Transcript Slide 1

Proven Strategies for Making Existing Buildings
Energy and Operationally Efficient
REMOVING OBSTACLES TO ENERGY EFFICIENCY
THROUGH BUSINESS CASE AND REAL RESULTS
John W. Conover IV, President, Trane Commercial Americas
At Fairleigh Dickinson University
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WEEC: Future of Performance Contracting
About John W. Conover IV
•
Leader for the Trane commercial business in the Americas –
14,200 employees in the U.S., Canada and Latin America
•
Been in the HVAC-R industry for 30 years
•
During tenure with Trane, played integral role in better
understanding customer expectations and market needs such
as the growing search for energy efficiency solutions.
•
Focus heavily on gaining innovative insights on what it takes to
acquire, satisfy and retain customers.
•
Earned a bachelor’s of science degree in civil engineering from
Lehigh University and is a registered professional engineer.
•
Attended the Executive Leadership Program at the Wharton
School of Business at the University of Pennsylvania.
•
John and his wife Marsha live in New Jersey and are the proud
parents of four children
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About Ingersoll Rand
• $17 billion diversified industrial company
• 64,000 employees worldwide
• More than 100 manufacturing facilities
worldwide
• Operate in every major geographic region
• Strategic brands are #1 or #2 in their markets
About Trane
Commercial Equipment + Systems
Residential Products
Aftermarket Parts
Trane Building Services
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How Ingersoll Rand Walks the Talk
about Energy Efficiency
INGERSOLL RAND IS REDUCING ITS OWN ENVIRONMENTAL FOOTPRINT
•
Trane and Ingersoll Rand – active with the U.S. Environmental Protection Agency
– Members of Climate Leader Program
– Joined Smart Way Program: To reduce environmental impact of transportation activities
– Members of the Green Chill program: Energy efficiency in the supermarket industry
•
Member of the Dow Jones North American Sustainability Index, various investing indicies
•
Established internal goals for reduction of energy use and climate change emissions
– Energy audit program to understand energy use/strategies for reducing consumption
– Established a Sustainability Strategy Council to further integrate Sustainability principles
throughout our business
– Created “green teams” in all locations to engage employees and champion reduction
– Established national patch program with Girl Scouts of the Americas called “BTU Crew”
to encourage girls to reduce energy use in community buildings
– LEED certified buildings in the U.S. and Asia
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Why Trane is Talking About
Energy Efficiency
WHAT WE DO
•
Trane works with leaders who take a broad view of organizational performance
•
We offer most energy efficient systems along with energy management and optimization
service that leverages operational savings to support business objectives
OUR EXPERIENCE
•
1 out of every 2 buildings in the U.S. has a Trane system
•
More LEED certified Accredited Professionals (AP) in the industry
•
Most energy efficient large chilled water system on the market today
•
More than 125 performance contracting projects
– Average project in the range of $2M with 10 year contract
OUR ENVIRONMENTAL CONTRIBUTION (ENERGY SAVINGS EQUIVALENT)
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•
18,722 cars taken off the highway
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11,323,812 gallons of gasoline saved
•
21,843 planted mature trees
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68,074,062 gallons of water saved
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224,666,420 pounds of CO2 saved
Perfect Storm:
Factors Influencing Energy Efficiency + Building Owners Today
ENERGY USE IN EXISTING BUILDINGS A PRIORITY
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Buildings consume 1/3 of energy worldwide and
expected to grow: Population growth,
urbanization, developing countries
•
Energy use in buildings projected to grow
– Up to 40% of total operating expenses of some
buildings
– Single greatest contributor to global warming
•
Tremendous amount of energy-related policy:
– Improve environment and reduce oil reliance
– Stimulate the economy and create jobs
– Reduce risk and increase business confidence
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Perfect Storm:
Factors Influencing Energy Efficiency + Building Owners Today
ESPECIALLY IN CHALLENGING ECONOMIC ENVIRONMENT
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Reduced operating budgets and deferred maintenance
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New construction outlook remains weak
•
Considered to be operating in a global recessionary market
•
Businesses pinched more than ever
– Operating costs continue to rise with intense pressure to reduce
– Access to cash and credit more limited than ever
– Limited appetite for capital investments without clear payback
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What This Means:
For Building Owners and Business Leaders
ENERGY EFFICIENCY IS A BUSINESS IMPERATIVE
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More than a “nice to do” or method for being socially responsible
•
There are tangible business results directly associated with energy efficiency
– Financial, customer satisfaction, employee productivity
– Not to mention that it makes assets more valuable
– And there’s a positive environmental contribution
•
As business leaders, our job is to remove obstacles to energy efficiency
– Must be C-level owned / championed
– Need a financially-motivated business plan
– Don’t get caught up in the noise – there are proven strategies and
technologies for making existing business more efficient
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Why A C-Level Imperative
For Building Owners and Business Leaders
CONSERVATION IS FOR THE BOILER ROOM … EFFICIENCY IS FOR THE BOARD ROOM
ENERGY CONSERVATION
ENERGY EFFICIENCY
• Using less energy, without necessarily
increasing the output
• Using less energy and achieving more output
– Rightsizing / replacing infrastructure
– Fewer truck runs to / from warehouse
– Process / product improvement
– Turning off unused equipment on
weekends / off-hours
– Less environmental impact in the
supply chain
– Modifying behaviors and practices
– Low hanging fruit / low first cost / fast
payback projects
– Often higher initial cost, but better life
cycle payback (need to understand the
financials)
– “Holding the Gains” – depends on
culture
– Holding the gains – depends on
automatic controls and monitoring
The Value of Efficiency: Reduce production losses, spoilage,
downtime while increasing good will and customer impact
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Alliance to Save Energy: Strategic Industrial Energy Efficiency
Getting Started: A Financially-Motivated Business Case
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Making the Case for Energy Efficiency
Critical question: Is your building overhead or an asset?
