The Good Audit

Worried about rising fuel costs and lost dollars? A new program that looks at a building’s heating distribution system may hold the key to your building becoming more energy-efficient.

The board at Tara Close was contemplating some hard choices. A 100-unit co-op in Mount Kisco, N.Y., the 30-year-old building had a great deal of equipment approaching the end of its useful life. For a start, the boiler probably needed to be replaced. But that just didn’t sit right with board member Jessie Xu.

Xu (pronounced “shu”), a ten-year resident, also happens to be an engineer. As such, Xu wasn’t satisfied with making big decisions without knowing the facts. She went on the internet to look for some answers – and, bingo. She hit on the New York State EnergySmart page; saw the tab highlighting “Energy Efficiency for Building Owners and Managers,” and a pop-up menu that itemized “Residential Technical Assistance” (ResTech) with a veritable gold mine of potential assistance. The ResTech program would look at the building’s heating distribution system, indoor and outdoor lighting, and building envelope, among other things, and provide computer-assisted modeling of the building’s energy efficiency.

What wasn’t immediately clear from the website but proved to be the clincher for Xu – and, ultimately, the board – was that New York State had a program to provide funding to help pay for the audit, which could cost anywhere from $8,000 to $15,000, depending on the complexity of the investigation.

ResTech is an interesting phenomenon. Almost all city- and state-funded financial assistance is directed towards the most needy parts of the population – for co-ops and condos, that means there’s a cut-off point for buildings above a certain value. Few market-value properties are still able to apply for the J-51 tax abatements provided by the city to encourage capital improvements; and New York State’s assistance with weatherization programs is exclusively aimed at low-income buildings.

But the agency behind the ResTech program is the New York State Energy Research and Development Authority (NYSERDA). Its primary mandate is to cut back on demand for energy in the state. Large buildings are big energy-users and, with the relatively small incentive provided by the audit funding, it was hoped to entice reluctant owners to put their money in areas where there would be an impact on energy efficiency, leading to a cutback in energy demand. Needless to say, another incentive was already there: smaller fuel and utility costs. But, until recently, they haven’t been a significant part of most building’s capital spending decisions.
Xu spoke to Patrick Fitzgerald, project coordinator in Albany. NYSERDA, it turned out, would pay for half of the cost of the audit, upfront. Whatever fee the engineering company charged, the building would only have to pay half. If, within two years, the building completed enough of the recommended efficiency measures to equal the total cost of the audit, NYSERDA would then refund the other half.

Within one week of completing an application, Xu had been provided with the names of three engineering companies to choose from to undertake the audit.

High Point

Arthur Meltser, property manager for High Point on the Hudson, a 130-unit co-op in the Riverdale section of the Bronx, had a problem. He knew the windows of the 50-year-old building were due for replacement. They were old, drafty, needing repair – the job was huge.

“So, I went on line and gave it a shot and typed in ‘window program,’ and stumbled onto NYSERDA,” he recalls. “I made some phone calls to Albany and they told me how the program works... and if one of the [audit] recommendations happens to be something that the building wants to undertake as a capital improvement, like windows, then NYSERDA will subsidize a loan to undertake the work.”

When a building gets an energy audit through ResTech, nearly every aspect of the building’s envelope and mechanical systems is put under a magnifying glass. Neville Burrows of EME Group, an energy and engineering consulting firm, headed the investigation at High Point, with Robert Hauth assisting in the building survey. Meltser had mentioned his interest in window replacement to EME, but the investigation was much broader. One of the first places Burrows visited was the boiler room. A combustion efficiency test analyzed the residual gases in the smoke going up the chimney – too much oxygen, too little carbon dioxide. Dollars were going up the chimney with the smoke.

While in the boiler room, Burrows checked out the recirculating pipes that keep hot water “on tap” for the apartments so that when the faucet is opened there’s no wait for the hot water to come up. He recalls one building he audited where he found they were recirculating cold water. The system had been plumbed incorrectly, and no one had complained about the long wait for hot water to come up. But they were still paying for the recirculating pumps to operate 24 hours a day.

With more measurements, Burrows spotted a problem. The condensate coming back into the system was too hot. High Point uses No. 6 fuel oil and heats the building with a two-pipe steam distribution system that includes a variable vacuum control. One of the key components of the system is a series of traps that allow water to pass through while holding steam back until it condenses into water. Somewhere, there was a failure.

