who says money can’t grow on trees 9.30.2014
DESCRIPTION
Who Says Money Can’t Grow on Trees? Green Solutions for Tomorrow Part 1: The sources for free money when doing environmental upgrades and how to go about getting the funds. Part 2: When updating the reserve study, how can you incorporate “going green” so that you save money in the future? Moderator: Mohammed Salyani , CPA, Manager Wilkin & Guttenplan P.C. Speakers: Allan Samuels Energy Squared, LLC Mitchell Frumkin, PE, RS, CGP KipconTRANSCRIPT
Who Says Money Can’t Grow on Trees? Green Solutions for Tomorrow
Certified Public Accountants and Consultants
Moderator o Mohammed Salyani, CPA
oWilkin & Guttenplan P.C.
Speakers o Mitchell Frumkin, PE, RS, CGP
oKipcon
o Allan Samuels, LEED AP
oEnergy Squared, LLC
Our Moderator and Speakers
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Housekeeping
To ask questions please use the questions pane in the GoToWebinar dashboard on your screen. We will try to answer as many as possible.
This webinar is being recorded and will be uploaded on to our website at www.wgcpas.com
We will be sending a survey after the webinar via email. Please return it – we value your comments!
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Mitchell Frumkin, PE, RS, CGP
President
Kipcon
Green Reserve Studies
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First, Lets Clear Up the Confusion
What is GREEN? • Is it a color?
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First, Lets Clear Up the Confusion (cont.)
What is GREEN? • Is it a color?
YES
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First, Lets Clear Up the Confusion (cont.)
What is GREEN? • Is it a money?
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First, Lets Clear Up the Confusion (cont.)
What is GREEN? • Is it a money?
YE
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First, Lets Clear Up the Confusion (cont.)
What is GREEN? • Is it a environment?
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First, Lets Clear Up the Confusion (cont.)
What is GREEN? • Is it a environment?
YES
Today I Will Be Talking About
What is a Green Reserve Study and how it can be the starting point to saving money and helping the environment
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We All Know What A Reserve Study Is
A budget planning tool which identifies a stable and equitable Funding Plan to offset anticipated future major common area expenditures
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But, What Is A Green Reserve Study?
A budget planning tool which identifies the long term costs associated not only with Reserves but also with Maintenance and Energy. It identifies opportunities for long term savings based on the relationship between the 3 which will also result in environmental benefits.
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Your Associations Reserve Study Is the Perfect Starting Point
It lists the physical components of the community which are the responsibility of the Association to maintain and replace
It helps identify all components which require maintenance
It helps identify all components which consume energy
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How Can This Impact the Budget?
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Operating Expenses
(Including Energy
Costs), 31%
Administrative
Expenses, 16%Fixed Expenses,
11%
Repair/Reserves,
40%
Other, 2%
The Relationship Between the 3 Is the Key!
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Energy
Replacements
Maintenance
When You Set Up the Budget, Where Do You Get the Costs?
Reserves
Maintenance
Energy
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When You Set Up the Budget, Where Do You Get the Costs? (cont.)
Reserves
o Reserve study
Maintenance
o Historical information
Energy
o Historical information
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The Basis of Our Analysis Is Your Reserve Study…
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And Cash Flow Projection
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Which Looks Like This…
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Now Let’s Begin Looking at the Entire Picture …
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Replacements
Cost of Maintenance and Energy
The “Real” Cost….
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So, What Do You Do?
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Replacements
Reduced Cost of Maintenance and Energy
With A Cumulative Effect of..
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To Summarize…
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Total Contribution
Over 30 Years
Replacement Only $5,719,459
Replacement, Maintenance and Energy with Original Components
$6,318,553
Replacement, Maintenance and Energy with Alternative Components
$5,609,821
30 Year Savings !! Which does not include looking at the various funding plans!
$708,732
Which Leads To A New Way Of Bidding Replacement Projects
The Classic “First Cost” Approach
Option One Option Two
Material Cost
Labor Cost ________ ________
Total Cost
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Which Leads To A New Way Of Bidding Replacement Projects (cont.)