Owners who view their buildings as assets link the physical
environment to business outcomes – customer and employee
satisfaction, productivity, operating expense reduction, among
others. These buildings can be “high performance” and tie to the
mission, values and results of a business
• Value to people the building serves (environment, comfort, safety)
• Value to customers and community (competence, environmental
responsibility)
• Value to the bottom line (cost savings, avoidance, ROIC)
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Making the Case for Energy Efficiency
Critical question: What are your
driving factors for change?
• Every building, project and
customer is different – making each
project unique
• Modeling begins with
understanding:
– Why project was initiated
– Goals and objectives
– Appetite for risk
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Public
Private
Improve Infrastructure
Stay Competitive
(Attract Tenants,
Customers, Talent)
Reduce Maintenance
Costs
Reduce Maintenance
Costs
Reduce Operating Costs
Reduce Operating Costs
Optimize Capital Budget
Optimize Capital Budget
Improve Indoor
Environment (Comfort &
Occupant Performance)
Improve Indoor
Environment (Comfort &
Occupant Performance)
Be Socially Responsible
Add Asset Value
Making the Case for Energy Efficiency
Critical question: How will you fund your project?
Goal to Remain Budget Neutral
Capital Contribution
future planned monies allocated
today to broaden project impact
Capital
Budget
money for
projects
planned to be
completed in
the future
Operating
Operating Savings
Budget
non energy savings from
conservation measures and
maintenance practices
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Energy Budget
Energy
Savings from
Conservation
Measures
Three budget categories
• Energy budget
• Operating expense budget
• Capital improvement budget
Potential for more robust projects
• Evaluate benefits beyond payback
period
• Energy projects reduce operating
and capital improvement budgets
Making the Case for Energy Efficiency
Critical question: How will you fund your project?
•
Goal to Remain Budget Neutral
Goal: Allocate potential savings from operating budgets
and avoidance from capital budgets to fund project:
– Operating budgets should reflect the funding of the
debt service for the project with offsets to energy and
maintenance budgets.
– Capital budgets should also reflect the funding of
debt service...this is the amount of capital avoided as
a result of the project.
– Projects that take a comprehensive approach create a
consistent funding expectation and help mitigate
unexpected spikes in funding requirements.
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Capital Contribution - future
planned monies allocated
today to broaden project
impact
Energy Budget
Capital Budget - money for
projects planned to be
completed in the future
Operating Savings - non
energy savings from
conservation measures and
maintenance practices
Energy Savings from
Conservation Measures
Operating Budget
Making the Case for Energy Efficiency
Critical question: How will your project be delivered?
•
Though capital remains the same,
performance can be guaranteed by
providers
• Providers compensated based upon
success in achieving goals
• Contracts typically stipulate how
incentives will be paid out for elevated
performance or penalties assessed for
missed targets.
Performance criteria examples
• Reliability (uptime, # of unplanned
incidents)
• Efficiency (kW/Ton, mcf/BTU, etc.)
• Operating status (state of readiness,
availability)
• Field conditions (clean towers,
condensers, air intake)
• Output (BTUs, cooling tons, cfm, gpm)
• Capacity (peak output matched to load)
• Quality (power quality, load factors, IAQ)
The Aberdeen Group, February 2007
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• Rate of economic return (sustained energy
efficiency)
Making the Case for Energy Efficiency
Critical question: What changes can be made based upon financial
objectives?
