Developing an Energy Management Plan

“Every penny counts” may sound like a tired cliché, but in the new economic order this mantra has more resonance than ever. By happy coincidence, energy management presents apartment community owners with an opportunity to improve their financial performance while addressing another area of growing significance: their properties’ environmental performance, particularly as it relates to energy consumption.

“Every penny counts” may sound like a tired cliché, but in the new economic order this mantra has more resonance than ever. By happy coincidence, energy management presents apartment community owners with an opportunity to improve their financial performance while addressing another area of growing significance: their properties’ environmental performance, particularly as it relates to energy consumption.

“We think we know what we have, but we don’t know if it is what we need,” says Greg Lozinak, COO of Waterton Associates in Chicago. “In other words, we may have a facilities inventory that lists the types of chillers and boilers we have at each property, but we don’t necessarily know whether they are efficient or economical, much less whether there are alternatives that would be better for us.”

Lozinak voices an increasingly common theme in the multifamily industry, where owners are looking with renewed focus at ways to trim utility expenses. Efficient systems are an important part of the equation, but they are just one part. To truly effect sustainable change, where the economic and environmental benefits of reduced energy consumption are not merely the peak of a bell curve, property owners must make a permanent organizational commitment to strategic energy management. This requires a more expansive view of the role that energy plays in operations, and its ability to be manipulated and controlled.

“The hardest part is getting something on peoples’ radar screens that in the past has been either invisible or ignored,” says Lozinak. “Engineers might think about some aspects of it, accountants might too, but not necessarily as part of a larger, formalized discipline.”

Consumption reduction and commodity cost hedging (in deregulated markets) are the most common strategies used by property owners to lower energy costs, and both are central components of a strategic energy plan. But the development of the plan itself, and its ongoing administration, are essential for organizations looking to make substantive, systemic change.

In my years as Director of Energy Services at Archstone Residential I helped the organization create and implement a Strategic Energy Plan, the basic framework of which is now being replicated around the multifamily industry. The point of such a plan is to change an organization’s energy paradigm, resulting in long-term stabilization of energy costs, optimized equipment operation, reduced consumption, heightened energy awareness in property staff.

Any energy management system is reliant on data. Most organizations capture at least some data, usually expense-related, but true energy management requires the capture and analysis of more than just costs. Consumption data is as important as cost data when trying to analyze Key Performance Indicators (KPI) and establish benchmarks and load profiles. The collection and correlation of this data allows the determination of KPI such as cost per energy unit ($/kWh), BTUs per apartment unit and/or per square foot, which then allows for comparison against standards and benchmarks. The organization must capture and understand the data, assemble it into standard reports that are periodically reviewed by managers, and then use it for the purpose of evaluating energy usage patterns, optimizing rates and soliciting commodity cost  hedging bids  in deregulated markets. Professional third-party energy management service providers can be key facilitators in this process, as can some utility bill management programs, should an organization prefer to tackle the process itself.

Supply Management
Managing your organization’s energy supply starts with the resolution of billing errors, whether due to the utility’s use of incorrect rates or mistaken meter reads. This requires that someone actively review utility bills and monitor rates, a practice that should facilitate two other aspects of supply management: rate optimization and account management. Rate optimization is simply the process of reviewing current consumption as it affects rates, and insuring that the property is being charged the best rates. Account management is even more basic: make sure that accounts are opened and closed in a timely fashion, and that residents are switching utilities into their name after move-in.

Supply management also entails matching consumption profiles with utility  pricing options and incentives, which can lead to load shifting for better off-peak pricing. And in deregulated markets (which tend to be on the coasts, as well as Texas and a few Midwestern states), using the data described earlier is vital for soliciting bids on natural gas and/or electric commodity supply contracts. These programs alone saved Archstone millions of dollars a year on energy costs.

Performing Facilities Audits
A facilities audit in its most basic form can be a relatively simple inventory of equipment, controls and logistics. To truly add value, however, such an audit should include a benchmarking process that compares the facility to other similar facilities and to external standards, which allows for establishing performance targets and defining improvement opportunities. In fact there are varying degrees of audits, the most detailed of which combine KPI data with usage cycles to help pinpoint much more specific savings opportunities, and which document operating procedures with an eye toward controlling energy usage.

At AUM we recently performed such an audit for Presidential Towers, a 2,346-unit high rise property in downtown Chicago owned by Waterton. As a result of the audit one of the recommendations we made was that management consider the installation of natural gas fired chillers, because it reduces the electric load during periods of peak electric rates, and switches to natural gas, which is usually less expensive in the summer months. In addition the property could harvest waste heat from a gas fired chiller in order to pre-heat the domestic hot water, which results in additional system efficiency.

The Presidential Towers audit analyzes the property’s current systems in minute detail, assessing their overall efficiency and suggesting ways to make improvements. This is a central component to any truly effective energy management plan, and requires the use of outside experts who are versed in systems, system controls, alternative fuel options and new technologies. Such experts should also be knowledgeable about incentives available from utility providers for switching to certain kinds of equipment.

At the risk of giving short shrift to organization-wide adoption of an energy management plan, the fact is that without buy-in from everyone – senior management, property management and on-site staff – a plan may end up being little more than a well-intentioned waste of time. A true energy management plan identifies all departments, functions, processes and programs that impact energy usage and cost, and clearly describes the roles and expectations of each. Assigning someone to the role of Energy Manager, who will have day-to-day responsibility for implementing and monitoring the program, is critical to success of an energy management plan. The Energy Manager must have access to data as well as funding for recommended projects. Most important, he or she must have access to senior management, who are ultimately held accountable for the successful administration of the organization’s plan. That success should be measured against three simple objectives:

• Reduce energy consumption and costs
• Optimize return on energy investments
• Integrate energy supply and demand

(Dimitris Kapsis is Vice President of Energy Management Solutions at American Utility Management (AUM). Prior to joining AUM, Dimitris was Director of Energy Services at Archstone.)