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ADDRESSES ONE OF THE BIGGEST CHALLENGES FACING ENERGY EFFICIENCY PROJECTS Today’s Presentation ©Kingport DBA Resource Productivity Associates, 2011 1

How to Sell Energy Efficiency Products

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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 organization

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Page 1: How to Sell Energy Efficiency Products

ADDRESSES ONE OF THE BIGGEST CHALLENGES FACING ENERGY

EFFICIENCY PROJECTS

Today’s Presentation

©Kingport DBA Resource Productivity Associates, 2011 1

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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.

©Kingport DBA Resource Productivity Associates, 2011 2

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So you want to know……

How to Sell EnergyEfficiency Projects!

©Kingport DBA Resource Productivity Associates, 2011 3

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

©Kingport DBA Resource Productivity Associates, 2011 4

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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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Presenter
Presentation Notes
Sustainable energy is the provision of energy that meets the needs of the present without compromising the ability of future generations to meet their needs. Sustainable energy sources are most often regarded as including all renewable energy sources, such as hydroelectricity, solar energy, wind power, wave power, geothermal power, plant matter, and tidal power. It usually also includes technologies that improve energy efficiency. Conventional fission power is sometimes referred to as sustainable, but this is controversial politically due to concerns about peak uranium, radioactive waste disposal and the risks of disaster due to accident, terrorism, or natural disaster. Wikipedia
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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………

http://rethinkhr.org©Kingport DBA Resource Productivity Associates, 2011 21

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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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Presenter
Presentation Notes
The pie chart, created using data from the BOMA 2008 Experience Exchange Report published annually , clearly shows that ENERGY is the largest operating expense in office buildings. Of course, this group knows that energy is a controllable costs, but some building operators still think energy use can’t be controlled. Energy efficiency is a cash flow enhancing and money making strategy !
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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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Presenter
Presentation Notes
Source: The Commercial Building Initiative from http://www1.eere.energy.gov/buildings/commercial_initiative/research.html Review the process for public and private sector . All agencies including the US Department of Commerce research and contributions are detailed at the CBI website. Rigorous consensus-building between DOE, other Federal Agencies Including Department of Commerce, private sector, standard organizations such as ASTM International and academic institutions.
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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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Presenter
Presentation Notes
While an economically efficient project is likely to have one or more of these attributes, it is impossible to summarize cost-effectiveness by a single criteria. Determining true cost-effectiveness requires a life-cycle perspective where all costs and benefits of a given project are evaluated and compared over its economic life.
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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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Presenter
Presentation Notes
(CC Jiugang Wang)
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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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Presenter
Presentation Notes
Regardless of the building type, there is a way to benchmark a building against itself over time, against other buildings in the same industry, in the same regio or nationally A small business can also benchmark itself . Benchmarking provides a yard stick for evaluating opportunity when enough data is available to show trends in energy use
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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

©Kingport DBA Resource Productivity Associates, 2011

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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Presenter
Presentation Notes
Google ENERGY STAR ®Building & Plants Bookmark Buildings & Plants page http://www.energystar.gov/index.cfm?c=business.busindex
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The Typical Office

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Presenter
Presentation Notes
From ENERGY STAR for Building and Plants http://www.energystar.gov/index.cfm?c=business.bus_index
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The Typical Plant

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Presenter
Presentation Notes
From ENERGY STAR for Building and Plants http://www.energystar.gov/index.cfm?c=business.bus_index
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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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Presenter
Presentation Notes
If some of your facilities rate well, then those facilities are eligible for recognition. However, even if they don’t, you have vital information that you can use to gain support for building renewal projects. For example, if you have a building that scores 25, it would be a good candidate for a retrofit project or at least further technical evaluation. You can relate the rating to building performance and operational costs. Having this kind of information (based on a national rating system) gives your case enhanced credibility with your administrators and decision makers.
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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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Presenter
Presentation Notes
The above graph shows the growth of $100 from inception at year 1 earning simple interest of $10 (10%) and earning $11 in the 2nd year, thus making the new total compounded earnings to $21 at the end of year 2. This compounding effect continues to year 5 when the money has grown from $100 to $161.05 in Year 5
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Today’s Dollar is Better than Tomorrow! Why?

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Presenter
Presentation Notes
Image from: Accountingscholar.com © Accounting Scholar
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Net Present Value Analysis

• .

