Energy - Save Now, Save Later

I have been far too busy lately, I haven't had a chance to update this in almost a month. When I find the time to write a far better piece, I will. In the interim, enjoy this piece by Jason Ubay of Building Industry titled Energy - Save Now, Save Later

Take the Power Back

Every electric utility company in Hawaii tacks on a surcharge on every commercial electricity bill that funds an energy incentive program. The programs offer rebates or incentives for installing a number of energy-efficient products, essentially paying its customers to use less of its product, energy. Why would a business do such a thing?

According to HECO (Hawaiian Electric Co.), “The growth in our population and new uses for electricity result in a growing demand for electricity. Scaling back Oahu’s growth rate of energy use through energy-efficiency programs helps delay the need for new power plants in the future. Deferring that construction can save millions of dollars.”

The utility still wants you to use its product, but it wants you to stop careless consumption, too. “Their goal is to get rid of all the wasted power that’s being used by people unnecessarily. As a result, they’re encouraging you to use power wisely,” says Miles Kubo, president and COO of Energy Industries, Inc., HECO’s Trade Ally of the Year.

Since 1996, HECO has been offering rebates to commercial companies through its Energy$olutions for Business program and has doled out $20 million in rebates in the last 10 years. The Oahu electric utility company has aggressively pushed its rebate program recently, doubling its rebates and waiving minimum payback requirements in April 2006 and adding new rebates in April 2007.

The American Institute of Architects Committee on the Environment (AIA/COTE) selected the Hawaii Gateway Energy Center (HGEC) as a top 10 green project of 2007. Located at the Natural Energy Laboratory of Hawaii Authority (NELHA) at Keahole Point on Hawaii Island, the building is a zero-net energy structure, meaning it produces more energy than it uses. It does so through its building form, utilizing seawater air conditioning and using a photovoltaic array that produces 90 kilowatt/hours of electricity per day.

The $3.5 million project was designed by Ferraro Choi and Associates, Ltd. and opened in 2004. The 3,600-square-foot building is just one of 25 buildings to receive Leadership in Energy and Environmental Design (LEED) New Construction Platinum certification.

Every year, AIA/COTE receives electronic submissions for top green buildings from around the United States. Projects are judged by 10 metrics: intent and innovation; community; site; bioclimatic design; light and air; water; energy; materials; long life and feedback. Other winners of 2007 include a model single-family home, two nonprofit headquarters, a library, a school and a water treatment facility that doubles as a park.

“The whole industry is excited because there are more rebates now,” says Lily Koo, program specialist for the energy services department, HECO. The new rebates mostly include products that were under the customized incentive programs, but now can be found in the standardized worksheet. This makes it easier for commercial owners, especially small to medium-sized businesses, because calculations are easier.

Sister companies HELCO (Hawaii Electric Light Co.) and MECO (Maui Electric Co.) have similar programs but have not paid out nearly as much. In 2006, HELCO gave out $270,000 in commercial rebates.

Along with product rebates, HELCO helps fund its customers’ feasibility studies, which are done by a third-party consultant. “We try to share part of the cost with the customers because these studies tend to run pretty expensive sometimes,” says Mino Ceria, energy efficiency representative, HELCO. “That helps promote energy efficiency and shows that, as a utility, we have a genuine interest in helping people save at times.”

HECO, HELCO and MECO offer rebates after completing installation and verifying the energy savings. KIUC (Kauai Island Utility Cooperative), on the other hand, provides incentives based on pre-installation findings.

In KIUC’s Commercial Retrofit Program, the utility company differentiates potential customers and “free riders,” which are people who would have made a change whether or not there was an incentive or rebate. “We make that distinction because the money that we get, the money that we spend for doing this program basically is collected from the class that it serves,” says Ray Mierta, energy services supervisor at KIUC. Funds come from a surcharge on commercial customers’ bills. “The only way we can recover this money is to show that it is actually accomplishing what it has set out to do. What we set out to do, what we were asked to do by the commission, was create incentives to motivate commercial accounts to make these changes.”

