Whos Scared of an Audit?

What you should know about your next energy audit

By: Zach Denning January, 20th 2014

How many times has the word audit been used in the wrong connotation? Everyone hears the stories of having their taxes audited and the nightmare of working with the IRS. So naturally, when mentioning the word to facilities management, the first reaction is horror and disgust followed by, Wed rather just not pursue that route right now. So what are you actually losing by neglecting your energy usage? Is it best to wait until your manager or a new tenant forces you to expose your energy bill? How much time does a facility owner or manager have to dedicate to an audit to substantially reduce energy? The first step to subverting fear about an energy audit is to understand the process and terminology which can be initiated by discarding the term audit in place of Energy Analysis. Typically, the actual Audit portion of the project is at the end to quantify measures found in an Assessment of your building. The three components of an Energy Analysis include: 1. Energy Benchmark a. The process of accessing your energy records from your provider to obtain Energy Star building rating based upon the comparison to other properties with aligning features. b. A Benchmark shows how much energy is used regardless of actual facility usage. (i.e. hours of operation, equipment functionality, etc.) 2. Assessment a. Once you understand where your facility falls in terms of overall consumption, the next step is to understand how the energy is being consumed. b. An Assessment helps to identify how equipment is functioning (CFM outputs, lighting levels, etc.) and will provide analytics and information that can be used to facilitate energy based upgrades.

3. Audit a. Most misconceptions of an analysis are derived from the Audit portion of the report. b. An Audit takes data originated in the Assessment and quantifies the upgrade measures financially. c. Most energy related projects forecast savings based on calculations found in an Audit. i. i.e. If you install a VFD on a primary pump savings are annualized at $1,200.00. d. Pursuing an Audit becomes a mandatory step when capital expenditure levels and provider rebate incentives increase. Energy Analyses (a.k.a. audits) have traditionally received mixed reviews among stakeholders in the facilities industry. Figure: 1 illustrates common facts and myths that are often associated with energy analyses with facilities staff. The most common myths are centered on the cost and complexity of an analysis that has the ability to produce a ROI (Return on Investment) less than five years. The process of an Energy Analysis (Benchmark, Assessment, and Audit) allows an owner or tenant to pursue savings based upon their budget and
Energy Audit Facts
- Ample savings when changes are implemented correctly - Incorrect measure implementations lead to miscalculated returns - Low impact solutions from assessment generate large reductions - Most changes are negligible to occupant comfort - Scalable improvements based on upfront capital - PG & E incentives help to reduce capital expenditures - State & local governments are pushing for energy consumption to be public knowledge

Energy Audit Myths

- Heavy facility staff involvement - Long returns with high upfront costs - Audit procedure from start to finish can take a year or longer - PG & E capital reduction plans are limited and run out of funding quickly - Energy consumption is less than 25% of our operating budget - You never save as much money as predicted - Audit can produce no savings and the report itself can cost thousands

Figure 1 - Common facts and myths about energy audits

their level of engagement. For example, a facility with a relatively low Energy Star Building Index (> 50) can typically save up to 20% without actually quantifying the saving measures in the Audit portion of the analysis. A significantly low score could suggest failed equipment or poor method of control Both of which lead to higher savings after a full Assessment. Other myths include false expected savings, or no savings at all, generated by an analysis that may cost thousands of dollars and hundreds of staff hours to produce. Therefore, isnt it easier to skip the analysis if you sign a service contract that guarantees your equipment is working correctly? Arent most of the saving measures generated centered on broken equipment? Mechanical maintenance serves to protect capital investments and tenant comfort by keeping equipment functioning properly. In the energy analysis process, the Assessment will

identify failed components, but more interestingly, suggest a new methodology for controlling existing equipment; Methodology typically requiring little upfront cost. Now that the fear of the term audit has subsided, what level of financial involvement does the customer have when compiling a report? As identified above, the analysis itself as well as the measures it produces, can all be scaled based upon budget. Cost to generate a report is inherently a measure of facility size and usage requirements by the tenant. A facility that runs 24/7 is more likely going to have a higher level of involvement from the energy contractor and the maintenance staff to reduce energy. These facilities tend to be more critical in nature, with suggested energy measures typically requiring the upgrade of equipment and scheduled shutdowns. On the contrary, general usage spaces such as offices require less staff involvement for the analysis and little tenant disruption for most energy saving actions. Energy consumption within buildings is characteristically undervalued as a profit driver and funneled into expected annual costs. Negligently signing an energy bill is typically easier than trying to actively understand and reduce consumption. So how does energy stack up against other assumed costs in an occupied building? We can observe Figure: 2 to see where your consumption fits into the rest of your budget which is larger than expected.

Figure 2 - Energy consumption is double the cost of a typical yearly budget for facility upkeep.

Take the below example into account when trying to quantify gains from energy saving measures found in an Analysis: A building undergoes an Energy Analysis by starting with a Benchmark which reveals an Energy Star Index of 63. The building owner, in an attempt to entice tenants based on energy savings, sets a goal of 75 and the energy contractor proceeds with an Assessment. o The Assessment portion of the Analysis reveals heavy amounts of ventilation after scheduled hours in 50% of all zones. From measures found in the Assessment, the Audit reveals that by spending $42,000.00 to upgrade the equipment the owner can expect returns of 18% yearly. o Using the above 100,000 sf building, an 18% reduction in usage equates to $36,000.00 in savings yearly and a 1.16 ROI. Although this example is relatively vague, it shows that a mere savings of 18% in a building this size equates to a much larger savings this disregarding upfront capital savings from a provider. Many energy upgrades typically placed into capital avoidance budgets can surface in an Assessment and be quantified in an Audit with expected returns. The term audit has gained popularity in the energy industry due to its effectiveness at evaluating and quantifying consumption. Facility owners and managers are pursuing savings as tenants are demanding Energy Star and LEED ratings of a building before signing a lease. Partnering with a contractor to complete an energy analysis good practice and helps to alleviate concerns and provide reasonable expectations on savings.

I currently maintain an engineering sales position at Western Allied Mechanical. Our business is consulting customers on energy consumption and reducing costs through a joint mechanical and automation venture. Im an avid follower of the industry and am always open to new opportunities and approaches. You can reach me at zdenning@westernallied.com or my cell at 650-798-4154.