how to sell energy efficiency products
DESCRIPTION
This seminar focuses on using a nationally recognized third-party tool and resources to "validate" energy efficiency projects and successfully get projects funded. The focus will be the demonstration of how to use this unbiased tool to illustrate to clients the financial impact and benefits of your energy efficiency projects.Topics include - executive level financial considerations the role of benchmarking in getting project funding incentives as enabler high impact, proven financial lingo to get funding effectively presenting projects for funding Learning Objectives1. Tools and resources to support energy efficient project funding2. Benchmarking and project funding3. Impact of incentives on overall project funding4. The lingo of finance executives5. High impact presentation of projects6. The value of energy efficiency projects to the organizationTRANSCRIPT
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ADDRESSES ONE OF THE BIGGEST CHALLENGES FACING ENERGY
EFFICIENCY PROJECTS
Today’s Presentation
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Who We Are?
A strategic consulting firm that provides results-focused strategic planning and implementation to maximize resource productivity to meet sustainability goals of our clients.
We have provided seminars and speeches to over 1,000 busy businesspeople—from management level to CEO—on how to increase resource productivity in their companies.
We help companies develop a comprehensive strategy to resource productivity in their organizations to building a more sustainable financial future, serving as their resource productivity coach to meet their objectives.
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So you want to know……
How to Sell EnergyEfficiency Projects!
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Presented by: Daryl DeJeanEmerging Technologies AssociatesJune 29, 2011
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Copyright and Permissions
Copyright in all content on this site is owned by EmergingTechnologies Associates, Inc. and Kingport DBA ResourceProductivity Associates. No materials from this presentationmay be reproduced, stored, altered or further distributedwithout our prior written permission. Requests for permissionshould be sent in writing to our headquarters office at theaddress below.
KingportDBA Resource Productivity Associates
P.O. Box 5475Santa Barbara, CA. 93150
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Today Starts the Journey!
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First Let’s……..
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How Do We Bridge The Gap?
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Points to Ponder
• What is the “real” goal of the project?
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Besides……..
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It’s Really About……….
http://www.sdkcm.org©Kingport DBA Resource Productivity Associates, 2011 12
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Leading To……
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How are Sustainability and Energy Efficiency Connected?
Sustainable energyis the provision ofenergy that meetsthe needs of thepresent, withoutcompromising theability of futuregenerations to meettheir needs.
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Typically, the death of a project is based upon…..
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http://www.edi-nc.com/edi/news/Energyefficiency.asp
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It Takes MONEY!
http://blog.broadcastengineering.com
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http://happyhypnosis.net
Therefore…….
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http://www.rms.net
What is the Investment Worth?
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http://www.meetingarchitecture.com
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Executives Look For………
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How do I effectively “sell” and make
credible presentations of projects to the
Finance Team and Senior Management?
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ENERGY STAR® Provides the Foundation
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http://www.automatedbuildings.com
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To Create….
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Financial Justification of Projects
– According to US EPA, “30% of energy bills is used to pay for energy waste” in the typical building.
– Why not use the cash flow from the avoided energy waste to pay for new energy efficiency projects?
– “We are paying for energy efficiency projects whether or not we do the projects”
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http://www.millennialliving.com
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Utilities: Largest ControllableOperating Expense
Source: BOMA: 2008 EER
Growing Impact on Cash Flow
Return the CASH FLOW to Facilities/Engineering with ENERGY STAR!
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http://askmarklittle.com/
Leading The Team
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Create the Culture
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http://www.masternewmedia.org
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Decision-Making ProcessIn Whole Building Design
• Define project goals:– energy - historic preservation– healthy and safe - cost effective– sustainable - aesthetic– functional/operational
• Interrelationships and interdependencies with all building systems are understood, evaluated, appropriately applied
• Close coordination by integrated team
• Facility performance report to show continuous improvement
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Cost Effectiveness• Every owner wants a cost-effective building. But
what does this mean?• Is it the lowest first-cost structure that meets the
program?• Is it the design with the lowest operating and
maintenance costs?• Is it the building with the longest life span?• Is it the facility in which users are
most productive?• Is it the building that offers the greatest return on
investment?
