© 2010 airadvice, inc. using energy services to drive maintenance and retrofit sales

© 2010 AirAdvice, Inc.

Using Energy Services to Drive Maintenance and Retrofit Sales


Series Schedule – Using Energy Services To…

• Session 1 – April 14th

Ensure Maintenance Agreement Renewals

• Session 2 – April 21st

Win New Maintenance Agreements

• Session 3 – May 4th

Drive Retrofit Project Revenue


It’s No Accident…


Service Business Key Performance Indicators

You Can’t Manage What You Can’t Measure

Revenue from 2007 2008 2009PM Agreements 875,654$ 989,333$ 915,264$

% Change 13.0% -7.5%

Additional Service and Repairs 1,648,332$ 1,864,636$ 1,849,393$ % Change 13.1% -0.8%

Retrofit Projects 1,248,333$ 1,754,333$ 1,453,344$ % Change 40.5% -17.2%

Total Service Revenue 3,772,319$ 4,608,302$ 4,218,001$

% Change 22.2% -8.5%

Gross Margin % 34.0% 35.0% 32.0%

Total Service Gross Profit 1,282,588$ 1,612,906$ 1,349,760$ % Change 25.8% -16.3%

Service and Retrofit Revenue Mix

Service and Retrofit Revenue

$876 $989 $915

$1,648$1,865 $1,849

$1,248

$1,754$1,453

$-

$1,000

$2,000

$3,000

$4,000

$5,000

2007 2008 2009

Revenue ($k)

PM Agreements Service & Repairs Retrofit Projects


The Financial Leverage of Service

Total

PM Agreements $3.02

Service / Repairs $7.48

Retrofit Projects $5.41

Total $15.91

Each $1 of service agreements generates the equivalent of $15.91 in new revenue

PM Agreements

$1


“Cancellation Proof” Your PM Agreements

1. Probe for financial pain 2. Make energy is relevant (gain permission)3. Demonstrate potential savings (benchmark)4. Identify specific “low/no cost” measures that will

immediately reduce costs and improve cash flow5. Implement and verify


Debunking the 2 Myths That Prevent Energy Services Programs from Moving Forward

1. “Energy costs can’t be controlled”2. “Reducing energy spend will take a lot of capital”


Energy Service Agreement™ Sales ProcessGet the Meeting

1st Meeting - Introduction

Building Survey / Energy Benchmark

Present the Proposal

Close the Service Sale

Not an Opportunity Today

Confirmation / Verification

Sell Energy Services

~ 3% of cold calls result in a meeting

~ 1 in 6 1st meetings result in a PM agreement


Case Study

• 138,000 sf• Built-up system

– Chiller– Boiler

• Pneumatic, constant volume control system


Energy Benchmark


Temperature

Low-Cost Energy Savings Identified

Fix control issues

Eliminate weekend operation


Carbon Dioxide

Low-Cost Energy Savings Identified

Fix economizer / ventilation control


Low Cost Energy Savings Identified

• Increase cooling / decrease heating setpoints• Optimize temperature control and lighting

scheduling• Fix economizer / improve ventilation control• Boiler lockout above 60 F

Over $70,000 of energy waste eliminated for $6,000 investment


Retrofits are the Pot of Gold


Agenda – Session 3

1. Current economic climate for retrofit projects2. Retrofit project sales process3. Psychology of the sale4. Proving value with monitoring and verification5. Using utility rebates to your advantage


Current Economic Climate


Retrofit Project Sales Process1st Meeting

Building Survey

Energy Analysis

Not an Opportunity TodayClose the Project Sale

Present Proposal

Implement Retrofit

Performance Verification


Sources of Leads

Existing Service Base Bid Spec / RFPs



Building Survey

Energy Analysis


Present Proposal

Implement Retrofit



Building Survey / Energy Analysis

• Define a process that is: Repeatable Scalable Credible


Trade Offs

Simplicity | Complexity

Automation | Manual Labor


Guideline Document

• ASHRAE RP-669 / SP-56


Types of Energy Audits – ASHRAE Definitions

• Preliminary Energy Use Analysis• Level I – Walk-Through Analysis• Level II – Energy Survey and Analysis• Level III – Detailed Analysis


