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Proven Strategies for Making Existing Buildings Energy and Operationally Efficient

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 . About John W. Conover IV .

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Proven Strategies for Making Existing Buildings Energy and Operationally Efficient

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  1. Proven Strategies for Making Existing Buildings Energy and Operationally Efficient REMOVING OBSTACLES TO ENERGY EFFICIENCYTHROUGH BUSINESS CASE AND REAL RESULTS John W. Conover IV, President, Trane Commercial Americas At Fairleigh Dickinson University

  2. 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

  3. 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

  4. How Ingersoll Rand Walks the Talkabout 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

  5. 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) • 18,722 cars taken off the highway • 11,323,812 gallons of gasoline saved • 21,843 planted mature trees • 68,074,062 gallons of water saved • 224,666,420 pounds of CO2 saved

  6. Perfect Storm:Factors Influencing Energy Efficiency + Building Owners Today ENERGY USE IN EXISTING BUILDINGS A PRIORITY • 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

  7. Perfect Storm:Factors Influencing Energy Efficiency + Building Owners Today ESPECIALLY IN CHALLENGING ECONOMIC ENVIRONMENT • Reduced operating budgets and deferred maintenance • 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

  8. What This Means:For Building Owners and Business Leaders ENERGY EFFICIENCY IS A BUSINESS IMPERATIVE • 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

  9. Why A C-Level ImperativeFor Building Owners and Business Leaders CONSERVATION IS FOR THE BOILER ROOM … EFFICIENCY IS FOR THE BOARD ROOM ENERGY CONSERVATION • Using less energy, without necessarily increasing the output • Fewer truck runs to / from warehouse • Turning off unused equipment on weekends / off-hours • Modifying behaviors and practices • Low hanging fruit / low first cost / fast payback projects • “Holding the Gains” – depends on culture ENERGY EFFICIENCY • Using less energy and achieving more output • Rightsizing / replacing infrastructure • Process / product improvement • Less environmental impact in the supply chain • Often higher initial cost, but better life cycle payback (need to understand the financials) • 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 Alliance to Save Energy: Strategic Industrial Energy Efficiency

  10. Getting Started: A Financially-Motivated Business Case

  11. 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)

  12. 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

  13. Goal to Remain Budget Neutral Capital Contributionfuture planned monies allocated today to broaden project impact Energy Budget Capital Budgetmoney for projects planned to be completed in the future Energy Savings from Conservation Measures Operating Budget Operating Savingsnon energy savings from conservation measures and maintenance practices Making the Case for Energy Efficiency 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 Critical question: How will you fund your project?

  14. Making the Case for Energy Efficiency Critical question: How will you fund your project? • 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.

  15. Making the Case for Energy Efficiency Critical question: How will your project be delivered? 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) • Rate of economic return (sustained energy efficiency) • 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. The Aberdeen Group, February 2007

  16. Making the Case for Energy Efficiency Critical question: What changes can be made based upon financial objectives? • 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

  17. 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 DISTRICT COOLING/HEATING SYSTEM • Multiple buildings/ campus/ industrial • Higher overall system efficiency • Beautify city outlook GEOTHERMAL HEAT PUMP SYSTEM • Residential and commercial buildings • Pump energy from underground • Enjoy energy saving all seasons THERMAL STORAGE SYSTEMS • Large city with high peak demand • Shift demand from daytime to night • Reduce blackout during hot summer HIGH EFFICIENCY CHILLED WATER SYSTEMS • Large commercial/industrial buildings • Generate chilled water for cooling • Reduce energy consumption by half ENERGY RECOVERY • Less energy to cool fresh air brought into the building in summer • Less energy to pre-heat cold fresh air from outside in winter • Free energy to provide hot water INDOOR AIR QUALITY • Proper ventilation with minimum energy • Temperature and humidity control • Filtration options ensure good IAQ

  18. Making the Case for Energy Efficiency Critical question: What costs need to be considered when financially modeling an energy project? Total cost of ownership approach • All of these factors need to be addressed at some point • 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 Visible Costs Price/Time Engineering Charges Energy Costs CFC Issues Maintenance Costs Equipment Shutdown Costs Construction Change Orders Legal Costs Security Costs Start-up Delays Indoor Air Quality Being Green Costs Fire Protection Cost Performance Problems Hidden Costs

  19. 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 value-driven service • Doing so will avoid capital, energy and repair costs • 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

  20. Making the Case for Energy Efficiency Breaking a myth: Maintenance is more than just “break / fix” – being proactive is a conscious strategy

  21. Making the Case for Energy Efficiency Critical question: What is the financial model (example)?

  22. 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

  23. 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

  24. 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

  25. Proving the Model: Case Examples of Large Energy Projects

  26. 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 Energy Project Makes Manufacturing Facility More Competitive

  27. Identifying investment benefits: Energy Project Makes Manufacturing Facility More Competitive 1. Assessment 2. ECM Selection 3. Payback Analyzed HVAC systems, compressed air and lighting for efficiency, capacity and effective operating and maintenance practices. Evaluated remote monitoring application potential. Lighting retrofits, building automation upgrades and hot water boiler Selected ECMs offer quick return $2.1 million project investment in new air compressors, hot water boiler, lighting retrofit and remote monitoring • Results: • 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

  28. 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

  29. Identifying investment benefits: Infrastructure Improvements Generate Increased Production 1. Assessment 2. ECM Selection 3. Payback High-efficiency chiller systems with variable flow water pumps, upgraded air handling systems and centralized BAS -- Analyzed chiller and air handling systems and the pneumatic building automation system (BAS) for reliability, efficiency, capacity and performance 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

  30. 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: 3. Payback 1. Assessment 2. ECM Selection Selected ECMs offer solid return New chiller systems and a centralized (BAS) Evaluated efficiency, capacity, noise, safety and maintenance

  31. 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

  32. 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

  33. Identifying investment benefits: Hotel Hosts Upgrades for Increased Reliability 2. EMC Selection 1. Assessment 3. Payback High-efficiency chiller systems with variable flow water pumps to reduce energy use and a centralized BAS Evaluated central plant comfort systems for performance, energy consumption, operational efficiencies and maintenance access Selected ECMs offer medium timed return Delivered $2 million integrated systems solution with projected six year payback 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

  34. 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 3. Payback 2. ECM Selection Analyzed HVAC and lighting efficiency, and capacity and effectiveness of maintenance practices Medium return: Water, lighting, building envelope and insulation Life cycle return: BAS and HVAC 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

  35. 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

  36. Bottom Line Business Case

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