The Big Switch

Buildings are finding big benefits in converting from oil to gas.

Fred Rudd is no stranger to environmentally friendly practices at the buildings he manages, tackling projects ranging from solar hot water heaters to green lighting. But one type of project has recently taken center stage – converting heating systems from oil to gas. Rudd says it is growing more and more apparent that oil is on the way out, from new rules that require lower sulfur levels to the city’s purported aim to eventually phase out Numbers 4 and 6 heating oil. “We wanted to jump on the bandwagon right away,” says Rudd.

Oil-to-gas projects are underway now at six of the buildings Rudd manages. All six are also participating in a Con Edison rebate program in place for customers that switch from oil to gas.

“There can be some significant upfront costs to the customer and it’s necessary to help mitigate some of those costs,” says Joseph McGowan, manager of gas sales for Con Edison.

To participate in the rebate program, buildings must have existing gas cooking lines, says McGowan. Buildings also must submit a formal submission from a licensed plumber indicating that the overall area can handle the additional gas load. Con Edison pays for gas piping to be installed to the building’s property line and the building is responsible for costs associated with the rest of the work.

Two of Rudd’s co-ops that are on their way from oil to gas are 75 Central Park West, which has 50 units, and 257 Central Park West, with 88. In both cases, the existing boiler will be renovated so that it can burn oil or gas and work must be done to bring gas from the property line to the boiler room.

At 75 Central Park West, a gas-fired hot water heater will be installed but there is not room for similar equipment at 257. Rudd says the cost for 257 CPW is projected to be about $100,000 while the cost at 75 is slightly higher at $125,000 because of the hot water heater. The rebate at 257 CPW is expected to be between $13,000 and $15,000 and the rebate at 75 CPW is projected at about $22,000.

But Rudd says the real money comes from energy. “The actual savings comes in the difference in the cost of burning No. 6 oil compared to natural gas in each building. It will exceed $20,000 per year,” Rudd says. “So, the payback for each individual property is going to be in the four-and-a-half to six-year range.”

At 75 CPW, residents will also see energy savings in the summer because of the gas-fired hot water heater. Both buildings will see savings in lower maintenance costs with gas over oil. “That alone will save us a thousand dollars a year,” says Rudd, who adds: “We are very big on saving money for our properties. A lot of our buildings want to do things that are positive for the environment and to do what they can to reduce their carbon footprint and we want to help them do that.”

The upfront costs will be paid for out of the buildings’ reserve funds. In both cases, engineers have been hired to design the system and the next step is to bid out the work. Because Rudd is doing oil-to-gas projects at multiple buildings, he says he can get better deals. He hopes the jobs will be finished at 75 CPW and 257 CPW by the spring.

Terry Andreas, president of the board at 75 Central Park West, said the shareholders in the building were unanimously in support of the decision to go to gas. “We’re really looking forward to it,” says Andreas. “We would all like to be a little greener.” Andreas says that no one was scared off by the upfront expenses. “We looked at it and we discussed how much it would cost and how much we’d save on fuel and there wasn’t any more discussion.”

As part of the project, both buildings will sign up for a two-year fixed price deal for gas. When the contract expires, Rudd will decide whether to stick with the fixed price or switch to what is called an interruptible gas supply. In that case, the building will burn oil when Con Ed requires it, generally when temperatures are under 20 degrees. Fees for interruptible service are usually less expensive than fixed, but Rudd says he will have to weigh all the variables.

The Con Edison oil-to-gas rebate covers multi-family buildings of five units and up. There are two tiers of projects that qualify – one where the existing gas lines are adequate to handle the increased load – known as “service adequate” – and one where the existing lines are not.

The rebates for service-adequate buildings that have between 5 and 75 units are $500 per dwelling unit, up to $37,500. Per-unit rebates for buildings that are not immediately service adequate and/or have more than 75 units are determined on a customized basis, depending on how much oil they were consuming and the costs to Con Ed to provide gas service. But McGowan says the final dollar amount is similar to the service adequate tier.

If buildings purchase new high-efficiency boilers, they can obtain as much as $15,000. McGowan says the boilers that qualify are considered to be between 81 and 85 percent efficient and the amount of the rebate rises depending on the size of the boiler.

Buildings in the same area would be wise to try to consider going to gas together because it can lower Con Ed’s costs to provide gas, leading to less costs for the buildings’ conversions. “There may be some economic value in buildings considering gas conversion to look at this in a cluster fashion, if several buildings come on together,” McGowan says.

Encouraging more gas customers is good for Con Edison’s bottom line, of course, but McGowan also says that increasing the number of customers will lower costs for everyone involved. The rebate program, he says, “is a great way to grow the gas business, but it also slows the rate increases to our collective customers,” he says.

Under the current round of Con Edison oil-to-gas rebates, buildings would have until February 28, 2011, to file an application, as well as the contractor’s proposal and other necessary paperwork. McGowan says another round of rebates is likely.

“It’s a great investment for properties that have the resources to do it,” Rudd says. “If you don’t have the resources to do it, you should find them.”

For details, go to Con Edison’s website for multi-family oil-to-gas rebates at:

http://www.coned.com/sales/naturalgas/multi_res.asp.