As energy costs continue to rise, greater efficiency is a straightforward, sensible strategy to make the most of financial resources. Buildings account for nearly 40% of U.S. energy consumption, meaning there are significant gains to be made with improved efficiency. With rising costs and inflation, now is the right time to invest in efficiency improvements that lower long-term operational expenses.
Distributed energy resources (DERs), high-performance building materials and Internet of Things (IoT) devices have grown in number and sophistication, which means there are more options for innovative energy-efficiency upgrades and improvements to building envelopes. But tax policy changes and economic uncertainty may be complicating the picture for public buildings, campuses and other facilities.
These conditions, however, don’t change the fact that energy costs are growing and will continue to do so, as more data centers are built and long-term electrification trends drive greater energy demand. That’s why now is the time for infrastructure modernization that sets facilities on a path to reliable, ongoing cost savings through key upgrades, whether routine energy-efficiency improvements or longer-term capital projects.
“Using resources wisely is always a smart choice,” says Jason Shipley, Associate Vice President of Project Structuring and Finance with NORESCO, which helps customers modernize aging building systems and upgrade energy and water infrastructure to meet evolving demands. “Better use of resources saves money today and tomorrow because the longer you wait to make repairs, the more expensive they become.”
Facility upgrades drive multiple efficiencies
Energy-efficiency upgrades may seem simple and less impactful, but it’s their simplicity that makes them an effective way to reduce operating costs. Sensors and controls that turn systems off when they’re not in use are the most effective. As Shipley notes, “The easiest BTU saved is the BTU you don’t use.”
Occupancy sensors that turn off lights when no movement is detected, or demand-based HVAC systems, are relatively inexpensive upgrades that prevent energy waste. These solutions reduce operating costs by avoiding energy use when it isn’t needed, and they can be highly advantageous, especially when paired with other simple upgrades. For example, the building envelope is often overlooked as a source of savings, but changes like adding window film to reduce heat loss or replacing door sweeps and weatherstripping to eliminate gaps at the sill can add up. On a campus with multiple buildings, or even in a single large facility with many doors and windows, these energy-efficiency upgrades provide measurable savings.
Water consumption upgrades are another tactic to reduce operating costs and conserve resources. Low-flow valves are a simple fix, and on a larger campus, instituting the use of greywater can be more economical than new fixtures, further reducing consumption of potable water resources.
“The first step is to evaluate what you’re using the most, whether that’s electricity, natural gas or water,” Shipley says. “Then, determine how you can mitigate that usage or make it more efficient.” With savings from efficiency gains, facilities then have a budget available to tackle deferred maintenance projects, including updated energy generation systems that increase resilience and reliability.
Innovative contracting structures for capital projects
When it’s time to address deferred maintenance backlogs or make large-scale upgrades, facility managers can leverage several unique contracting types to make improvements without prohibitive capital expenditures. State and local governments, for example, can explore an energy savings performance contract (ESPC) for public buildings and campuses. Each state government offers guidance about the bid solicitation process based on particular rules and contract terms. Public entities can partner with an energy service company (ESCO) to identify and implement building upgrades.
These contracts are budget-neutral because they are paid for by the guaranteed savings from efficiency upgrades. “An ESPC is generally limited to making upgrades that cost the same or less as the savings they generate,” Shipley explains. “Essentially, the bill you pay tomorrow is no more than the bill you pay today.”
A slightly different approach is a public-private partnership (P3), which leverages private capital for energy and water efficiency upgrades. Under this structure, facilities determine their end goal and how much maintenance costs will be after the project is completed. “Unlike an ESPC, a P3 is based on what you’re able to pay in the future, not what you pay today,” Shipley says.
P3 contracts are becoming increasingly favorable for private universities and larger campuses that have multiple buildings. Municipal governments can also pursue this option — for example, if multiple local government buildings share a boiler facility, outdoor lighting and water supply, a P3 can be a fiscally responsible use of taxpayer dollars while addressing important efficiency improvements for decades to come.
Another option is As-a-Service (aaS), an alternative approach that shifts ownership and performance accountability to a third-party investor. For municipal governments and private organizations, aaS helps avoid high upfront costs and reduces long-term risk with predictable monthly payments tied to verified results. This approach can be an ideal solution to upgrading boiler and chiller plants, HVAC systems and chilled water, hot water and steam distribution systems.
Future-proofing facilities with long-term savings
With energy costs continuing to increase, it may seem easier to hunker down and put off facility upgrades. But, this only results in more expensive repairs or replacements later on, while paying for more expensive operating costs now. Investing in efficiency improvements today will lower both short- and long-term bills, and numerous contract vehicles can eliminate the need for capital expenditures.
“The key is to have the right team to make the project a success,” says Shipley. “It has to be a true partnership, as these are complex solutions that require the right expertise to capitalize on the opportunity.”
By collaborating with the right ESCO, facility managers can navigate the current financial environment and meet their budget goals. At the same time, they can establish lasting improvements in their buildings’ comfort, functioning and sustainability.
Learn more at www.noresco.com.
