Energy Efficiency Grants and Getting the Coconut

By Josh Greenfield,
Energy Services Manager, Primera Engineers

Like the old energy adage goes “You can’t manage what you don’t measure,” the same goes for energy efficiency upgrades, “You can’t make a good portion of energy efficiency upgrades economically viable without grants.” Okay, maybe that’s not a widely used adage by anyone, but the statement holds a lot of truth. With the simple payback period and internal rate of return metrics on building owners’ minds in this tough economy, these values can be make-it or break-it when it comes to the decision of implementing various energy efficiency upgrades or not.

Energy cost reducing measures (ECRMs) such as lighting upgrades are well known as being “low-hanging fruit” energy upgrades and typically have a lower payback period, making upgrades like this seem very attractive to building owners. Whereas ECRMs dealing with major heating, ventilation and air-conditioning (HVAC) equipment replacement, overhauling of building control systems or even building fenestration and/or envelope modifications are those energy efficiency upgrades that are more of the “coconut in the tree” in that they produce significant energy savings but the process of getting there is more comprehensive and more expensive. This results in an increased payback period, which at first glance seems very unattractive to building owners. This is where energy efficiency grants come to the rescue, in a way becoming the ladder to the coconut.

Energy efficiency grants in the Chicagoland area come in many different forms (equipment/materials grants and Assessment/Commissioning related grants), are available to many different end-users (Private sector, public sector, and not-for-profits) and concentrate on the common energy types that commercial buildings consume daily such as electricity and natural gas. If there were an Energy King of the energy efficiency grants in the Chicagoland area, it would no doubt be the Illinois Energy Efficiency Portfolio Standard (EEPS), which is responsible for the substantial progress in making energy efficiency grants excel from year to year.

Equipment/Materials Energy Efficiency Grants

Senate Bill 1592 was signed into law in August 2007 creating the EEPS and a Renewable Portfolio Standard (RPS) that are among the most ambitious in the nation. The EEPS required Illinois utilities to reduce overall electric usage by 0.2% of demand in 2008, increasing to 2.0% by 2015. The RPS required utilities to supply 2% of their power from renewable energy sources by 2008, escalating to 25% by 2025. This law created a substantial budget for programs and incentives to reduce electrical energy usage and demand for customers of ComEd and Ameren Illinois.

During the first year (June 2008 to May 2009), there was approximately $50 million devoted to various sectors of utility customers. ComEd and Ameren Illinois focused approximately $38 million on residential, commercial and industrial customers and the Illinois Department of Commerce and Economic Opportunity (DCEO) utilized about $12 million on the low income and public sectors. During the second year (June 2009 to May 2010), there was over $100 million for programs and now in its third year, there is over $150 million—by far the largest opportunity Illinois has ever had for energy efficiency and demand reduction.

Titled the “ComEd Smart Ideas” program, the plan offers standard prescriptive based “dollars per unit” incentives for lighting, HVAC, motors and refrigeration system upgrades. For upgrades not included in the standard prescriptive category, the Smart Ideas program can be customized, allowing for incentives to be awarded on a basis of dollars per kilowatt-hour saved annually. Typical custom program ECRMs include compressed air systems, building control systems and process-load efficiency upgrades.

The Smart Ideas standard and custom programs are open for all ComEd private-sector commercial customers as well as not-for-profit commercial customers. The current maximum total incentive per facility for the ComEd Smart Ideas program is $400,000. For public-sector commercial customers, the DCEO offers a program equivalent to the ComEd Smart Ideas program, in that customers can also take advantage of both a standard prescriptive and custom incentive program for their energy efficiency upgrade projects, for a maximum total incentive per facility of $300,000.

Recently, a new energy efficiency grant offered by the Illinois State Board of Education is a dollar for dollar state matching grant program providing up to $250,000 for energy efficiency projects in schools. All school districts, charter schools, vocational centers or public university laboratory schools are eligible. There is $50 million total in the fiscal year 2010 grant budget that can be used for insulation, windows, doors, energy controls, lighting, energy recovery, energy conservation, alternative energy systems and other projects designed to reduce energy consumption.

Assessment/Commissioning Energy Efficiency Grants

The above programs predominately deal with acquiring energy efficiency grants via the purchase of energy efficient equipment and materials, but a wide array of grant programs exist that offer incentives for the implementation of energy assessments, energy audits and retro-commissioning services.

Retro-commissioning is a facility-wide tune-up designed to help a building perform optimally. It targets energy saving opportunities through a systematic evaluation of energy-using systems, resulting in the identification and implementation of no-cost and low-cost energy-saving improvements that, in many cases, also improve occupant comfort.

ComEd has been offering their retro-commissioning (RCx) program since mid-2009 for the private-sector and not-for-profit business customers, and the DCEO has partnered with the Smart Energy Design Assistance Center (SEDAC) to administer their RCx program, which started in the fall of 2010 for the public-sector customers in the ComEd and Ameren Illinois Utilities service territory, including units of local government, K-12 school districts, community colleges, public universities and state buildings.

In order to be accepted into the various RCx programs, the applicant building must be over five years old, exceed 150,000 square feet and have the potential to produce substantial electrical savings. The RCx services are fully funded, but the facility owner must commit to funding the recommended measures of implementation from the RCx process (at least $10,000 or $20,000 for ComEd RCx, depending on the size of the facility, and at least $10,000 for DCEO/SEDAC RCx) that result in an estimated simple payback of 18 months or less based upon electrical savings.

