The vision behind the Empire State ‘rebuilding’
After only one year, the Empire State Building’s energy efficiency retrofit has saved US$2.4 million and made the building 20 percent more energy efficient. Johnson Controls’ CLAY NESLER reveals how this was achieved.
The mantra for commercial real estate owners used to be ‘location, location, location’. Now it is ‘location, location, efficiency’. Building owners and facilities managers are increasingly realising that energy efficiency is simply good business. Efficient energy systems cut operating costs and increase the value of the building, while at the same time having a positive impact on the environment.
Johnson Controls recently announced the findings from its sixth annual global Energy Efficiency Indicator Survey and found that 80 percent of Australian respondents are paying more attention to energy in 2012 than they did in 2011.
The survey also found that, globally, a vast majority of respondents depend on energy management to drive operational efficiency and, in Australia, increasing asset value is one of the top three drivers for investing in building efficiency improvements.
And, when it comes to putting their money where their mouths are, more than half (52 percent) of Australian companies surveyed have invested in energy efficiency measures in the past year and 46 percent are planning to increase spending over the next 12 months.
There have been a number of government policies promoting an increase in energy efficiency awareness and investment, including the National Strategy on Energy Efficiency (NSEE). One-third identified tax credits, incentives or rebates as the most important factor in driving building improvements, with a further 11 percent saying a price on carbon emissions was most important. The market for green buildings continues to grow in response to these policies, with 27 percent of Australians indicating that they are planning to pursue green certification and 41 percent planning to certify their existing buildings.
In addition to setting supportive policies, governments can demonstrate leadership by improving the efficiency of their own buildings. A good example is the Victorian Government’s Greener Government Buildings program. By 2018, the program aims to implement energy performance contracting (EPC) or similar programs at sites accounting for 90 percent of the State Government’s total energy consumption, concentrating on projects that pay for themselves within a seven-year payback period.
MEETING A THREE-YEAR PAYBACK PERIOD
Governments have traditionally allowed longer payback periods for retrofit projects as they can rely on long-term ownership and stable tenancy. The commercial building market, however, requires shorter payback periods in line with their shorter ownership terms and difficulties in obtaining project funding. In Australia, the average acceptable payback period is only three years, which limits the amount of savings that can be achieved in a retrofit project.
A great example of an extensive energy efficiency retrofit project that still meets the three-year payback criterion is the one implemented at the world’s most famous skyscraper – the Empire State Building in New York City. The owner of this iconic building embarked on an energy efficiency retrofit project that after one year has saved US$2.4 million and made the building 20 percent more energy efficient, exceeding by five percent the guaranteed savings amount specified in the energy performance contract.
The project was designed and implemented by a collaborative team of experts from Johnson Controls, Jones Lang LaSalle, the Rocky Mountain Institute and the Clinton Climate Initiative, and is a model for reducing costs, increasing property value and protecting the environment.
Eight improvement measures that address the core building infrastructure, common areas and tenant suites are being implemented. The program includes the refurbishment of 6500 windows, insulating 6500 radiators, a chiller plant upgrade, incorporating new building controls, the installation of wireless sensors and the introduction of a web-based tenant energy management system.
Once all tenant modifications are complete, the Empire State Building will save around US$4.4 million a year and reduce energy use by up to 38 percent. The project has helped attract new tenants that place a high value on sustainability, as well as a desire to provide a more comfortable and productive workplace for their employees. These include LinkedIn, Skanska, LF USA and Coty.
FINANCING METHODS MAKING IT EASIER
Closer to home, new financing methods are making it easier for Australian commercial building owners to make more extensive energy efficiency improvements. As part of its Zero Net Emissions by 2020 strategy, Melbourne has launched a 1200 Buildings program that aims to retrofit 1200 existing office buildings – about two-thirds of the city’s building stock – to reduce energy use, save water and lower carbon emissions.
A critical part of the program is an innovative financing model based on environmental upgrade agreements (EUA), which allow property owners to seek out a commercial lender independently to secure attractive rates and terms specific to the project. Upon approval of the EUA, the lending body advances funds to the building owner to undertake the project.
The owner or occupier pays an ongoing environmental upgrade charge (EUC), levied by the council, that covers principal and interest. Lenders have security because an unpaid charge transfers to the property, is subject to penalty interest rates and can be recovered. In addition, the Melbourne approach is unique in targeting portfolios of properties instead of single-building retrofits alone.
Whether in Melbourne or New York City, these examples highlight the trend of increased global interest and investment in energy efficiency as a way of reducing energy costs, increasing property values and meeting sustainability objectives.
Clay Nesler is the vice president of global energy and sustainability for the building efficiency business of Johnson Controls. In this role, he is responsible for energy and sustainability strategy, policy, innovation and the Johnson Controls Institute for Building Efficiency. He also serves on the company’s global environmental sustainability council. Since joining Johnson Controls in 1983, Nesler has held a variety of leadership positions in research, product development, marketing and strategy in both the US and Europe.