Energy Summit Reveals Cost Saving Strategies – Real Estate Matters
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Energy Summit Reveals Cost Saving Strategies

Everyone is increasingly feeling the pressure of rising energy costs, especially those who own and manage property.  The second annual Minnesota Real Estate Journal Commercial Building Energy Summit offered insights into how property owners and managers can take easy steps to decrease energy expenses, regaining control of their buildings and their bottom line.energy_150x150

Many buildings can achieve a 15% reduction in consumption without any capital investment.  According to Priscilla Koeckeritz of Energy Print, Inc., a St. Paul based company that provides energy management software and services, energy expenses are rising faster than any other building operating expense, at a rate of 6-8% annually.  The 5 million existing commercial buildings in the US spend $200 billion annually to power their facilities.  Participation in energy-reduction programs like EPA’s Energy Star can easily result in energy savings of 30%, reducing total energy costs from an average of $2.33 per square foot to $1.63 per square foot.

Conference attendees indicated that they have spent more time tracking energy data in the past year than ever before.  Koeckeritz explains that “energy cannot be managed, if energy information is not measured.” Energy Print provides a tool for owners and asset managers that automatically collects consumption data from utilities and normalizes it based on weather conditions.  Energy usage can then be compared historically for a property or amongst an entire portfolio, so that investors can target capital expenditures towards their worst performing assets.  The “3 C’s of cost, consumption, and carbon” for an entire portfolio can be tracked and reduced from a user-friendly website. Koeckeritz cites that in addition to reducing expenses, building owners who market their efforts properly can see additional return in the form of increased occupancy rates, typically around 4.1% higher for LEED certified buildings and 3.6% for Energy Star rated buildings.

In order to implement an energy management program, there are a few basic steps to take.  The first task involves benchmarking the property’s current usage.  This can be accomplished via the EPA’s Energy Star energystarlogoPortfolio Manager tool or via an energy management vendor.  Energy Star allows owners to rank each of their properties in comparison to other buildings in the region of a similar type and size, resulting in a score between 1 and 100, where 50 is an average score and a score of 75 or above earns the coveted Energy Star label.  There are other systems of benchmarking including the Energy Utilization Index, which normalizes consumption into annual kBtu per square foot.  Stephen Todd of Egan Companies equates this index for buildings to the miles-per-gallon (MPG) rating in the auto industry.

Once a building is benchmarked, an energy audit should be conducted, and is typically performed by the building’s utility provider such as Xcel Energy.  The auditor will provide a detailed written report that lists recommended building adjustments, retrofits, and upgrades, including an estimated payback schedule.  Minor adjustments to mechanical systems can be made immediately to provide instant savings; larger projects that require capital investment can be prioritized and conducted in conjunction with utility rebate programs.

Dustin Gellman of GreenPoint Partners, LLC, a Chicago based sustainability consulting firm, has analyzed where the opportunities are for energy retrofits with the greatest return.  His research indicates that older, larger commercial buildings and hotels will yield the highest return on investment from upgrades.  Gellman cites that there are currently 110 LEED-certified commercial buildings in the Twin Cities out of a total of LEED47,511 properties, so there is still opportunity for building owners to differentiate themselves from the competition by achieving LEED status.  Of the same 47,511 properties, 223 have earned the Energy Star label.  Gellman notes that standards are changing with the implementation of green leases; costs of capital improvements that are made to reduce tenant utilities can now be passed along to tenants.

A panel moderated by Herb Tousley of the University of St. Thomas discussed state incentives and mandates that affect commercial property owners.  While some US cities on the East and West coasts have already mandated that building owners track and manage energy usage, Minnesota’s focus has been to require utility providers to procure energy from clean sources, such as solar photovoltaics (PV).  Current incentives allow building owners to install solar thermal and solar PV systems on their rooftops at a tremendous discount.  Minnesota is offering a $10,000 rebate through September 15th on solar thermal systems, and Xcel Energy offers $2.25-5.00 per watt on PV systems, reimbursing up to 50% of the total cost of the system.  The average payback period for a PV electric system is 10-11 years; however, with federal tax credits available for 30% of the system cost, the actual payback period can be reduced to under 5 years.

Jennifer Stokes of Center Point Energy encourages building owners to contact Center Point to inquire about any energy efficiency upgrades they are considering, including routine work such as building system recommissioning and boiler tune-ups.  Tax credits are available retroactively for work performed to the building envelope, lighting, and HVAC systems.  Paul Bertucci of Franklin Energy notes that through the Minnesota Energy Resources Incentive program, rebates are available for $1.50 per therm saved for up to half a project’s cost, saving some property owners up to $300,000.  Owners who are looking to finance renewable energy systems should contact Great River Energy or the St. Paul Port Authority, both of which offer low and no-cost financing for renewable systems such as geothermal.

With incentives expiring soon, Commercial Building Energy Summit panelists agree that now is the optimal time to plan and execute energy efficiency upgrades.  With the savings that can be achieved, resulting in higher NOI and property value, efficiency projects area a win-win for all stakeholders.  Whether choosing to pursue Energy Star, LEED, or simply invest in minor green retrofits, building owners who invest in their triple bottom line will reap the benefits for investors, tenants, and the environment.

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