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The Evaluated Cost Approach
Option One Option Two
Material Cost
Labor Cost ________ ________
First Cost
30 Year Maint. Cost
30 Year Energy Cost ________ ________
Total 30 Year Cost
Also must consider any rebates, tax credits, etc.
Analyzing the Information
Wait until replacement is scheduled?
Perform replacement now?
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Analyzing the Information (cont.)
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Existing HVAC System
Replacement Cost $175,000
Useful Life 20 Years
Annualized Cost $8750
Annual Energy Cost $70,000
Total Annualized Cost $78,750
Analyzing the Information (cont.)
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Proposed High Efficiency
HVAC System
Replacement Cost $250,000
Useful Life 20 Years
Annualized Cost $12,500
Annual Energy Cost $50,000
Total Annualized Cost $62,500
The Results
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Increase in Installation Cost ($250,000 -
$175,000)
$75,000
Rebate at 50% of Incremental Cost $37,500
Incremental Cost
($75,000 - $37,500)
$37,500
Annual Energy Cost Savings
($70,000 - $50,000)
$20,000
Years to Breakeven ($37,500/$20,000) 1.9 years
Cumulative 20 Year Savings
($20,000 x 18.1 years )
$362,000
QUESTIONS
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Allan Samuels, LEED AP
Managing Partner
Energy Squared, LLC
Green “a la Gratis”
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What Makes A Project “Ideal” for Incentives?
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20+ years old
Building envelope (windows) in good condition
Old/original systems and equipment
Focus on low-cost upgrades first
o Windows/insulation are typically high cost
Ideal when heating and cooling are centralized
Look beyond the up front costs!
o Decision makers often feel the need to choose the option with the lowest capital costs
o Even if long-term savings are understood, they’re often forgotten
o Cost of an upgrade is returned well before the end of useful life of equipment
o If equipment needs to be replaced anyway, incremental costs are even less significant!
Life Cycle Costs
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3 major components:
o Energy savings
o Immediate reduction in energy costs
o Savings are multiplied as energy costs increase over time
o Maintenance/Non-energy savings
o Maintenance costs can be lowered (fewer equipment replacements)
o Water/sewer cost savings (i.e. low-flow toilets)
o Incentives/Rebates
o Up-front cost reduction
o Make high-efficiency equipment more competitive
Life Cycle Costs (cont.)
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Life Cycle Costs (cont.)
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Many upgrades have payback period ≤ 3 years
o Lighting
o Thermostat/temperature set-backs
o Boiler controls (i.e. outdoor air temperature reset)
o Pipe insulation
o Air sealing and weather stripping
o Low-flow water fixtures
Switch to Natural Gas
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Save up to 50% of heating costs versus oil
Increasing environmental regulations against oil
Simple burner upgrade
Going “Green” - It’s Not Just Solar!
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Solar and renewables are often seen as the cornerstone of being “green”
o Should be considered only once a facility is made as energy efficient as possible
Energy efficiency is more cost effective
o U.S. DOE found
o Saving energy ~ $0.03/kWh
o Generating energy ~ $0.10 - $0.15
Going “Green” - It’s Not Just Solar! (cont.)
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Solar is not ideal for mid/high-rise buildings
o Use lots of energy, no room for solar
No direct incentives available anymore in New Jersey
o Only SRECs remain
o Prices dropped from $600 to $170 (per 1,000 kWh generated)
New Jersey set aside $380M+ for energy efficiency projects in FY 2014 alone!
Funds come from fees in your utility bills
Anyone paying into the programs can receive incentives
Must apply and be approved before installation
Programs target individual measures and whole buildings
www.njcleanenergy.com
New Jersey Clean Energy Incentives
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$71M+ budget for FY 2014
P4P targets holistic approach to saving energy
Existing buildings and new construction
$2M available per project
Mandatory building modeling is performed by pre-approved P4P partner
P4P provides largest potential incentives
Pay for Performance
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Must save 15%+ energy and IRR ≥ 10%
High-cost measures (i.e. boilers) are grouped with low-cost measures (i.e. lighting) to make entire project cost effective
Most projects achieve 30%+ overall energy savings
Lower maintenance fees (condos) increase property value (apartment complex)
Up to 2 years given to install measures
3 stages of incentives
Pay for Performance (cont.)