The amount of incentives given out depends on the amount of money in the fund. In 2006, KIUC spent more than $500,000 in incentives, having exhausted its funds by mid-year.

The amount paid varies. For retrofit projects, in which usable equipment is replaced by more energy efficient ones, KIUC offers 50 percent for installation of the equipment or project. “We try to show them the savings benefit to do it now rather than waiting until the (equipment’s) end of life,” says Paul Daniels, commercial energy service representative.

For new construction and replacement of equipment that has reached its end of life, the incentive is 80 percent of the difference between the standard efficient equipment and the installed energy-efficient equipment. For example, a business needs to replace a motor. The standard efficiency model costs $2,000 while the most energy-efficient one costs $3,000. If the business decides to go with the $3,000 model, KIUC would pay 80 percent of the $1,000 difference, or $800. “What we want to do is make sure they get the most efficient equipment that we can identify,” Daniels says.

Initial costs for energy-efficient equipment tend to run on the high side up front. Ceria says, “If people were able to project the cost of energy efficient equipment over the lifetime of the equipment, they would find that they’d be saving more money even though initially it’s a little more expensive. There seems to be a real first-cost mentality here.”

In most cases, upfront capital isn’t even necessary. Energy Industries provides energy services from consulting to installation and monitoring, including financing. They’ve found that most people want to pay cash up front, but financing can actually turn cash flow into neutral or even positive. For example, in August 2005, the OHANA Waikiki Malia Hotel needed to replace 25-year-old mechanical systems near their end of life. Total retrofit costs approximately $750,000, but through an equipment lease, the hotel actually increased cash flow because its monthly energy savings are greater than its monthly equipment lease payments. With the addition of HECO rebates, savings from avoided repair and maintenance and energy savings before the lease payment began, the hotel increased its cash flow by approximately $100,000 in the first year.

It all sounds too good to be true, and “some people never get past that part,” says Kubo, making it difficult to convince people to “buy into” energy efficiency. However, positive cash flow is a result of rebates and overpaying the utilities by using inefficient equipment.

A variable refrigerant flow (VRF) air conditioning system by Fujitsu was installed by Honolulu Air Conditioning at Honolulu International Airport’s Kalitta Air Terminal. These three outdoor units connect to 16 indoor compact duct fan coils, allowing the building’s owner to cool only the rooms that need to be cooled at any given time. Admor HVAC Products was the distributor.

“I think HECO is doing a much better job than before and has made people more aware of the rebates they are offering,” says Drew Santos, president, Admor HVAC Products, Inc. Admor distributes a number of products available for rebates, including but not limited to central air conditioning units by Rheem, variable refrigerant flow (VRF), high SEER (seasonal energy efficiency ratio)-rated air conditioners by Fujitsu, heat pump water heaters, variable frequency drives (VFD), and Koolduct, a phenolic foam-based, pre-insulated duct system which is more efficient than typical fiberglass ducts. Santos adds that Hawaii is ahead of the curve in equipment using green products, phasing out air conditioning and heat pumps using R22 refrigerant, an ozone-depleting HCFC (hydrochlorofluorocarbon). By law, R22 cannot be used in new HVAC (heating, ventilation and air conditioning) systems by 2010, and R22 will no longer be manufactured by 2020.

It also should be noted that even though the equipment may be efficient, it might not be in the right application. “All technologies are not applicable to every situation,” says Duane Ashimine, executive vice president and chief technology officer at Energy Industries. He says he has seen cases where a customer has a VFD installed on a mechanical system, but it either isn’t in the right place or is used and maintained improperly. The customers then blame the technology and equipment, and not the installation. “What we’re trying to educate people on is you have to do the front-end work to get a true understanding of how your system works to apply it properly and maximize the capacity,” he says.

As Brian Kealoha, senior vice president, sales and business development for Energy Industries, says, “This is a limited window in terms of … the rebates and tax credits, and new technologies coming along. If people are thinking about it, this is the time to do it. It probably won’t get any better than this."