Cool savings through CEFC finance

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Ageing commercial buildings in Australia’s CBDs are benefiting from ‘cool savings’ following retrofits financed through the Clean Energy Finance Corporation (CEFC).

According to the Property Council of Australia there are about 4000 commercial office buildings in Australian cities with almost 25 million square metres of office space.

A typical building in Australian CBDs is well over 10 years old, has its original operating equipment in place, and its increasing electricity bills are eating into operating margins.

For CEFC chief executive officer Oliver Yates, the higher electricity consumption of ageing equipment and the growing cost of energy represent opportunities for building owners and facilities managers to save money through energy efficiency upgrades.

“Looking closely at the energy use of a typical commercial building, heating, ventilation and air-conditioning (HVAC) is responsible for about 40 percent, lighting about a quarter, and the rest is a combination of equipment, lifts, hot water and other uses,” says Yates.

“Technology has improved immensely in the past 20 or so years, so upgrading with new equipment means making significant inroads on those energy bills.”

The resources hunger of HVAC

The Energy Efficiency Exchange – a joint initiative of the Australian, state and territory governments – estimates that non-residential HVAC systems in Australia consume about nine percent of electricity produced and create more than 55 percent of electrical peak demand in CBD buildings, as well as consuming billions of litres of water per annum in cooling towers. The Energy Efficiency Exchange says optimising the use of HVAC systems and best practice maintenance can deliver utility cost savings of between 10 and 40 percent.

Demand for HVAC services can also be reduced by improving the air-tightness and insulation of a building. Upgrading lighting to more energy efficient equipment can also result in reduced cooling loads by as much as five to 20 percent.

“So it makes sense to tackle HVAC as part of any CBD building retrofit aimed at improving sustainability,” says Yates.

However, a familiar tale emerges when it comes to upgrades. Independent research body ClimateWorks has found that the energy intensity of the building stock overall has improved by about two percent in the past decade, driven by a small number of market leaders and capture of ‘low hanging fruit’ in other buildings involving improvements in appliance efficiency, hot water and lighting.

“Even when a sound business case for retrofitting to improve the sustainability of a commercial building presents, financing and making that change happen can be too high a hurdle for many,” says Yates.

Catalysing clean energy investment

The CEFC has catalysed clean energy investments of more than $2.5 billion since it began investing in renewable, energy efficient and low emissions technology last July.

By working alongside Australian banks and international financial institutions, the CEFC has used $700 million in investments to leverage $1.8 billion in private sector funds.

It is in active discussions with project proponents seeking finance of more than $1.2 billion for over $3 billion worth of projects across a diverse range of technologies and industries.

The CEFC’s investments have focused on later stage development of new technologies to accelerate their market take-up, and have helped develop 500 megawatts of clean energy generation capacity and emissions reduction of 3.9 million tonnes annually.

In the property sector, the CEFC is working with National Australia Bank (NAB), Balmain Corporation, Commonwealth Bank and Origin to provide finance tailored to suit retrofitting projects.

“Our loans and other financial products are tailored to an individual company and the life of a project, which means we offer longer-dated lending and flexible repayment structures, which haven’t been previously available to Australian businesses,” says Yates.

Success stories

The CEFC’s finance for commercial property provides success stories demonstrating the cost savings that can be through retrofitting.

“Several projects have effectively halved the base building electricity consumption,” says Yates.

In Brisbane, a seven-storey 1970s office block in Adelaide Street has achieved a five-star National Australian Built Environment Rating System (NABERS) Energy Base Building Rating following $1.23 million spent in energy efficiency improvements.

The improvements, which resulted in a reduction in base building electricity use of nearly 50 percent, involved installing new high efficiency air cooled chillers, new pumps and variable speed drives, a new mechanical switchboard, solar thermal heating, ventilation and air-conditioning units and LED lighting. CEFC finance was used for around $700,000 of the project cost.

In Ipswich, also in Queensland, a $1.6 million upgrade of the Limestone Street Centre transformed the 0-star NABERS rating bulky good retail centre into an office building that is targeting four stars with a reduced energy use of more than 50 percent.

The CEFC financed improvements that included replacing air-conditioning and building management systems.

At O’Connell’s OBM House at Wharf Street, Brisbane, energy consumption was reduced by over 40 percent when the 11-storey commercial office building improved its building management system, chiller and mechanical plant, base building lighting, metering and controls. The upgrade with energy efficient technology delivered immediate savings, improved tenant amenity and appeal, and helped drive up the value of the property in a highly competitive market.

Environmental Upgrade Agreements

The CEFC’s involvement in Environmental Upgrade Agreement (EUA) financing has also supported projects involving HVAC that are expected to result in significant energy cost savings.

Environmental Upgrade Agreements, available for commercial properties in Sydney and Melbourne and a number of regional centres in New South Wales, provide upfront capital for projects and allow building owners to tie the finance to the property.

Loan repayments are made through a local council charge on the land. Earlier this year the CEFC extended its finance agreement with NAB to increase the finance available for EUAs to cater for their growing popularity.

The former Ansett building in Swanston Street, Melbourne, accessed CEFC-supported EUA finance for a $7 million upgrade that is expected to halve its energy use. The 19-level 1970s building is undertaking a full upgrade of its plant room, chillers and boilers, and is using solar film on the windows to lessen the load on air-conditioning. New energy efficient regenerative braking elevators are also being installed.

Also in Melbourne, a 15-storey 1970s office block at 470 Collins Street has cut its energy costs by up to 30 percent through a $720,000 upgrade accessing an EUA.

The building’s improvements involved installing a new cooling tower, two new efficient condensing systems, a new building management system and energy efficient lighting. Meanwhile, the CQ hotel complex in Queen Street, Melbourne, used EUA finance to install a tri-generation plant that provides on-site electricity, heating and cooling as part of
its retrofit.

In Sydney, an office and commercial retail building is also expecting to cut its grid electricity usage by over 50 percent and natural gas usage by four percent through a $2 million EUA-financed retrofit involving new lighting and building metering, improved heating and cooling, and an upgrade of elevators and hydraulic services.

What’s next

Looking to the immediate future, the CEFC’s focus is on progressing the business and new investment proposals.

“The CEFC is on track to reach our target of $800 million to $1 billion invested in our first financial year with further new investments to be announced shortly,” says Yates.

“We’re continuing to experience strong interest from the market and are in active discussions with more than 30 project proponents seeking CEFC finance of more than $1.2 billion for total project costs of over $3 billion.”

To date the CEFC has invested about seven percent of its total $10 billion available and predicts that a portfolio of $5 billion in 2020, invested with the same level of co-financing participation, and a similar emissions reduction outcome, could contribute over 20 percent of the total abatement required to meet the bipartisan 2020 national abatement target, and at the same time deliver a net positive return to the taxpayer of over $100 million per annum.

The big picture

Projects financed under the CEFC’s delivery models, innovative financing and partnerships bring positive benefits in many industries across Australia, including property, agribusiness, manufacturing, utilities and local government.

Importantly, these projects are profitable for the businesses involved. They are realising productivity gains for these businesses and the Australian economy, while at the same time helping to build Australia’s clean energy supply chain capability and skills base for subcontractors and others providing value-added products and services.

“In the short time since its establishment, the CEFC has demonstrated its capability and its potential to assist our economy in making the transition to Australia’s future energy mix,” says Yates.

“By catalysing investment in new energy infrastructure and energy efficiency, the CEFC can play a valuable part
in developing the capabilities and capacity for lowering emissions and enabling a globally competitive Australian economy in a carbon constrained world.”

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