Every steam trap in the building was probed to locate the problem. Most of them tested perfectly. Burrows shot an infrared beam at every trap from a small heat gun, and got an instant remote reading of the surface temperature. A reading of 160 degrees on the pipe feeding from the trap indicated the trap was “holding,” i.e., only water was feeding through. Any temperature higher than 200 would indicate that steam was escaping through the trap with the condensate because, at 212 degrees Fahrenheit, water turns into steam. (A few degrees have to be added to the reading to account for the greater temperature inside the actual pipe.)

At the very last steam trap, the gun gave a reading of 213 degrees on the exit pipe. That was steam going through – the culprit had been found. “That’s why your condensate in the boiler room is so hot,” Burrows informed the super, and suggested an immediate repair. One of the things he recommends in most reports is a very simple money-saving maintenance item: the super should regularly check all steam traps. One heat gun is all the equipment that’s needed. Expenditure on this improvement? About $150.

Seeing the Light

Most of the audit involved taking detailed measurements and observations. Hours were spent surveying the roof vents, measuring the building footprint, examining the size and condition of the windows, checking out room temperatures in sample apartments, and looking at the functioning of the radiator valves. Lighting improvements are almost always a major area for affordable updates. The garage is an ideal location for replacement of the standard T12 fluorescent lights with energy-saving bi-level T8 fluorescents.

In the stairwells, they measured the level of the lighting. “When you do retrofits, you want to ensure that you’re retaining the same light level,” explains Burrows. People start complaining if you reduce the light levels. But bi-level lighting could be an option – reducing the light levels when no one is in the stairwell yet not completely shutting off the lights. In the laundry and basement areas, it is more usual to recommend occupancy sensors that completely shut off the lights at night or during unoccupied periods.

All the measurements and statistics, including comprehensive details of the building’s current energy use, are fed into a computer-modeling program. The program estimates how much energy the building should be using, taking into account numerous other factors such as weather conditions in the area, the price of fuel and utilities for the relevant period, and the building location.

But this is not the end-point of the program. The aim is to match the energy consumption of the computer model as closely as possible to the actual fuel consumption of the building. Then you do the “what-ifs.” Install a new boiler – with detailed specifications – and the model immediately calculates the energy savings the building could achieve. Results show energy savings in fuel or utility consumption, in dollar savings, and in the number of years it will take to recoup initial expenditure on the measure.

The computer also takes into account the very high fuel bills at High Point and its location on a bluff above the Hudson River. In this case, the program indicates that window replacement will have a significant impact on energy consumption. Payback, depending on the final package the building selects, will run 20 to 25 years. But the annual energy savings are estimated to be between 15 to 20 percent – enough to qualify the project for a low-cost NYSERDA loan.

Missed Opportunities

Tom Sahagian, energy division manager at Power Concepts, is another consultant providing ResTech audits and also lecturing widely on the subject of energy efficiency. His team has been investigating energy use at a 260-unit 1960s-era co-op building in the West Village.
Sahagian is passionate about the missed opportunities for energy savings in buildings. “Any time you open up a wall where there are hot water pipes, you should make it a policy to insulate them,” he says. “So, even if you only get one apartment at a time, eventually, you’d get every place.” It’s almost guaranteed that domestic hot water piping is not insulated in the risers. “You could send [the water] out at 130 degrees, and by the time it gets to the top floor, it could have lost several degrees.”

Insulation would reduce the differential. If there are wide swings in water temperature, however, the cause could be a failed mixing valve, and replacement with a motorized valve is often a very cost-effective measure. If the building has a hot-water recirculating system, significant savings can sometimes be achieved by installing an aquastat device (basically, a thermostat for water). Instead of constant pumping of water through the system, the aquastat can be set to shut the pump down when the water is above a certain temperature. At times of low demand (typically at night), the energy savings can be considerable.

Sahagian audits many buildings where residents have been complaining for years about temperature distribution problems. Some apartments are too cold; some are too hot. Few are just right. “This is a problem in almost every building in New York City,” he explains. “It’s a staggering problem of gigantic proportions. In order for every apartment to be warm enough to meet the city code, many, many apartments are grossly overheated.”

