Covering Your Bases

Very soon there will be no more No. 6.

By June 2015, buildings in the city will not be able to burn the smog-producing heating oil. Lots of buildings have already switched to cleaner-burning No. 2 or No. 4 oil, or to natural gas. But there are plenty of buildings where boards are still wrestling with what to do next.

“A lot of people are just pushing the button and going all the way with natural gas,” says Jim Marcinek, project manager for Rand Engineering & Architecture.

But it’s not always the best choice.

“We recommend to our clients that [they] look at the big picture,” says Marcinek. “Don’t just jump and run to natural gas because it’s cheaper.”

For one, natural gas service for heating is not available in some parts of the city. Buildings can pay extra to get Con Ed to run lines into their neighborhoods, but that’s costly. Marcinek, recalling that one estimate came in at $1 million, notes: “People aren’t going to add that to their budget. They’ll wait until Con Ed comes into the area.”

Marcinek notes that some buildings didn’t have time to switch from No. 6 to gas. If your certificate to operate your boiler expired before July 2012, you could get a new one, buy some time, and continue to burn No. 6 oil until June 2015. If it expired after July 2012? No No. 6 oil for you. Since the oil-to-gas conversion can take at least nine months, many buildings had to go to No. 2 or No. 4 – at least for the short term.

You can go from No. 6 to cleaner oil in a matter of months, but the costs vary widely, Marcinek says. The tank and lines must be cleaned and a new burner is sometimes required, an expense that can top $30,000. Another wrinkle? Because of No. 6’s viscosity, cracks in the storage tanks often do not leak because the oil is so thick. Thinner oil may leak through those cracks and the tank will need to be fixed.

A Case History

At 1150 Park Ave., an 89-unit Manhattan co-op, the board decided to convert to a dual-fuel system that could run on No. 2 oil or natural gas, says Daniel Storr, the board treasurer. Storr reports that his building and others in the neighborhood had a deal with Con Edison to service the area as long as they made necessary internal changes to accommodate gas service.

Storr adds that the co-op tapped into its reserves and spent about $280,000 to retrofit the building to burn gas and another $200,000 to go from No. 6 to No. 2 oil. Con Ed, he says, has not yet done the street-level work needed to service the building.

“The point was to have gas service and use No. 2 as a backup,” Storr says, noting that the building’s heating costs have skyrocketed now that it’s relying on costlier No. 2 oil. “We were burning about $90,000 to $120,000 worth of No. 6 oil per year,” he says, “but when we switched to No. 2 oil, our overall cost is up to about $180,000.”

Other Options

Another fuel oil option is low-sulfur biodiesel, which has the same energy content as No. 2 oil and is a blend of No. 2 oil and recycled, purified waste vegetable oil. A B20 biodiesel has 20 percent vegetable oil; a B100 is 100 percent.

Systems that currently burn No. 2 oil can switch to biodiesel without any modifications, but going from No. 6 to biodiesel requires retrofits similar to those from No. 6 to No. 2. Dehran Duckworth, managing member of Tri-State Biodiesel, estimates the cost can range from about $10,000 to $20,000. Biodiesel prices are slightly cheaper than No. 2 oil prices.

Oil to gas conversions are the most costly and complex. Even if you already use gas for cooking, you’ll need a larger main inside the building and you might need a gas booster pump to increase the pressure. If you are burning only gas, you’ll also need a new burner.

The required chimney lining is especially costly; because gas burns cooler than fuel oil, the gas condenses in the stack and basically turns into acid rain, which can destroy masonry and leak fumes into the building. Relining the chimney with steel can cost about $10,000 per floor, Marcinek says.

There are other considerations, observes Kenneth Camilleri, senior account manager for New York City Clean Heat, which assists buildings going through the No. 6 conversion process. Say you go to Con Ed asking if it can service your building. Camilleri notes that you should be ready to go with a conversion once you get your answer. If Con Ed says it can service your building at no additional cost, but you wait longer than 60 days, the utility may close out your case and the gas that was reserved for your building could go back into the system. If your neighbor starts a conversion process in the meantime and then you decide to take on the project, that gas supply could now be considered taken and you might have to pay a hefty tab to boost delivery to your building.

“You can’t take it as your first step to ask Con Ed if they can service you,” says Camilleri. “You have to understand what your internal costs are going to be and what needs to be done in your building, so when you get the response from Con Ed you can start.”

Another Case

Oakland Gardens, a three-building co-op in Queens, went straight from oil to gas.

The co-op needed to install new boiler/burners in two of the buildings because the systems were antiquated (one building had already made the switch). They decided to switch to dual-fuel, knowing that No. 6 was on the way out. The entire project took more than a year to complete, and at press time they were still waiting for the final gas hookup. The cost was $600,000, which was paid for with a combination of reserves and an assessment.