Quick Return (0-3 yr payback)
Intermediate (3-8 yr payback)
Long-term
Retrofit lighting
Install new building automation
system
Replace high efficiency
equipment (major systems
chiller/boilers)
Update existing building
automation systems
Improve HVAC systems (CV to
VAV)
Building envelope
improvements
Conduct retro/recommissioning
Implement water conservation
Apply renewable technologies
Make behavioral changes (Turn
lights off, program systems)
Use fans and motors (VFDs, high
efficiency change outs)
Apply on site/distributive
power generation
Explore utility procurement
options
Apply load shifting technology
(ice storage)
Implement comprehensive
maintenance and repair
strategies
• Purpose of the building determines the investment strategy
• If a lifecycle return / financial approach is taken, owners can enjoy the benefits of everything listed on
the chart = significant energy, operating, environmental and business benefits
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Making the Case for Energy Efficiency
Breaking a myth: We need to wait for new technology or need
emerging technology to improve energy efficiency
Proven technologies available for all buildings types meeting various payback requirements
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HIGH EFFICIENCY CHILLED WATER SYSTEMS
DISTRICT COOLING/HEATING SYSTEM
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Large commercial/industrial buildings
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Multiple buildings/ campus/ industrial
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Generate chilled water for cooling
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Higher overall system efficiency
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Reduce energy consumption by half
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Beautify city outlook
ENERGY RECOVERY
GEOTHERMAL HEAT PUMP SYSTEM
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Less energy to cool fresh air brought into the
building in summer
•
Residential and commercial buildings
•
Less energy to pre-heat cold fresh air from
outside in winter
•
Pump energy from underground
•
Enjoy energy saving all seasons
•
Free energy to provide hot water
THERMAL STORAGE SYSTEMS
INDOOR AIR QUALITY
•
Large city with high peak demand
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Proper ventilation with minimum energy
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Shift demand from daytime to night
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Temperature and humidity control
•
Reduce blackout during hot summer
•
Filtration options ensure good IAQ
Making the Case for Energy Efficiency
Critical question: What costs need to be considered when financially
modeling an energy project?
Visible Costs
• All of these factors need to be
addressed at some point
Price/Time
Energy Costs
CFC Issues
Equipment
Shutdown
Costs
Security Costs
Being Green
Costs
Hidden Costs
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Maintenance
Costs
Legal Costs
Start-up
Delays
Performance
Problems
Total cost of ownership approach
Engineering
Charges
Construction
Change Orders
Indoor Air Quality
Fire Protection
Cost
• Modeling the building as a long-term
asset
– Offers greater financial transparency
– Will ultimately save energy and
operating dollars throughout the life
of the asset
Making the Case for Energy Efficiency
Critical question: How do owners ensure ongoing performance of
energy projects?
Proactive maintenance strategy
• Ensure that desired outcomes as assured
throughout the life of the asset
• Deliver an agreement that is cost-beneficial
to Trane customers and provides valuedriven service
• Doing so will avoid capital, energy and
repair costs
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• Return on investment: 10 times
• Reduction in maintenance costs: 25% to 30%
• Elimination of breakdowns: 70% to 75%
• Reduction in downtime: 35% to 45%
• Increase in production: 20% to 25%.
--- FEMP Guide, page 5.4
Making the Case for Energy Efficiency
Breaking a myth: Maintenance is more than just “break / fix” – being
proactive is a conscious strategy
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Making the Case for Energy Efficiency
Critical question: What is the financial model (example)?