Some buildings place sensors in multiple apartments in an effort to balance heat in the building. “But the sensors don’t balance anything,” Sahagian notes. “They turn the boiler on and off, and they can save energy, but, in my opinion, you can adjust your existing controls probably with a little bit of time and effort and save just as much energy as [you can in] high-tech units with multiple sensors.”

Sahagian’s team comes equipped with “hobo” loggers (small temperature recording devices) to assess the extent of overheating. A sampling of residents is asked to let the “hobos” hitch a ride in their apartments for a few days to record temperature variations throughout the day.

Making a Difference

There are many simple measures that can make a huge difference and are nearly always included in the audit reports. There can be a big impact from attending to infiltration of cold air. Cover the window air conditioners in the window; see if the weather-stripping on old windows needs replacing. Even more basic: make sure that the windows are closed. It is not unusual to find the upper sash of a window isn’t all the way up.

The team checks to see that radiators aren’t blocked. “A big couch could be sitting in front of the radiator and most of the heat goes right up to the glass of the windows and starts heading outside,” Sahagian says. If there are pets, they check to see that the fins on baseboard heaters are not clogged up with animal hair. For many buildings, Sahagian recommends inexpensive thermostatic radiator valves (TRV), but only for overheated apartments. Instead of opening the windows, residents can fine-tune the heat output.

Most buildings are very anxious to have window replacements as one of the audit recommendations so that they can qualify for a low-cost loan through NYSERDA. It is a common myth, however, that window replacements generally provide significant energy savings – although with the price of fuel skyrocketing, the payback on replacements may now be short enough to make this a worthwhile measure. But there are many variations. If a building is tall, the “stack effect” (referring to a chimney-like phenomenon) may be significant. The higher the building, the greater the volume of cold air that will be sucked in through leaky windows at the top of the building.

If the building is short and wide, the stack effect is minimal and there is less air infiltration than in a building with the same square footage but a different profile. While, in one building, window replacements may be an energy-efficient measure; in another building, with almost identical leaky windows, the computer model may indicate that payback is too extended.
Jessie Xu, however, did not have window replacements in mind when she signed up her building for an audit. In March, her board received a draft of the comprehensive report on its building and the consultant attended a board meeting to discuss the options. This was another building audited by the EME Group. The cost to the building was just under $5,000, with an equal amount paid directly to EME by NYSERDA. Consultation before the draft report is completed is a crucial part of the process. That ensures that the board has input before the final recommendations are presented to NYSERDA and the building.

Among a number of measures, Burrows recommended replacement of the boiler and upgrading the drive controls on both elevators. The boiler recommendation confirmed the board’s suspicion that the boiler was reaching the end of its useful life. But what the audit made very clear was the estimated cost of replacement and the dollar and energy savings that could be expected. While the replacement would be a higher-efficiency boiler, nevertheless, the initial installation cost was very high (over $100,000) and the estimated payback on the project was 17 years.
The meeting with Burrows gave the board an opportunity to raise its concerns about the more costly items. Boiler replacement was an item that would probably have to be deferred and Burrows agreed that updating some of the boiler controls could be recommended as an immediate, more limited measure. Another idea recommended in the report was an upgrade of the hot water system, ideally, in conjunction with the boiler replacement for an additional $50,000.

The board established that it would be possible to go ahead with this upgrade as a separate item to the boiler replacement. This would significantly reduce the drain on reserves and would yield sufficient energy savings to cover the initial cost in 13 years. For the long run, Xu is confident that the board will address most of the measures identified in the report.

But, the first aim will be to implement more than $10,000 worth of measures to recoup the other half of the audit cost. Lighting upgrades will probably figure in the projections for the next two years as well as installation of baffles or flaps on some of the baseboard radiators to try and provide some heating controls for residents. One no-brainer they will be adding to the list is insulation of the hot water pipes in the basement.

To SIR, With Love

NYSERDA’s hope is that these audits will get boards to look at the suggested measures, compare them to the projects they have planned for the next five years, and see how they match up. When energy-saving potential is brought into the picture, priorities could change. You might look at an item that hadn’t been at the top of your list, but when its energy-saving potential is factored in, it could make more sense to tackle that item sooner rather than later. The concept of looking at energy efficiency may be the key to significant savings in the long run. The audit makes it easy to see the most cost-effective measures.

For each measure recommended in the report, an estimated installation cost is provided together with an indication of the energy and cost savings that can be expected. Another calculation estimates the number of years – or months – it will take to recoup the installation costs. Based on these figures, a key additional piece of information is provided: the savings-to-investment ratio (SIR).

