyefciency activities in particular.

A sample of 120 corporate ofcersand high-level managers were con-

tacted, with 50 sustainability ofcersand 70 general corporate contacts(over 50% were at the vice presidentlevel or higher).

To be an eligible respondent, thecorporate ofcers had to meet thefollowing criteria.

Company revenues of at least

$250 million in 2010One of the following roles: C-level

or head of department divisionor business unit, vice-president,director of a department division

or business unit, or a supervisingmanagerResponsibility in at least one of the

following areas:1. Selecting and installing moreenergy-efcient products andpractices2. Setting budgets andgetting nancing for corporatesustainability initiatives3. Establishing benchmarksand performance measures forsustainability initiatives4. Promoting the companyscorporate governance, ethics,stewardship, or philanthropicactivities

Data Sidebar(pages 5867):Analysis in this section was con-ducted using data collected from2009 to 2010. Some of these data

were previously released in differ-ent forms in the following studies:2009 Greening of Corporate AmericaReport , Business Benets of GreenBuilding SmartMarket Report , andGreen Retrot and Renovation Smart- Market Report . However, the resultsin this study aggregate and analyzethese data as a way to help the indus-try understandand help inuencethe business case for investing in

energy efciency upgrades to exist-ing buildings.In November 2010, MHC pub-

lished the Business Benets of GreenBuilding SmartMarket Report , whichfeatured some results of a marketsurvey conducted from July throughSeptember 2010. This research inves-tigated the impacts perceived in 150Energy Star labeled/LEED EBO&Mcertied buildings under manage-ment by CB Richard Ellis (CBRE),interviewing the building managers,

building owners and tenant compa-nies. The research was conducted inpartnership with CBRE and the Uni-versity of San Diego.

In October 2009, MHC publishedthe Green Retrot and RenovationSmartMarket Report , which featuredsome results of a market survey con-ducted from May through June 2009with building owners and tenants.61 building owners and tenants whohad conducted green retrots com-pleted the survey, which was drawnfrom a sample of 738 ofce and retailexisting commercial buildings man-aged by CBRE. Respondents werescreened on the basis of whetherthey had owned or occupied spacein a building that was at least veyears old and that had completed orplanned to complete a renovationproject that addressed at least twogreen areas.

Methodology :


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Resources

Organizations, websites and publications that can help you get smarterabout energy efciency and green building retrot and renovation

Federal Government Agencies and ProgramsU.S. Department of Energy (DOE) : ww w.energy.govDOE, Office of Energy Efficiency and

Renewable Energy : www.eere.energy.govBuildings Energy Databook :http ://buildingsdatabook.eren.doe.govU.S. Energy Information Administration :www.eia.doe.govU.S. Environmental Protection

Agency (EPA) : ww w.epa.govEPA Clean Energy Information :www.epa.gov/cleanenergy/index.htmlEPA Energy Portal : w ww.epa.gov/energyNational Plan for Energy Efficiency :www.epa.gov/cleanenergyEnergy Star : www.energyst ar.gov

National LaboratoriesPacific Northwest National

Laboratory : ww w.pnl.govEnergy & Efficiency Division :

www.energyandefficiency.pnl.govNational Renewable Energy

Laboratory : www.nrel.govLawrence Berkeley National

Laboratory : ww w.lbl.govEnvironmental Energy Technologies

Division : www.eetd.lbl.gov/eetd.htmlAmes Laboratory : www.ameslab.govArgonne National Laboratory : ww w.anl.govBrookhaven National Laboratory :www.bnl.gov/worldOak Ridge National Labratory : ww w.ornl.govNational Energy Technology

Laboratory : www.netl.doe.govNational Institute of Standards and

Technology : www.nist.govSavannah River National Labratory :www.srnl.doe.gov

White HouseEnergy & Environmental Issues :www.whitehouse.gov/issues/energy-and-environmentCouncil on Environmental Quality :www.whitehouse.gov/administration/eop/ceq

U.S. Department of Housing and Urban

Development (HUD) : www.hud.govHUD, Office of Environment and Energy :www.hud.gov/offices/cpd/library/energy/index.cfmU.S. Department of Commerce : www.commerce.govU.S. Census Bureau : www.census.gov

University ProgramsCarnegie Mel lon University, Center for Building

Performance and Diagnostics :www.cmu.edu/architecture/research/cbpd/absic-cbpd.htmlUniversity of Californ ia, Berkeley, Center for the

Built Environment : www.cbe.berkeley.eduUniversity of San Diego : www.sandiego.edu

Nonprot OrganizationsAlliance to Save Energy : www.ase.orgAmerican Council for an Energy-Efficient

Economy : www.aceee.org/index.htmAmerican Society of Heating, Refrigerating and

Air-Conditioning Engineers : www.ashrae.orgBuilding Performance Institute : www.bpi.orgClinton Climate Initiative :www.clintonfoundation.org/what-we-do/clinton-climate-initiativeDatabase of State Initiatives for Renewables

and Efficiency : www.dsireusa.orgElectric Power Research Institute :http://my.epri.com/portal/server.ptEnergy and Environmental Building

Alliance : www.eeba.orgNational Association of Home Builders

(NAHB) : www.nahbgreen.orgNABH Research Center : www.nahbrc.org

National Association of State Energy

Officials : www.naseo.orgNew Buildings Institute : www.newbuildings.orgPew Center on Global Climate Change, Energ y

Efficiency Resources :www.pewclimate.org/energy-efficiencySustainable Buildings Industry

Council : www.sbicouncil.orgU.S. Conference of Mayors, Climate P rotection

Center : www.usmayors.org/climateprotectionU.S. Green Building Council : www.usgbc.org

McGraw-Hill Construction

Main Website : construction.com, GreenSource: greensourcemag.comResearch & Analytics : analytics.construction.com, Sweets: sweets.comEngineering News-Record : enr.com, Achitectural Record: archrecord.comGreen Reports : construction.com/market_research


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