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Costs and benefits of alternative decisions?
Process is in three steps in large scale projects:
1. Utilize cost management in planning, design development Process
2. Use Economic Analysis to evaluate design alternatives which tool(s) depends on objective: simple payback to life cycle cost analysis
3. Integrate non-monetary benefits such as aesthetics, security, safety or historic preservation
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Assess RISK!
Performance risk a hugecomponent of any decision
Address RISK OFFAILURE UP FRONT
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Credibility
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Dealing with Skepticism• MYTH: Buildings need
to use all that energy. Energy reduction would require big sacrifices.
• FACT: On average, office buildings waste 30% of the energy they use, and simple changes can save a lot!
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Dealing with Objection• MYTH: We don’t have the time or
money to focus on energy efficiency right now.FACT: Saving energy might be the easiest way we can help our workplace reduce operating costs—and improve the bottom line. Companies and organizations that are leaders in energy efficiency use about 30 percent less energy than their competitors. No wonder nearly one-third of Fortune 500 companies have made a commitment to energy efficiency by becoming ENERGY STAR® partners! ENERGY STAR labeled office buildings cost, on average, $0.54 less per square foot to operate than similar buildings
http://www.businessinsider.com
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Who Participates in ENERGY STAR Building & Plants?
• 6,200 buildings earned the Star in 2008 and 9,000 in 2009, 50% jump!
• 75% of the consumers were aware of the ENERGY STAR brand
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2009 Staggering Growth!
• Energy performance of 120,000 buildingswith 14 billion square feet have been measured.
• 5,000 organizations have joined the Buildings Program as partners.
• 9,000 buildings earned the ENERGY STAR in all 50 states.
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How Do I Assess Building Energy Performance?
• How do you know how efficiently a building is operating?
• What is Energy Performance?
• How do you compare buildings? – ENERGY STAR benchmarking
– Whole building assessment
– Energy management
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How To Start An Energy Management Plan?
• Compare against other buildings• Track energy savings over time• Monitor energy efficiency projects• Good business practice!Easy and simple!
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ENERGY STAR® - The “Whole Building”
• Assessing a Building Energy Performance – ENERGY STAR benchmarking
– Establishing a baseline is easy as pie!
– Staged approach is cost-effective methodology and allows you to see the interaction between Building Systems
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Compared to National Average
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What is Energy Performance? • Energy: Gas, Electricity, Oil,
Nuclear, Coal
Converted into Common Unit Of Measurement:
British Thermal Units
• 1 kWh electricity = 3.412 kBtu
• 1Therm of Natural Gas = 100 kBtu
• 1 gallon fuel oil = 138.69 kBtu
• Building and Operating Characteristics
• Square Footage
• Weather
• Occupancy
• Plug Load
kBTU/Square Footage = Energy Use Intensity
Portfolio Manager
Model
Building B
Building
A
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Four Pillars of a Building: The Systems
• Lighting
• Plug Load
• HVAC
• Building Envelope
• Their interactions – why it matters“whole building” performance leads to higher energy efficiency or “energy performance”
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Accessing ENERGY STAR
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The Typical Office
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The Typical Plant
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Prioritizing Projects
1. Use ENERGY STAR Staged Approach 2. Estimate energy savings and financial
value of:– Single measure project:
• Use energy calculators – ENERGY STAR, FEMP or other third party– Manufacturers with caution
– Large scale retrofit:• Economic and energy modeling
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ENERGY PERFORMANCE RATING
Facilities in this range may reap significant savings from concentration on simple, low-cost measures, such as improved operations and maintenance practices. Equipment upgrades could yield additional savings.
MAINTAIN
INVEST
These top performing facilities offer examples of best practices as well as opportunities to gain recognition. Continue to improve and maintain superior performance by focusing on operations and maintenance.