This is not an arcane statistic. It represents the discounted savings of the measure over the projected lifetime of the item, divided by the initial capital investment – or installation cost – of the measure. It encapsulates in one simple number the accumulated conclusions of the computer model and makes it very easy to compare the return on investment for every item. A SIR under 1.0 shows clearly that the measure is not cost-effective: the initial outlay will not be recouped in the lifetime of the item.

Window replacements usually fall into this category. The initial cost is large and energy savings are usually small. On the other hand, boiler replacements may also have a very large initial cost but they produce enough energy savings over their lifetime to give them a SIR higher than 1.0. So, while boilers will qualify for a low-cost loan from NYSERDA, any measure that’s not cost-effective – or has a SIR of less than 1.0 – will not.

Recirculation pump controls are an example of a relatively low-cost item (around $2,000) with a projected ten-year lifetime and cost savings that exceed the installation costs in a matter of months. The SIR ratio could be 19 or 20, and would clearly indicate that this is a no-brainer in terms of outlay.

Results from buildings that have implemented energy-saving measures show that there can be a significant impact on energy consumption and dollar outlay. Statistics on energy savings achieved through ResTech audits are difficult to amass since there is no requirement for monitoring of progress or results in market-rate buildings.

However, a wealth of data is being collected about results achieved through AMP (Assisted Multifamily Program), ResTech’s sister program for lower-income multifamily buildings. Considerably more financial aid is provided by NYSERDA for these buildings and, not surprisingly, considerably more effort is put into the ongoing monitoring of results and collection of data.

Candace Damon of Hamilton, Rabinowitz & Alschuler, the program implementer for AMP, estimates that the average in combined electric and fuel savings is at least 15 percent and in projects still underway is probably going to be closer to 25 percent. This is a very worthwhile return for both individual residents and for buildings.

But, at a time of rapidly rising fuel prices, there is a strange reverse effect. While it should be obvious that energy-saving measures are even more valuable when prices rise, the actual dollar savings may be difficult to understand.

“People see their energy and fuel bills and they are smaller, but not as much as was promised,” Damon notes. “The consumer is having a hard time separating what part of it is the cost increase and what part of it is the decrease in consumption. The cost increases are coming so fast, that that’s not how you perceive it.”

For example, a 27-unit apartment building in upstate New York had a fuel bill of nearly $11,000 in 2001 before a package of energy-saving measures was undertaken through an AMP program. Last winter, in spite of some severe cold weather, it used six percent less fuel than it did in 2001. But, the fuel bill was $15,586, substantially higher than it was before the AMP intervention. Without the improvements, the bill would have been $16,627, but people don’t see the actual savings; they just see that the bill has gone up.

The real point of all this is that an audit’s predictions will provide you with invaluable estimates of where it makes most sense to spend the building’s money – not with actual guarantees that, in the real world, you will save so many dollars or Kilowatt hours of electricity.

Sudden Impact

With this tremendous range of opportunities, Sahagian, of Power Concepts, is concerned that many audit reports end up gathering dust on a shelf. “People think there is going to be a kind of magic bullet that is easy or inexpensive and that’s going to save a lot of energy. And the harsh reality is that, mostly, that doesn’t exist,” he says. “You are going to have to make some investments, and you are going to have to go through a certain amount of activity to make this stuff happen.”

NYSERDA is also aware that the ResTech program may not be achieving a sufficient impact on energy-efficient investments by market-rate buildings. This is particularly important since applicants for the program are increasing as the pressure of rising fuel prices is hitting budgets where they hurt. In 2005, there were 546 applicants; in just the first four months of 2006, there have already been 270 applicants, an increase of nearly 70 percent. But, by the autumn of 2006, the ResTech program will be withdrawn.

This doesn’t mean that you will lose the opportunity to benefit from NYSERDA’s help, but simply that a new performance-based program is going to be introduced. In order to receive incentives, a building will be required to be more energy-efficient by a specified amount. While the details of the program are still being developed, in all probability, there will still be some upfront assistance towards the cost of the initial audit.

In the future, however, the relationship with the auditing company will be considerably more market-based. NYSERDA will be less of an intermediary and boards will be encouraged to choose a consultant from a much more extensive list of qualified companies provided by NYSERDA. Boards will have the option to consider various proposals on a competitive basis and their relationship will be directly with their chosen consultant.