Construction Customer
Pro Forma
Cash Purchase
Yes
Energy Savings - Gas
Energy Savings - Electric
Operational Savings
Capital Cost Avoidance
Utility Rebate
Total Annual Savings
425,000
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Year 1
600,000
250,000
300,000
500,000
1,650,000
1,449,000
1,250,170
1,303,609
1,359,421
1,417,714
1,478,603
65,000
78,750
143,750
66,950
82,688
149,638
68,959
86,822
155,780
71,027
91,163
162,190
73,158
95,721
168,879
75,353
100,507
175,860
5,000,000
445,447
610,651
6,056,097
1,100,533
1,147,829
1,197,231
1,248,835
1,302,743
4,277,420
528,611
5,000,000
Annual Net Cash Flow
(4,575,000)
1,550,000
1,305,250
Cumulative Cash Flow
(4,575,000)
0
(4,575,000)
(4,575,000)
(3,025,000)
(1,719,750)
(619,218)
1,550,000
(3,025,000)
1.00
1,305,250
(1,719,750)
1.00
4,277,420
1,100,533
(619,218)
1.00
Net Cash Flow
14-Apr-09
Totals
5,185,205
2,099,574
2,298,739
250,000
500,000
10,333,517
25,000
75,000
100,000
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Year 5
729,304
292,465
337,653
Yes
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Year 7
804,057
316,330
358,216
3
Year 3
661,500
270,400
318,270
5,000,000
4
Year 4
694,575
281,216
327,818
Yes
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Year 2
630,000
260,000
309,000
250,000
Installation Costs
Maintenance Costs
Central Plant Operations
Total Annual Costs
Assumptions
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0
Year 0
300,000
125,000
Yes
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Year 6
765,769
304,163
347,782
1,725,842
2,974,677
4,277,420
1,147,829
1,197,231
528,611
1,725,842
0.54
0.00
Financing Institution:
1,248,835
2,974,677
0.00
Fleet
1,302,743
4,277,420
0.00
NPV @ 15%
664,840
Amount Financed:
4,000,000
Payback Period
3.5 Years
Interest Rate:
8.50%
250,000
500,000
Making the Case for Energy Efficiency
Critical question: What is the financial model (example)?
Model offers comprehensive view
• Driving factors, funding and budget allocations, capital expenses, total cost of
ownership and financial return
• Analyzes cash flow over project life
Model incorporates more ECMs
• If owner considers only energy savings in financial decision
– Project would yield a 11.7 year payback
• If owner considers energy, operating cost, maintenance and asset replacement
cost savings over the life of the project
– Project yields a 3 year payback and it generates positive cash flow
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Making the Case for Energy Efficiency
Critical statement: Different payback, same return on investment
•
Return calculations dependent on benefits
received beyond initial payback
•
Guaranteed returns support analysis
beyond simple payback calculations and
provide financial basis for long term
investment in sustainability
•
Simple payback calculations help assess risk
•
Guaranteed savings minimize risk of
evaluating longer term projects
Return on Investment
$450,000
$400,000
$350,000
$1,000 Invest, 30% Savings, 16.7% IRR
$10,000 Invest, 20% Savings, 16.9% IRR
$100,000 Invest, 16% Savings, 17.0% IRR
$300,000
$1,000 Invest
$250,000
$10,000 Invest
$200,000
$100,000 Invest
$150,000
$100,000
$50,000
$0
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20
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How To Get Started: And Hold the Gains
Make efficiency a c-level imperative
Create a shared vision and create a mindset of “high performance
buildings” rather than “overhead”
Make the business case to understand appetite for risk, payback and
realistic measures / actions that can be taken
Make decisions and initiate your project
Integrate energy efficiency into business strategies, build
employee engagement
Measure progress to ensure continuous improvement
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Proving the Model:
Case Examples of Large Energy Projects
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Energy Project Makes Manufacturing
Facility More Competitive
Situation:
• Campus-style 102.200-sq-meter (1,1 million-sq-ft) heavy industrial
manufacturing plant
• Aging infrastructure with low energy efficiency and reliability and high
operating and maintenance costs
– Dramatic downturn in product sales
– While experiencing 70+% increase in energy costs
• Corporate goal of 15% reduction in energy cost by 2013
Approach:
• Factors driving improvements:
– Need to stay competitive
– Reduce maintenance and operating costs
– Add asset value
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Energy Project Makes Manufacturing
Facility More Competitive
Identifying investment benefits:
1. Assessment
Analyzed HVAC systems, compressed
air and lighting for efficiency, capacity
and effective operating and
maintenance practices. Evaluated
remote monitoring application potential.