Facilities in this range offer the greatest opportunity for financial and environmental improvement. Investing in new equipment and enhancing operational practices may have the greatest impact on your bottom line.
10075501
ADJUST
Once an energy performance baseline rating is established, the next steps are to set improvement goals. The ENERGY STAR guide below helps you interpret the ratings and determine appropriate next steps.
Rating and Narrow Down ProjectsWith First Screening Process
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Lighting
Behavior
Controls Equipment
How do I Prioritize Projects?
O&M
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7-28.1% 3.5- 15.2%
9.4 - 25%
3.5 – 15.9% 7.3 – 22.9%
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The Critical Component
• Financial crisis continues
• Energy Efficiency Project Financing is available for projects that meet– Credit standards
– With reduced or mitigated Performance risks
– Produce strong stream of CASH FLOW DURING THE LIFE OF THE FINANCING OR LONGER
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Where is The Money, Honey?
• We have no budget!
• How do I finance 100% of the projects?
Get money from Wall Street?WRONG! Think again!
Cash Flow Grows from Energy Efficiency Not On Trees!
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Cash Flow is King! Why?Businesses and governments cannot exist without cash flow
Money has to grow to allow to pay for goods and services
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Today’s Dollar is Better than Tomorrow! Why?
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Net Present Value Analysis
• .
All payments are added and
brought back to today’s dollars
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Sources of Financing
• Internally Generated Cash Flow– Higher rental income– Lower utility bills and related labor– Use the Staged Approach Strategy
• Utilities Incentives and Rebates
• Leasing: the new frontier in Energy Efficiency Financing!
• Federal / State Tax and Other Incentives
• Insurance premium discounts
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Cash Financed Projects
1. Benchmark
2. Maximize Operations & Maintenance Savings
3. Identify and sequence LOW cost improvements
7 to 28 % on energy bills
helps pay for measures!
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ENERGY STAR METHODOLOGYIdentify and sequence LOW cost
improvements
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Operating Budget vs. Capital Budgeting
• What if no leasing policy?
• Use your operating budget to fund projects.– Easier to get approved. Can achieve budget
neutrality if energy savings equals or exceed
monthly debt service
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25%
9.4%
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Leases • Types:
1 . Operating Leases = rent equipment 2 . Capital Leases – own for $1 buyout
• 100% of equipment costs, hardware, software and installation
• Term: up to 10 years, normally
• Every industry - private and public finance
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Leasing - Benefits
• Reduces first cost hurdles
• Common vehicle in financing projects
• Quick turnaround time
• Flexible Payment schedule: match business cash flow
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Utility Incentive Programs
• Utility Financing program• Savings by Design• Rebates & Incentives • Demand Response
2010-2012 Energy Efficiency Portfolio approved by the California Public Utilities Commission (CPUC)
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Utility Rebates vs. Incentives
Incentives• up to 50 % of project cost including labor• takes longer due to Measurement & Verification
• pre-inspection
• larger lighting projects
Rebates• quick & simple• submit invoice• ideal for small projects
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Permanent Load Shifting
“Shift & Save”- store thermal cooling capacity during off-peak hours and/or partial-peak hours in order to meet thermal cooling load in subsequent on-peak hours.
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San Diego Gas & Electric On Bill Financing
• 0% interest loan
● Loan = total project cost – incentive/rebate
● Monthly payments based upon
energy costs savings.
● Payments are made on the
utility bills.
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SDG&E On-Bill Financing
• Business Customers :
- Loan from $5,000 to $100,000 per meter
- Max five year term.