Preliminary Energy Use Analysis

• Analyze historic utility use and cost

• Develop an EUI• Compare to similar

buildings

Energy Benchmark


What’s the Difference?Level I

Walk-Through AnalysisLevel II

Energy Survey & AnalysisLevel III

Detailed Analysis

Focus of Audit • Documenting systems and operations

• Rough estimate of savings potential

• No / low cost measures

• Energy consumption by end use• More rigorous estimate of

savings potential• No / low cost and capital

measures

• Detailed analysis of subsystems

• Investment-grade estimates of savings potential

• Capital measures

Inputs • Utility bills• Site drawings• Site walk-through• Interviews

• Level I items, plus measurement of key environmental parameters

• Level II items, plus measurement of key equipment operational parameters

Outputs • Checklists• Engineering estimates • Spreadsheet calculations

• More complex spreadsheet calculations

• Simple computer energy models

• Complex computer energy models


Data Collection

Data Loggers

Building Automation System Trend Logs

Custom Data Acquisition Systems


Typical Analysis Methods 3,000 0.1085$ 7,000 0.0984$

190,000 0.0839$ 200,000 0.0646$

0.0111$ 0.0087$ 0.0063$

kWh Billing Demand 200 400 600March 363,200 728.0

Date Consumption Peak Demand Demand (kW) Load Factor PLL-C TOU-SSD-4 PLL-CJan 1/28/2008 214,880 256,000 654 470880 46% $ 23,557 $ 11,350 $ 12,207 Feb 2/25/2008 488,960 (56,864) 643 432096 113% $ 38,046 $ 15,291 $ 22,755 Mar 3/27/2008 363,200 102,544 626 465744 78% $ 31,112 $ 13,368 $ 17,744 Apr 4/28/2008 363,680 117,088 626 480768 76% $ 31,135 $ 13,375 $ 17,760 May 5/28/2008 335,040 89,760 590 424800 79% $ 29,758 $ 12,770 $ 16,988 Jun 6/26/2008 320,160 105,096 611 425256 75% $ 26,511 $ 34,275 $ (7,764)Jul 7/28/2008 356,320 99,872 594 456192 78% $ 30,845 $ 36,474 $ (5,629)Aug 8/27/2008 341,120 115,360 634 456480 75% $ 33,803 $ 35,981 $ (2,178)Sep 9/29/2008 359,200 118,376 603 477576 75% $ 29,816 $ 36,785 $ (6,969)Oct 10/28/2008 298,880 106,192 582 405072 74% $ 25,626 $ 12,201 $ 13,425 Nov 11/24/2008 284,800 70,952 549 355752 80% $ 25,921 $ 11,824 $ 14,097 Dec 12/29/2008 370,240 97,640 557 467880 79% $ 30,348 $ 13,112 $ 17,236

356,478$ 246,810$ 109,668$

31%

$-

$5,000

$10,000

$15,000

$20,000

$25,000

$30,000

$35,000

$40,000

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Monthly Electric Bill

PLL-C

TOU-SSD-4

Hand Calculations

Spreadsheets

Computer Models



Building Survey

Energy Analysis


Present Proposal

Implement Retrofit



The Energy Project Proposal


You Do Not Get Paid…

by the hour

for complexity

by the pound


You Get Paid For…• Providing information useful

in decision making• Moving projects forward


Focus on the Financial Decision Maker


Is Energy Savings a Motivator?

“By maintaining proper tire pressure, keeping your engine in tune, and replacing dirty air filters you can improve gas mileage by up to 15%.”U.S. Department of Energy

The Psychology of the Sale

This savings is equivalent to 1 free tank of gas every other month


What if someone stole a full tank of gas out of your car…every other month


Would you be more likely to take action?



“If you move forward with this project you will save $X per year”

“If you do nothing you will continue to waste $X per year”

vs.

Psychologically, most people will do more to avoid a penalty than to earn a reward


The Cost of Doing Nothing



Building Survey

Energy Analysis


Present Proposal

Implement Retrofit




Baseline PeriodECMEvent

Performance Period

1. Measure impact of ECMs

? 2. Ongoing monitoring and verification

??

Reduce the risk of saying “Yes”


Two Perspectives

Building Owner

“Did I get what I paid for?” “Did I get credit for what I provided?”“Did my customer perceive value?”

Contractor


Comparisons Challenges• Variables that impact baselines

– Weather– Occupancy– Utility Rates


Methods for Performance Verification

1. Periodic Energy Benchmark2. Continuous Energy Monitoring System


Closing the Loop“Adding the continuous energy monitoring and verification application to the BuildingAdvice™ program will really help us close the loop for our customers. Now when we’re proposing a sizeable energy retrofit project we can include a system that will accurately measure and report the actual energy savings delivered. This eliminates a tremendous amount of financial risk for the building owner. We think this will help justify moving forward with more projects.”Rick CookeVice PresidentAirco Commercial Services


Using Utility Rebates to Your Advantage• Two types of rebates

1. Prescriptive2. Custom


Prescriptive Rebates


Prescriptive Rebates – Xcel Energy

Example:• Replacement of ten 20-

ton RTUs• Proposing high efficiency

(12 EER) w/ economizers

Efficiency upgrade:($75 + $5 x (12.0 – 10.2) / 0.1) = $165 / ton$165 / ton x 20 tons / unit x 10 units = $33,000

Economizers:$20 / ton x 20 tons / unit x 10 units = $4,000

Total rebate = $37,000


Custom Rebates

• Requires pre-approval and submittal of engineering analysis

• Xcel Energy provides rebates of up to:

– $400 / kW (electricity)– $5 / mcf (gas)


Energy Analysis Rebates

• Rebate for a portion of the cost of an energy study or audit

• AirAdvice can help you work with your utility to understand and approve your energy analysis process


Biggest Challenge in Working With Utilities

• Don’t get slowed down


Case Study

• 138,000 sf• Built-up system

– Chiller– Boiler

• Pneumatic, constant volume control system


An Energy Benchmark™ Determines ActionENERGY STAR® Energy Performance Rating

• Greatest opportunity for improvement

• Invest in new equipment and enhanced O&M practices

Invest

Source: ENERGY STAR

Recommended Capital Improvements• Retrofit chiller plant with variable

speed drives on compressor, fans, pumps ($205k)

• Replace pneumatic system with DDC ($181k)


Energy Savings Audit


Why Does This REALLY Matter?• From the building owner’s

perspective…CASH IS KING!• Building value is determined by

cash flow

NOI = Gross Income – Operating Expenses• Income (lease payments)• Expenses (taxes, insurance, utilities, depreciation on

capital upgrades)

Building Value = NOI / Cap Rate


• 99% of all commercial real estate has a mortgage• Commercial real estate mortgages are generally

short term (3 to 5 years)• Refinancing a loan for a property that has declined

in value requires cash• Reducing operating expenses…

– Increases NOI– Increases asset value– Decreases cash required to refinance

Why Does This REALLY, REALLY Matter?


Summary• Current economic climate – tight grip on cash• Your best leads will come from existing service base• Develop a method for energy analysis

– Repeatable– Scalable– Credible

• Highlight the “cost of doing nothing”• Include a system of performance monitoring• Utilities – friend or foe?


Questions

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© 2010 airadvice, inc. using energy services to drive maintenance and retrofit sales

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