One result of this approach is that the whole program will be less costly for NYSERDA to administer and, accordingly, more money will be available for incentives. At the same time, the aim is to create a larger market of firms able to offer the skills and experience needed for a professional audit.

Mike Colgrove, a NYSERDA project manager based in Manhattan, is hopeful that the new approach will have a positive impact on long-term objectives: “Ultimately, the goal of a market transformation program is to create enough awareness, enough demand, and enough supply so that the effect occurs without government intervention.” Ultimately, Colgrove hopes, boards will use energy consultants as routinely as they call on the expertise of accountants and attorneys.

Cutting Back

To qualify for incentives – which, Colgrove believes, are likely to be more generous than at present – a building will have to commit itself to cutting back on an agreed percentage of its energy consumption or expenditure. The program will be flexible in that, based on the audit recommendations, the building will be able to select the items that it will agree to implement.
But the incentives themselves will be based on the achievement of certain energy goals rather than on the implementation of measures that may trigger a full refund of expenditure on the audit. An important aspect of the program will be that the incentives will directly encourage energy savings in buildings that opt to take part.

“From our perspective, we are willing to pay a building a little bit more, not just to save more energy, but to give us more of a guarantee about how much energy they’re going to save,” explains Colgrove. “If we know, from the beginning, that a building is committed to saving 15 percent of its energy, then that’s a quantifiable amount. That’s less risk on our part. Right now, in ResTech, we don’t know, when we provide that technical assistance fee, whether they’re going to save zero percent of their energy or 90 percent.”

However, he offers this guide to buildings that may be trying to consider whether they should wait for the new program opportunities or grab what’s being offered now: “If you’re a building that just wants to do one or two things and you already have an idea what this is, and you don’t really care about saving energy, then this new program is not going to be for you.”

And if your answer is that you can avail yourself of a very useful low-cost loan that pays down the interest rate by four percent at the expense of NYSERDA, then Colgrove sees that as a disservice to people who are genuinely prepared to cut back on their energy use, adding: “If you’re serious about saving energy and about managing the costs of your building, then you may want to wait for this new program.”

Buildings starting earlier than October (when the current program ends) may, by the time they have moved through the early stages of the program, still have the option to benefit from the new opportunities.

There are some other interesting prospects. At present, although this is not at all clear from perusing the EnergySmart website, if you plan to go ahead with recommended measures and require some kind of technical oversight, NYSERDA will, again, pay an upfront amount to cover half the cost of the work, and reimburse you for the rest – in this case, if the projected work is completed.

A large project such as getting a new boiler or replacing all your windows may benefit hugely from having technical advice to identify the most suitable and efficient items for the building’s investment, and to oversee planning and installation. FitzPatrick usually presents this option only after the building has been audited and expressed the intention to go forward. It’s a relatively new component in the last year, which isn’t contemplated in the new program.

But what is contemplated may provide even greater assistance for buildings that demonstrate the need for funding. Extended aid will not, as now, exclude all market-value buildings and be exclusively reserved for AMP projects in lower-income buildings. If a board can demonstrate that it is eager to move ahead with an energy-efficient measure but doesn’t have the wherewithal to finance it, NYSERDA may offer some assistance.

If, for example you have a large lead removal project to finance, leaving little for any other major work, NYSERDA may, after extensive investigation of the building’s finances, decide to offer additional assistance to allow the energy-saving work to go ahead. But the idea is still being explored. It may leave too many options for owners to “game the system.” Clearly, you won’t be able to take your $500,000 reserves, build a swimming pool with it, and then plead poverty.

Sahagian finds it difficult to understand board thinking that doesn’t clearly grasp the value of adopting the energy-saving measures that the audits recommend. “To me, what it boils down to is that, with most buildings, there’s always money to pay for something that breaks,” he continues. “But there’s never money to make investments to make things so that they don’t break or that they’re more efficient. This strikes me as a false economy. Something with a five-year payback, means, roughly, a 20 percent return. Yet people are reluctant to do it.”

Nonetheless, that payback is changing faster than anyone had predicted. Just four years ago, oil prices were at about $23 a barrel and predicted to remain at that level for the long term. As of late April 2006, oil prices have escalated past $75 a barrel. Now, that’s one statistic that no building can afford to ignore.