2. ECM Selection
Lighting retrofits, building
automation upgrades and hot
water boiler
3. Payback
Selected ECMs offer
quick return
$2.1 million project investment in new
air compressors, hot water boiler,
lighting retrofit and remote monitoring
Results:
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•
Two-year payback with projected $1.13 million in annual energy savings +
$275,000 in annual labor cost reduction
•
Energy reduction of 11.5 MKWH equivalent to CO2 emissions from 11 tanker
truckloads
•
On track to achieve mandated 15% reduction by 2013
•
Safer, more reliable and more energy-efficient plant operations
Infrastructure Improvements
Generate Increased Production
Situation:
• Single-story 32.500 square-meter (350.000 square-foot) manufacturing
facility with 1,100 employees
• Needed stable ambient environment for optimized consumer product
manufacturing
• Outdated, unreliable infrastructure systems
Approach:
• Factors driving improvements:
– Need to stay competitive, improve indoor environment
• Guaranteed performance of the upgraded system for one year, offering
on-call maintenance support if ambient conditions were not met
• Assurance of improved performance and plant reliability, with available
on-call support, convinced management to complete the upgrades
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Infrastructure Improvements
Generate Increased Production
Identifying investment benefits:
1. Assessment
2. ECM Selection
3. Payback
Analyzed chiller and air handling systems
and the pneumatic building automation
system (BAS) for reliability, efficiency,
capacity and performance
High-efficiency chiller systems with
variable flow water pumps, upgraded air
handling systems and centralized BAS --
Quick return: BAS
Solid return: Chiller and air
handling systems
$8 million system upgrade
Results:
• Customer able to more effectively compete
– Increased production in improved environment
– Maintained near-perfect system performance
– Completed needed adjustments within hours
– Project finished on time and on budget with minimal production
downtime
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Five Star Hotel Increases
Comfort and Efficiency
Situation:
• Five-star Le Meridian Hotel on three-acre complex
• High operating expenses and service costs
• Outdated systems lacking centralized control
• Noise levels compromising guest and employee comfort and
government regulations
Approach:
• Factors driving improvements: increase competitiveness, reduce
operating costs, add asset value
• Identifying investment benefits:
1. Assessment
Evaluated efficiency, capacity,
noise, safety and maintenance
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2. ECM Selection
New chiller systems and a
centralized (BAS)
3. Payback
Selected ECMs offer
solid return
Five Star Hotel Increases
Comfort and Efficiency
Deliverables:
• $375K project with reduction of operating costs, increasing reliability
with a 3.5 year payback – included systems and remote monitoring
Results:
• Significant reliability increase and 30% improvement in chiller plant
energy efficiency
• BAS achieved additional 6-8% energy savings
• Project completed in tight timeframe with minimal guest
inconvenience
• Ongoing maintenance contract reduced service costs 30%
• Noise level reduction of 40% improved guest and employee comfort
and brought systems to code
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Hotel Hosts Upgrades for Increased
Reliability
Situation:
• 20-story hotel with 518 guest rooms, casino and meeting and exhibition
• Frequent breakdowns, reduced efficiency and high operating costs from
outdated systems
• Difficult-to-access plant room and decentralized system control
• Infrastructure systems generating noise complaints from guests
Approach:
• Factors driving improvements:
– Increase competitiveness
– Reduce operating costs
– Increase asset value
– Environmental responsibility in compliance with 2010 mandate
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Hotel Hosts Upgrades for Increased
Reliability
Identifying investment benefits:
1. Assessment
Evaluated central plant comfort
systems for performance, energy
consumption, operational
efficiencies and maintenance access
2. EMC Selection
High-efficiency chiller systems with
variable flow water pumps to reduce
energy use and a centralized BAS
Delivered $2 million integrated
systems solution with projected
six year payback
3. Payback
Selected ECMs offer
medium timed return
Results:
• 15% improvement in overall building energy efficiency (30% system
improvement)
• Significantly reduced carbon emissions to meet 2010 mandates
• Increased comfort by reducing system noise by 25dbA
• Reduced system breakdowns to near zero (reduction in maintenance
costs)
• Completed project off-season without disrupting hotel operations
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Municipality Conserves Resources,
Increases Comfort
Situation:
•
Master-planned city of 36,000 residents
•
Aging infrastructure, high energy consumption and mechanical system
and comfort issues in city buildings
Approach:
•
Factors driving improvements: Improve infrastructure, reduce operating
costs, improve comfort, be environmentally and socially responsible
•
Identifying investment benefits:
1. Assessment
Analyzed HVAC and lighting
efficiency, and capacity and
effectiveness of maintenance
practices
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2. ECM Selection
High-efficiency HVAC, lighting,
water saving fixtures, BAS,
building envelope and insulation
$1.3 million performance contracting with
11.5 year payback including annual
savings of $120,000 based on today’s
utility rates
3. Payback
Medium return: Water, lighting,
building envelope and insulation
Life cycle return: BAS and HVAC
Municipality Conserves Resources,
Increases Comfort
Results:
• No capital funding increase to make significant physical
improvements
• Project guaranteed energy savings of 877,266 kWh per year,
equivalent to recycling 215 tonnes of waste
• First full year following renovations showed 10% energy savings
above predicted savings
• Project has also saved 18,448 therms of natural gas and 1.2
million gallons of water
• Comfort and maintenance issues resolved
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Bottom Line Business Case
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