Who says money can’t grow on trees 9.30.2014

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.

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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

mfrumkin@kipcon.com

Allan Samuels LEED AP

Managing Partner

Energy Squared, LLC allan.samuels@energysquaredeng.com

Mohammed Salyani CPA

Manager

Wilkin & Guttenplan P.C. 732.846.3000

msalyani@wgcpas.com