All payments are added and

brought back to today’s dollars

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Presenter
Presentation Notes
The Net Present Value (NPV) analysis of a project is the calculation in financial management that measures the benefit of a project in today’s dollar terms, net of the initial cash outlay, taking into account that over time money today is more valuable than money in the future (discounted time value of money). ��The NPV savings calculation consists of two financial concepts:�• The “net” part of the NPV savings calculation is the difference between all costs and all benefits (savings and other gains). �• The present value portion of the NPV calculation takes into account the time value of money; so that adjusts to expenditures and returns, as they occur over time, can be evaluated equally
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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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Presenter
Presentation Notes
The utility industry has developed four key programs to help small to large businesses, non profit and semi public institutions invest in Energy Efficiency: 1. Under loans and Utility On- Bill Financing Plans , some utilities can fund an ALCS project for terms of up to 10 years and under other programs at 0%. 2. Savings by Design target high performance buildings in new construction and major retrofit projects. 3. Rebates and Incentives: the utilities have incentiveprograms for every industry, building size , industrial or commercial buildings . This is the best in class utility program in the country ! 4. Demand Responses programs offers financial incentives in exchange for shifting or reducing electric demand and is an ongoing source of cash. Businesses receive incentive payments and /or payments for performance in every possible situation. The three independently operated utilities as well as Sacramento Municipal District operate in a three year cycle with regard to funding that they receive from the State’s Public Goods Fund in order to provide rebates and incentives under the four programs listed on this slide. The last funding cycle expired on 12/31/08 and the utilities are currently operating under Interim Funding which began 1/01/09 and ends on 12/31/09. We recommend that you check the websites of each of the utility company provided to you in the handbook for the current status of each program. The 2009-2011 Energy Efficiency Programs have not yet been approved by the California Public Utilities Commission (CPUC). In order to maintain program availability, the CPUC has issued a Bridge Funding Decision that authorizes the three investor owned utilities, SDG&E, SCE and PG&E to continue the programs following the same guidelines. Bridge Funding will end no later than December 31, 2009. Customers may participate in all programs described on the websites using the 2006-2008 program rules, incentive levels and applications. Program incentive funds will be allocated on a first-come, first-served basis, until all funds are committed or until December 31, 2009, whichever occurs first.
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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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Presenter
Presentation Notes
For simpler projects that involve the installation of lighting equipment or systems such as ALCS only , your customer will qualify for two programs : 1. Standard Performance Contract (SPC) : *This will most likely be the program that ALCS would net your customer the most incentive dollars depending on the kWh saved over a 12-month period. * How much is the incentive payment ? As much as 30% of the cost of each installed measure. Disadvantages: * pre- inspection is required which may cause delay with project * measuring and verification of the energy savings is required and will take much longer time than straight rebates. 2. Express Efficiency is a much easier incentive program to qualify under but it typically is a fixed rate set for prescribed measures and does not pay out as much as the Standard Performance Contract . * The rebate amount depends on the type of equipment and the utility company involved. * Typically, this is for smaller projects * Submission of vendors’s invoice to the utility company is all that is needed.
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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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Presenter
Presentation Notes
On-Bill-Financing (OBF) is a tool that makes small business energy efficiency as easy as falling off a log. Under OBF an electric utility offers upgrades to its small business customers and loans to pay for the upgrades. The energy savings are used to pay back the loan, so the monthly utility bill is no higher than it was before. When the loan is paid off, the small business owner's utility bill is permanently lower. On Bill Financing programs are available through SDG& E and So Cal Gas to support the Energy Efficiency rebates and incentive programs . Since California utilities are operating under Bridge Funding, SCE and PG&E ‘s On-Bill Financing Program will most likely be available in 2010 under the new CALPUC 2009-2011 Energy Efficiency Program. It is an interest free loan for the duration of the payback period of an Energy Efficiency Project . 1. The term is determined by the payback period on the equipment and is limited to five years. Not only does your customer receive a rebate or incentive but he also gets to finance 100%. Traditional bank financing cannot even come close to matching these terms. 2.The program requires an energy audit and then measures are reviewed with customers. Typically for smaller transactions . 3. The incentive coupled with On Bill Financing is reduced by 10% . The loan is repaid through the customer’s utility bill and the electric costs may actually decline while the payments are made. B. Other subsidized utilities loan programs: 2. Certain utilities such as SMUD offers term loans up to 10 years for qualifying Energy Efficiency projects. PG&E and SCE are working on utility programs under California Public Utilities Commission(CPUC) guidelines just issued this Summer. See the Handbook for the CPUC memorandum . IMPORTANT : Each utility has its own program. Check your utility websites.
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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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Presenter
Presentation Notes
FEMP Energy Cost Calculator : this calculator was created to allow Federal and State agencies to quickly calculate the cost benefits of new energy efficiency measures on specific measures. Please refer to the FEMP webpage below , http://www1.eere.energy.gov/femp/technologies/eep_eccalculators.html
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Energy Savings Estimates

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Presenter
Presentation Notes
http://www1.eere.energy.gov/femp/technologies/eep_ac_chillers_calc.html
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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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Presenter
Presentation Notes
Pacific Northwest National Laboratory, one of the leading research national laboratories, used by the Federal Governement for energy research and development, created an air conditioner Cost Estimator. For the preview of the actual tool, please check, http://www.pnl.gov/uac/costestimator/main.stm
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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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Presenter
Presentation Notes
Before starting a project, you might wish to review the following eight-point checklist: 1. Cash Flow from Operations & Maintenance Savings : Before starting any energy efficiency, a project sponsor should review all operations and maintenance procedures in conjunction with the utility bills to look for potential cash savings from reduction in cash outlay for utility expenses. 2. You might review with your customer as part of the presentation of your proposal : - Is the project eligible for utility incentives ? - Which incentive program would the project qualify for ? SPC, Express Efficiency - Which Demand Response Program could the project allow the project sponsor to participate in ? 3. Is there utility financing such as On-Bill Financing or other available?
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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?

©Kingport DBA Resource Productivity Associates, 2011 87

Presenter
Presentation Notes
4. If a state or local government , is there CEC Energy Efficiency available for the project ? Is there funding for the project study through CEC ? Does Bright Schools or The Energy Partnership Program apply ? 5. Is the project available for Energy efficiency financing available ? 6.
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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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Thank You!

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Daryl DeJean [email protected]