Steven Miller, president of the board, says the board expects a return on investment in about four years.

“We knew the deadline was coming up to get rid of No. 6, and we looked at switching to No. 2 or No. 4, but the equipment in two of our buildings was so old we figured that it would make more sense to convert to something other than oil,” says Miller, who adds that, since No. 4 oil will be banned by 2030, “we figured there was no reason to go halfway.”

==HABITAT SIDEBAR==

Financial Incentives: What’s Out There

Con Edison has a pool of about $1.5 million available to help buildings convert from oil to gas. Incentives vary based on the size of the building. For example, buildings that have between 5 and 75 units can get up to $22,500 for the conversion process and up to $5,000 for purchasing a highly efficient boiler. Customized incentives are available for larger buildings: they can get up to 10,000 “conversion” dollars and a maximum of $5,000 for highly efficient boilers.

The caveat is that the only way to be eligible for the incentives is to be a so-called “firm” rate customer, meaning that your system burns only gas and is not dual-fuel, says Joe McGowan, manager of gas sales for Con Edison.

That’s not a value judgment on dual-fuel, which many buildings prefer for the flexibility. It’s because the incentives are funded by a fee called the System Benefits Charge that is paid by firm gas customers, so they are the only ones who qualify.

If you are a dual-fuel customer, you burn oil when heating demand is high and burn gas when it’s not. Con Ed can interrupt your gas service, so the system is called “interruptible.” Interruptible customers get a favorable gas rate because Con Ed can cut them off when the system is overworked.

Con Edison does have a designation known as “dual-fuel firm,” which means the heating system can burn oil or gas, but Con Ed can’t interrupt your gas service. Those customers still qualify for equipment and upgrade rebates, but they often receive lower awards than firm customers. McGowan says the deadline for conversion incentives is in June, while the energy-efficiency rebate programs run year-round.

National Grid territory includes parts of Brooklyn, Queens, Staten Island, and Long Island. The company has a variety of incentives for energy-efficient boilers, condensing unit heaters, water heaters, and other equipment, reports Louis Rizzo, lead program manager for residential and commercial energy-efficiency programs.

The limits on rebates are determined by what buildings are installing. Specific equipment, such as boilers and water heaters, fall under the so-called “prescriptive” plan, which has a $100,000 limit. If a building is installing custom energy-management systems, it must pass a cost-benefit screening to determine the level of therm savings. Custom projects are generally paid at $2.25 per therm saved. The incentives cover up to 50 percent of the total project costs, with a cap at $250,000.

Rizzo gave this hypothetical example for the prescriptive plan: a 50-unit condo might install a highly efficient, 1,000-MBH hydronic boiler. It costs about $15,000 to install and the rebate would be $3,500. The unit saves $2,500 annually in fuel costs, leading to a return on investment in just about four and a half years.

Rebates are paid out after all the equipment is installed. Rizzo says that usually can be done for prescriptive buildings in about four to six weeks; custom customers take longer. All customers must be firm gas customers, similar to the requirements for incentives offered by Con Edison.

New York State currently offers a rebate to biofuel users of a penny per gallon for each percentage point of biofuel, up to 20 cents per gallon. So, if you use B20 biofuel, you can net 20 cents a gallon in rebates. A condo using B20 biofuel that burns 100,000 gallons in a heating season would see a $20,000 rebate, says Dehran Duckworth, managing member of Tri-State Biodiesel. If your building pays a state income tax, the rebate would first go as a credit toward that tax. If there are no state income taxes, the money is returned as a cash rebate that is then distributed to residents.

NYSERDA grants incentives for oil-to-gas projects through its Multi-family Performance Program, which is currently fully funded until 2015. The program involves an energy audit of your building that helps the experts develop energy-saving projects for the property, says Cameron Bard, project manager at the New York State Energy and Research Development Authority (NYSERDA). Tackle enough projects to cut energy usage by 15 percent and you can net $500 to $1,000 per unit, depending on your affordable-housing status.

NYSERDA does not give incentives to go from No. 6 to No. 2 oil or biofuel. As with Con Edison’s incentives, only firm gas customers – not dual-fuel – can qualify for an oil-to-gas project.

The New York City Energy Efficiency Corporation (NYCEEC) was founded two years ago by a city grant from U.S. Department of Energy funds. It provides loans to buildings that need to finance projects to convert from No. 6 or No. 4 oil to either gas or No. 2 fuel. It has a pot of more than $42 million, but its real strength comes from its partnerships with traditional lenders, says Posie Constable, director of Clean Heat Finance, which is part of NYCEEC.

Because NYCEEC puts up a chunk of capital, it can convince other lenders to also chip in. The loans are designed for buildings that may not be able to get a traditional lender to give them a loan, says Constable. Most are aimed at low- to moderate-income neighborhoods. “We’re not trying to compete with private capital,” she says. “This is for buildings that are having a hard time getting the financing.”

