Last week, my family and I traveled to New York City. There are hundreds of things to do and see in the city that never sleeps. While we may not have seen or done them all, we did see some fantastic and spectacular sights. When asked what they thought of the city itself, my daughters responded using various adjectives including “big,” “bright,” and – my favorite – “lots of windows.” Without realizing it, they had hit on a very important characteristic of the city. With over 350 million square feet of office space and over 43 percent of buildings built before 1945, commercial space in New York City uses a lot of energy. It is big, it is bright and it does indeed have a lot of very old (and most likely drafty) windows. In other words, it is full of energy efficiency retrofit opportunities.
Perhaps the most well-known example of a large scale energy efficiency retrofit is the awe-inspiring Empire State Building. Opened in 1931, the building houses 2.8 million square feet of office space over 102 floors and includes 6,500 windows. In 2010, after two years of planning and design consulting with partners that included the Clinton Climate Initiative, Johnson Controls Inc., Jones Lang LaSalle, and the Rocky Mountain Institute, the building’s owners initiated a series of energy efficiency improvements. The owners estimate that once all improvements are completed, the Empire State Building will cost-effectively reduce energy use by 38 percent (or $4.4 million annually in avoided energy costs) and reduce CO2e emissions by at least 105,000 metric tons over the next 15 years. Additional information on the planning and implementation of the project can be found in this white paper prepared by the five partners.
The retrofit was motivated by the owners’ desire to reduce greenhouse gas emissions, but also to demonstrate how to retrofit large commercial buildings cost effectively. Therefore, the partners spent a significant amount of time refining energy and financial model inputs to ensure outputs were accurate and understanding the critical relationship between economics and CO2e reductions. By modeling multiple project implementation scenarios and the resulting cumulative reductions in energy use and CO2e reductions, the building owners were able to find the optimal balance of net present value and emission reductions. The key takeaway for all building owners? The optimal point was not the point with the highest Net Present Value (NPV) or the point with the most CO2e emission reductions, but rather somewhere in between.
The majority of the cost of the improvements were financed using an energy savings performance contract, the rest from improvements in the building’s cash flow. The expected income stream enhancements include:
- Reductions in existing capital improvement program costs
- Reduced utilities budget due to greater efficiencies in energy and water usage
- Reduced building operations budget due to lower maintenance and repair costs
- Increased rent and occupancy due to enhanced value placed on updated services
- Additional income from new tenant service offerings, such as chilled water and emergency power
The final project focused on eight improvement measures addressing core building infrastructure, common spaces and tenant suites, including five energy performance contracts for the refurbishment of all 6,514 windows, installation of insulation behind all radiators, a chiller plant retrofit, and new building management systems controls. One of the most innovative aspects of the project is the collaborative way it is being implemented – a partnership between the building owners, the energy savings performance company and the tenants themselves. In fact, 17 percent of the expected energy savings is projected to come from a direct reduction in the tenants’ energy use – using tools like a web-based tenant energy management program and the Department of Energy’s eQuest financial simulation tool. In return for taking steps to reduce their own energy use, the building’s tenants will see a reduction in their own operating costs.
It was a beautifully sunny day when my family and I visited the Empire State Building. Did we notice all of the improvements that had been made to the building? Of course not, but that’s the point. The Empire State Building is still as grand as it has ever been, it is now operating at a much lower energy and environmental cost. As we looked out at the amazing New York City skyline from the 86th floor of one of the city’s most energy efficient buildings, we could see the big, bright lights of the city surrounding us. If an energy efficiency retrofit can be done for this iconic and historic building, think of how many other buildings can embark on a similar journey.
Want to learn more about how to tackle energy retrofits for your building? Read the following white papers and case studies.
Environmental Finance Center’s Financing Sustainable Energy Projects at Small Liberal Arts Colleges
Jen Weiss is a Senior Financial Analyst at the Environmental Finance Center at UNC Chapel Hill.