NYC releases its Energy and Water Use 2013 Report: Useful to building owners and managers - by Crawford

George Crawford, Green Partners

New York City has just released New York City’s Energy and Water Use 2013 Report – August 2016.  This “report” contains information that can be highly useful to building owners and managers of older buildings. Much of the information contained in this report goes beyond just “energy and water.” Included is a timely reminder that the vast majority of existing NYC buildings were built in a 40 year period between 1920 and 1960. Given that time frame, a quick math calculation would tell you that the youngest of those buildings is over 50 years old and the oldest is approaching 100. Because of the high likelihood that a majority of these buildings will continue to stay with us, this Report offers a timely heads up for owners and managers to start giving some careful thought to evaluating the condition of the infrastructures and systems of these buildings. Certainly over the years there have been upgrades, but when these buildings were built, there were few, if any, 100-year warranties given. So if your building is in this age group  and has not been upgraded, now may be a good time for an evaluation.   

Another interesting takeaway from this report are opportunities. These opportunities include a number of building infrastructure improvements that will  pay for themselves through the energy savings that result following implementation. According to this report, lighting and domestic hot water improvements are the two most highly recommended “opportunities” for implementation. These measures have fast investment paybacks in the two year range, which make them worthwhile investments both in terms of improving building operations but also improving building cash flow as well.  

However, as building owners and managers well know, there are also many infrastructure improvements that do not result in savings, but must be done. Given the age factor of the majority of NYC buildings, addressing more and more infrastructure improvements that do not result in savings will become the new norm. The downside is the negative impact on building operating expenses. Capital projects that do not result in savings will always increase building operating expenses. Resistance to increased expenses is a reality and will often, if not always, put the brakes on projects that should be implemented sooner rather than later. The focus of this article is to suggest a strategy to work around these financial road blocks.

Our recommended strategy to address  “financial roadblocks” is to combine projects – one project with a positive payback and the other with a slow (or no) payback. The goal here is to combine those projects that would result in an average payback of five years or less. If you go to page 30 of the report, you will find a schedule of energy saving measures with payback periods for each measure. A case study of how this strategy could work follows:

 The building in this example is a luxury high rise multifamily building. The common areas in this building were lit by 1,075 fluorescent lamps of different descriptions (tubes, CFLs etc) and some MR 16s for lighting accents in the lobby areas. All of the common area lighting was replaced by a variety of LED products. The total annual KWh savings that resulted from this LED retro-fit is over 190,000 KWh - an annual cost reduction of $45,000 (24 cent rate). The total cost for this retrofit, including LED product and installation was $60,000 - less a Con Ed Multifamily rebate of $15,000, for a net investment of $45,000. Over a five-year period the electric utility bill savings will total $225,000 (net $180,000 after deducting the cost of the retro-fit). For the purposes of this example, this savings of $180,000 could be utilized to fund other capital projects that do not result in savings. Taking this example one step further, the $45,000 annual savings from this LED retro-fit could also be used to cover the annual debt service for a $200,000 loan with a five year payback. By taking this approach, there would be no up-front cash requirements for the building to proceed with their $45,000 LED retro-fit - plus an additional $155,000 to spend on other project(s), all paid for by the annual utility bill savings of $45,000.   

 For buildings interested in exploring financing related to energy savings, there are financial institutions, including Barret Capital and M-Core Credit that specialize in financing energy savings related projects.  You can access additional New York Real Estate Journal articles relating to energy savings at www.GreenPartnersNY.com.

George Crawford is the principal of Green Partners, New York, N.Y.