• Government & tax-funded agencies:
- Loan from $5,000 to $ 250,000 per meter
- Max ten year term
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On Bill Financing
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SDG&E – RadissonRancho Bernardo Case Study
Replace 153 guest room PTAC’s and switch to T-8’s
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Energy Savings Estimates
Vending Machine Energy Savings Calculator
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Energy Savings Estimates
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Energy Savings EstimatesTransparent Assumptions
Assumptions are crucial in your Management presentation
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FEMP Single Measure Calculator
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Energy Savings Estimates
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Energy Savings EstimatesContinued
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Energy Savings EstimatesContinued
This cost calculator is a screening tool that estimates a product's lifetime energy cost savings at various efficiency levels. Maintenance and installation costs do not vary significantly among the same product having different efficiencies; so, these costs are not included in this calculator tool. See For a detailed life-cycle cost analysis, FEMP has developed a tool called Building Life-Cycle Cost (BLCC). This downloadable tool allows the user to vary interest rates, installation costs, maintenance costs, salvage values, and life expectancy for a product or an entire energy project.
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FEMP Life Cycle Cost Tool for Large System
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FEMP Life Cycle Cost Tool for Large System
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FEMP Life Cycle Cost Tool for Large System
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FEMP Life Cycle Cost Tool for Large System
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DOE Endorsed Single Measure Calculator
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Project Financing Checklist
Check for savings from Operations and Maintenanceprocedures?
Is the project eligible for utility? Rebate, Incentive, Demand Response, Savings by Design?
Is utility financing available?
Is energy efficiency financing available from the State?
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Project Financing Checklist (Cont’d)
Is project eligible for EPACT 2005 tax deductions?
Has project sponsor applied for grants or loans?
How much of the project can be financed with a lease?
How much up front cash is required after all of the
above sources are used?
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http://www.iamaceo.com
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Letter Attachment toBuilding Upgrade Value Calculator
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Letter Attachment toBuilding Upgrade Value Calculator
Therefore, we recommend and request approval for these energy efficiency measures to improve Mark Twain House & Museum ’s overall performance. We look forward to speaking with you. Sincerely,Daryl DeJeanEmerging Technologies Associates Inc.
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Locate Calculatoron ENERGY STAR
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92
Locate Financial Calculator on ENERGY STAR
Financial Value Calculator
Scroll down to the bottom of the page
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Step 1 - Input Data
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Step 2 - Choose Savings Level
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Step 3 - Estimate Cash Flow
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Step 4 - View Potential Returns
Run what if’s©Kingport DBA Resource Productivity Associates, 2011 97
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Compare Today and Tomorrow Dollars!
Today’s $: $111,601
Tomorrow’s $:
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Building for Environmental and Economic Sustainability(BEES)
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Resource Productivity Associates is a member of ASTM committee developing worldwide standard
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http://www.jmorganmarketing.com
A Critical Piece of The Puzzle
CASH FLOW
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Create Cash Flow
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The Value of ENERGY STAR
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Reduce Consumption Reduce Operating Expenses
0.00%
0.81%
1.62%
2.43%
3.24%
4.04%
4.85%
5.66%
6.47%
0%
1%
2%
3%
4%
5%
6%
7%
0% 5% 10% 15% 20% 25% 30% 35% 40%
NOI
Energy Consumption ©Kingport DBA Resource Productivity Associates, 2011 103
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THE BUSINESS CASE: WHY THIS IS WORTH YOUR TIME
• Managing energy use is good business– strengthens the bottom line and– positions your company as an
environmental leader
• By improving financial performance and embracing corporate social responsibility, superior energy practices can give you a critical competitive edge.
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Look Out from the Microscope
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Checklist
Determine the “real” goalTie to corporate goals and profitability
Understand the corporate financial requirements
Educate and engage management using ENERGY STARDocumented impact on profitability
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Checklist (cont’d)
Create a strategy and TEAM
Determine savings using third party toolsENERGY STAR
FEMP
Analyze any associated riskLife cycle analysis and impact on profits
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Consider options on how to finance projectsSelf using savings – operating budget
Utility programs
Lease
Use ENERGY STAR Financial Value Calculator to generate letter
Create 5 – 7 slide presentation if required
Checklist (cont’d)
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Mission Accomplished?
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