Another funding source for the local and state government and not-for-profit sectors is a hybrid energy efficiency grant that lumps together green building design implementation and commissioning services. The Green Building Design & Commissioning Program offered by the Illinois Clean Energy Community Foundation offers grant incentives up to $150,000 for projects that achieve the required LEED certification level as well as direct a required percentage of the grant award to building commissioning.

Future Coconuts

While the majority of the energy efficiency grants in action today deal with electric consumption savings only, the EEPS world will be making a major expansion in mid-2011 to include natural gas consumption savings. For a heating-driven climate such as that of northern Illinois, these natural gas incentive opportunities will provide commercial building owners many options to turn a mildly-favorable heating energy reduction upgrade into a profitable and beneficial energy savings project.

While the exact details and incentive values of the Natural Gas EEPS program have not been released yet, customers can already take advantage of various natural gas incentives via their local natural gas providers and their self-structured energy efficiency programs. The Chicagoland Natural Gas Savings Program promotes high efficiency, gas-saving products by providing cash incentives, while educating customers about the benefits of energy efficiency. Rebates are available to non-residential customers of Peoples Gas or North Shore Gas (customers must be on Service Classification No. 2) for qualifying high efficiency furnaces, boilers, water heaters, insulation, commercial kitchen products and other measures (boiler controls, boiler tune-ups, etc.).

For gas-saving projects that are not covered by the Chicagoland Natural Gas Savings Program’s prescriptive offerings, the program also offers a Custom Incentive Program. This program offers incentives for energy efficiency projects that involve improvements to existing systems or processes which result in a permanent reduction in natural gas usage. The natural gas savings must be verifiable over a 5-year period. The Custom Incentive Program offers a $1.00 per annual therm saved incentive rate for a maximum of 50% of the total project cost, or $50,000 per project (whichever is less) and a maximum of $100,000 per site per incentive year.

The Nicor Gas Energy Efficiency Program offers a very similar structure to that of the Chicagoland Natural Gas Savings Program for business customers in their territory (rates 4 and 74). The Nicor program offers the same prescriptive based incentives for qualifying high efficiency furnaces, boilers, water heaters, commercial kitchen products and other measures (boiler controls, boiler tune-ups, etc.) as well as a custom incentive program for gas-saving projects not covered by the prescriptive offerings. The Nicor Custom Incentive Program offers a $0.75 per annual therm saved incentive rate for projects saving less than 7,500 therms per year and $1.00 per annual therm saved incentive rate for projects saving 7,500 or more therms per year for a maximum of 40% of the total project cost, or $100,000 per project (whichever is less) and a maximum of $100,000 per site per incentive year. The supply of coconuts in 2011 will be plentiful!

To the Rescue

It is necessary to recognize that approximately 86% of building construction expenditures relate to renovation of existing buildings, not to new construction. It is estimated that over the next 30 years, about 150 billion square feet of existing buildings (roughly half of the entire building stock in the United States) will need to be renovated. New construction only represents about 2% of U.S. commercial building stock. If there is any hope in making a large percentage of those existing building renovations energy efficient, energy efficiency grants are going to be that hope.

When completing life cycle cost assessment (LCCA) analysis on energy efficiency upgrades, numerous factors including first costs, possible existing equipment salvage costs, utility rate escalation and annual maintenance costs are assessed, but the end results that building owners and financial planning teams look at are the final calculated metrics, whether they be simple payback periods, internal rate of return, or other worth indicators. By applying energy efficiency grant savings to LCCA calculations, the first cost values are reduced significantly, therefore resulting in payback metrics that are much more favorable with the financial goals of the institution and allowing the owner to see real and consistent savings.

As long as we’ve made up one adage, there’s no reason to stop there. So when thinking about your next energy efficiency upgrade project, think about this one: “When life gives you coconuts, take them…those are your coconuts and they are money in your pocket.”

Links

ComEd Smart Ideas
DCEO Standard/Custom Incentives
ComEd RCx Program
DCEO/SEDAC RCx Program
SEDAC Design Assistance Program
ICECF Green Building Design & Cx Program
ISBE Energy Efficiency Grants
Chicagoland Natural Gas Program
Nicor Gas Energy Efficiency Program


As the Energy Services Manager at Primera Engineers, Josh Greenfield leads the Energy Management Services Group that acquires energy efficiency grants for private- and public-sector clients, conducts energy audits and assessments on existing facilities including life cycle cost assessment analysis, creates energy model simulations for new and existing buildings to maximize energy savings and trains the design community, contractors and municipalities on energy standards and state energy codes. Greenfield also works with Primera design teams on the 40+ completed or current LEED projects in the Chicago area, Southwest United States and Mexico City, Mexico. He can be reached at jgreenfield@primerachicago.com.

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One Response to “Energy Efficiency Grants and Getting the Coconut”
  1. The existing building stock has the ability of alleviating much of the demand on the grid simply through the low-hanging fruit and the energy efficiency grants do a great job at attaining this low-hanging fruit. I see that these incentives will be here to stay for a while, partly thanks to the Renewable Portfolio Standard.

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