The cost of utilities is typically the largest line item in a corporation's budget. This seemingly is followed by an uncertain and, more than often, non-existent plan of action to combat these rising costs. This article will address three key questions that often stump condo boards when trying to address the energy elephant in the room. 
Isn’t it cheaper to keep existing equipment running?

Every board will usually have at least one person unwilling to tinker with or replace any equipment because of that feeling of “If it isn’t broken, don’t fix it”. In theory, this traditionally works when none of the operating costs are increasing. The reality is, that it often costs a building more to be complacent about original equipment from the builder that is more than five years from install. The key to demystifying the “keep or retrofit” debate is understanding the Total Cost of Ownership (TCO). In other words, how much does a piece of equipment cost to purchase, operate, and maintain from now until the recommended replacement date on the reserve fund study? More importantly, which of these costs takes up the biggest portion of the TCO pie? This part may be familiar to owners of new cars, who quickly find out their biggest cost of ownership is depreciation, when the new car can lose up to 20% of its value when driven off the lot. The same cannot be said about HVAC equipment. In most cases, energy takes up over 70% of the overall pie. 
Boilers and other natural gas equipment are particularly sensitive to the cost of energy, especially with the Federal Carbon Charge escalating each year. Condos with low-efficiency atmospheric boilers that spend $300,000 a year on natural gas are asking themselves- if the boilers marked for replacement this year should be replaced like for like. In a case study, one board member wants it done cheaply, according to the reserve fund study, and another wants to see if spending more for high-efficiency condensing boilers is ultimately worthwhile. Here’s how the simple math for TCO looks:

Six new atmospheric boilers to end of life at year 25 would be the cost of a new boiler plant at $480,000 plus $7,500,000 in fuel for a TCO of $7,980,000. A high-efficiency system that uses 10% less natural gas would cost $600,000 plus $6,750,000 in fuel for a TCO of $7,350,000. That’s a minimum savings of $630,000 over the life of the system, with a project payback of 4 years on the incremental cost of $120,000. The payback becomes even more compelling with an Enbridge efficiency incentive! In this specific real-life case study, that one-time incentive totalled $30,000, making the total payback only 3 years. Therefore, spending for better efficiency equipment can make financial sense and better position the condominium board for long-term financial success. TCO models could also be expanded to include costs like annual maintenance, repairs, and comparative interest from GICs. 

For those of you keeping score, over 90% of the ownership cost for boilers is fossil fuel energy. For condominiums looking to decarbonize, some corporations are considering retrofitting only part of the boiler plant to cover the majority of heating needs and bankrolling their reserve fund savings for a low / zero carbon replacement in the future. At the time of writing this article, switching to electric heating does not provide any financial benefit over using natural gas.

How can a Building Automation System help?

For condo boards with limited budgets or middle-of-the-road equipment where the TCO for a retrofit is not overly compelling, the next best option is simply operating the equipment better via automation. The cost of sensors and electronics has fallen dramatically over the last decade, which makes installing a Building Automation System (BAS) the next best thing, if not better, than installing new equipment. By reducing the output of the HVAC equipment during non-peak periods, a BAS can significantly reduce energy consumption and achieve project paybacks in as little as ONE YEAR! The monitoring functions of the BAS ensure that costs are contained, allowing the building to reschedule equipment to meet a set budgetary cost when necessary.

How do we pay for this project?

Some corporations may be limited by reserve fund capacity, trapped by the requirement of needing money to save money. If the shortfall is minor, some contractors may be willing to accept flexible financing terms of up to 2 years to win your business. Some municipalities, like the City of Toronto, offer Energy Retrofit Loans, financing for up to 30 years. These programs can also include big-ticket items like window replacements. For buildings with a serious budget crunch or skeptics not willing to use the reserve fund, there are also energy savings companies. These companies are willing to invest in building energy efficiency in exchange for the lion’s share of savings, all the carbon offsets generated by the project, and potentially relinquishing control of the building’s heating and cooling system to ensure the savings targets are achieved.  

How can we be sure these savings figures are legitimate?

The cheapest and most accessible way of gauging your building’s energy performance is via Energy and Water Reporting and Benchmarking (EWRB) on the Energy Star Portfolio Manager. By examining where the condo’s energy usage intensity (EUI) stacks up against other buildings of similar age and size, the corporation can determine if there are enough potential savings to warrant further investigation. The next step would involve an ASHRAE standard Level 2 or 3 detailed energy audit, which identifies energy conservation measures with payback periods and incentives and forms the basis of a long-term energy management plan for the building. Budgeting for energy efficiency is one of the few relatively painless options a corporation has at its disposal to generate a return on investment and improve the long-term asset value of the corporation in a pragmatic and cost-effective manner. Verifying the savings with benchmarking and providing proper maintenance on equipment ensures that the project will continue to provide positive returns budget after budget. 

With the increasing costs of utilities, which have been further exacerbated by the Federal Carbon Policy, the ultimate question that condo boards need to ask is: 
How to proactively plan and implement fiscally prudent measures in a pragmatic and sustainable manner to help combat these rising costs, which will continue to place a heavy burden on Operating budgets for the foreseeable future.  Otherwise, the alternative will be positioning the condominium to be reactive and playing catch up to these rising costs, ultimately causing further strain on the overall finances and well-being of the condominium. The choice is seemingly clear, and there has never been a better time to make the right decision!

Fan Fong possesses an extensive list of credentials, Member of IBPSA Canada, CaGBC EAP, TransformTO contributor, Environment and Climate Change Canada CAIF SME Program Participant – Commercial Deep Retrofit Projects, Ryerson University Centre for Urban Energy – Microgrid, Distributed Energy Resources, and Rural Electrification Project Developer, Fan Fong is the battalion to energy savings. Mr. Fong has identified and realized over $35 million (and counting) in equipment and energy savings for condos. He has over 20 years of experience in the field of energy management, developing onsite power generation, building controls, and mechanical retrofit projects. 

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