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3 stages of incentives
o Incentive #1: Based on building size
o $0.10 per square foot
o Paid upon approval of Energy Reduction Plan (ERP)
o ERP outlines the efficiency measures and their expected savings
o Incentive #2: Based on projected savings
o $0.09-$0.11 per kWh, $0.90-$1.25 per Therm
o Projections come from simulating facility in energy modeling software
o Paid upon installation of all measures
Pay for Performance (cont.)
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o Incentive #3: Based on REAL savings
o Same per kWh and per Therm as incentive #2
o Paid upon verification of savings, true-up for projections
o Verification performed by analyzing 12 months of utility bills
o Low cost loans for P4P approved projects
Pay for Performance (cont.)
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Target standard/prescriptive measures
Lighting/controls, boilers, chillers, HVAC, motors, VFDs and refrigeration
Smaller incentives than P4P
Simplified application, approval still required before installing
Funding committed upon approval, paid after installation
1 year given to install measures
Smart Start Buildings
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What is CHP?
o CHP and Fuel Cells are generators that put wasted heat to work
o Building space heating, process heating (laundry/kitchens), or additional electric generation
o ~70% efficient, versus ~33% for traditional power plants
$3M available per project
Additional incentive (up to $250k) for completing P4P
Combined Heat-Power and Fuel Cells
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Resiliency
Sandy made long-term blackouts very real
When grid goes down, CHP/FC system can separate from the grid, keep building powered
o Aka “Islanding”
Combined Heat-Power and Fuel Cells (cont.)
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Incentive structure
o 30% of incentive paid upon purchase
o Meant to mitigate high up-front costs of CHP/FCs
o Additional 60% paid upon installation
o Final 10% paid upon performance verification
o 12 months of data used to confirm compliance
Combined Heat-Power and Fuel Cells (cont.)
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Lighting
o LEDs, reduced wattage T-8s
Lighting controls
o Occupancy sensors and daylighting controls
Best Upgrades
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Boilers
o New, condensing boilers are 96% efficient!
o This is the largest source of overall savings for most P4P projects
Chillers
o Significant portion of electricity usage
Pumps and variable frequency drives
o Control flow/power to only what is needed
Best Upgrades (cont.)
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Cooling towers
o Efficiency and equipment life diminished by weather
Air-sealing/weatherization
o Very low-cost
o Ideal for older facilities
Best Upgrades (cont.)
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Ventilation
o Fix undersized/malfunctioning equipment
o Increase comfort levels
Insulation
o Ensure that your boilers don’t heat the outdoors!
Piping (main building risers)
o Avoid costly failures in older buildings
Best Upgrades (cont.)
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Ideal applications
o Condos, co-ops
Cost shifting advantages
o Eliminate uniform/per-square-foot charges
o Encourage efficient behavior
Sub-Metering
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Proven savings!
o DOE notes 21% drop in usage when occupants pay for their own usage
What is involved?
o Meters, web-based interface, auto-billing
o Limited wiring required
Sub-Metering (cont.)
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Incentive programs will continue!
o New Jersey programs aren’t “going away” despite rumors
Continual cost reductions
o Advancements are pushing down costs
Stronger SREC market
o BPU stabilizing to increase installations
PJM demand savings incentives
o Regional grid operator gives incentives for kW savings
What the Future Holds
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Don’t get distracted from life cycle savings
Most common: lighting, boilers, HVAC
Behavioral changes have big impacts
Lots of NJCEP money available
Incentives make efficiency a no-brainer!
Don’t embark on any infrastructure upgrades without investigating incentives!
In Summary
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QUESTIONS
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THANK YOU
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Mitch Frumkin PE, RS, CGP
President
Kipcon Inc. 800.828.4118
Allan Samuels LEED AP
Managing Partner
Energy Squared, LLC [email protected]
Mohammed Salyani CPA
Manager
Wilkin & Guttenplan P.C. 732.846.3000