NYCEEC is working on loans worth $1.8 million – money that came both from its coffers and from traditional lenders. Its pipeline of loans, across a number of platforms, continues to grow. In one deal, a Manhattan co-op wanted to convert from No. 6 oil to gas. The project cost was about $100,000. NYCEEC’s loan share was 15 percent, while other lenders fronted the remaining 85 percent. The deal will be financed as an equipment lease, which means that the building leases the new equipment over the life of the loan and then the lenders sell it back to the building for a dollar. That structure allows the building to avoid financial and legal headaches with its mortgage holder.

The loan, with payback dates over the next three to seven years, has a rate between 6 and 7.5 percent. Constable says commercially available, unsecured lease-back transactions can carry much higher rates, from 7 to 12 percent. –J.V.H.

NO. 6 OIL TO GAS: WHY IT COSTS MORE THAN NO. 6 TO NO. 2

Switching from No. 6 oil to No. 2 costs significantly less than going from No. 6 to gas. Why? As these two sample proposals make clear, the reason is simple: there is a lot more work involved in changing from No. 6 to gas. That takes time, and that, of course, means more money. Elementary.

(Information by Kenneth Camileri, senior account manager for New York City Clean Heat)

No. 6 to No. 2

3 Access, remove product, and thoroughly squeegee clean existing 7,500-gallon above-ground No. 6 oil tank in order to prepare tank for storage of new No. 2 fuel oil. Conduct a certified tank test after cleaning to determine if tank is sound before adding new fuel supply.

3 Furnish and install required anti-siphon and shutoff valve on oil supply line and vent whistle on oil tank vent line.

3 Remove existing water line and electric oil heaters from boiler and burner. Modify oil piping for No. 2 fuel oil operation and install proper oil strainer baskets. Start up and test existing oil burner for No. 2 fuel oil operation.

3 Furnish and install 3 x 3 fire door.

3 Steam-clean oil lines, suction, supply, and return lines.

3 Reseal tank using new gasket, nuts, and bolts.

3 Clean existing oil tank room and apply epoxy sealant to floor and lower oil tank room walls to required level in order to create a containment barrier equivalent to 110 percent of oil-tank capacity.

3 Pull oil line and cap.

3 Provide the services of an NYS PE to file all necessary plans and applications. Conduct all necessary tests and inspections. Obtain all final approvals from NYC DOB and NYS DEC.

Purchaser’s Responsibilities

Modifications to the existing chimney.

Any additional electrical service.

Any oil tank environmental issues, including any tank repair or environmental cleanup.

Any existing violations, fines, and fees.

COST: No. 6 to No. 2

$15,250.00

No. 6 to Gas

3 Furnish and install one mobile boiler to provide hot water supply to the building during the entire length of the project. Note: fuel required to operate mobile boiler will be provided and paid for by the building.

3 Furnish and install new stainless-steel chimney liner; the existing liner is brick- lined and not acceptable to burner gas.

3 Dismantle and remove the existing oil-burning equipment, attached piping, water line heater, and related controls.

3 Furnish and install one new burner, capable of burning No. 2 fuel oil and natural gas. Job will be set for natural gas only.

3 Furnish and install one new 8-inch steam header shutoff valve and 4-inch return shutoff valve.

3 Furnish and install a new 1-inch boiler control line with individual fittings and siphon loops for each new boiler control. Controls to be installed to the burner replacement shall be as follows (one of each):

Programmer Relay

Pressure Control

Manual Reset Control

Aquastat

Potentiameter Control

Low-Water Cutoff

3 Access and thoroughly clean existing 7,500-gallon above-ground fuel oil storage tank to prepare tank for decommission.

3 Provide a penetration and sleeve for new high gas-pressure service. Furnish and install approximately 125 feet of gas supply line. Gas supply piping to new burner will be equipped with one new 3-inch gas train assembly. Gas piping will include tie-in of new service to existing house gas meters and piping.

3 Dismantle and remove all old electrical control cabinets, switches, wiring, and components no longer being utilized as part of the burner system. Furnish and install all necessary and adequate electrical material and wiring for a completely operational boiler/burner.

3 File all necessary plans and permits for the installation of the new gas/oil burners and gas piping to comply with all city ordinances and municipal rules and regulations. Obtain all final certifications and approvals pertaining to this project.

3 Upon completion, leave the boiler room in a broom-swept condition and remove all debris caused by the installation.

Purchaser’s Responsibilities

Modifications to the existing chimney.

Any additional electrical service.

Any oil tank environmental issues, including any tank repair or environmental cleanup.

Any existing violations, fines, and fees.

Asbestos removal.

COST: No. 6 to Gas

$294,000.00