“As you can imagine, sometimes you can’t justify the replacement of equipment based solely on the improvement in energy efficiency,” Murphy explains. “Looking at something over a 10- or 15-year period for the investment, it’s easier to look at that walk on the road versus trying to say, ‘You’re going to save 25 percent on a boiler replacement.’ That’s just never going to pay for the cost of replacing the boiler because running the boiler is nowhere near the cost of the new install.”
Murphy also says the decision to invest in retrofits depends largely on the customer—whether they are a public or private organization, for example, and what their motivations and threshold for payback are.
Scott Derby, vice president and partner of SmartEdge (also an InsideIQ Alliance member) in Tonawanda, N.Y., agrees: “Each owner is unique. When you get into the not-for-profits and government, their threshold of payback, for example, can be 10-plus years and in some cases they could be almost up to 20 years,” he says. “When you get into private industry—private organizations, for-profits— they’re three years or less.”
Convincing building owners to make investments in energy-efficient equipment is relatively straightforward, according to Derby, because the payback on the “low-hanging fruit” is pretty easy to gauge.
“We tend to be in the mechanical, electrical, energy-reduction business, and so a lot of our information is—if you retrofit the lighting, the payback will be this much. If you replace the central heating, cooling—all those things—there’s numbers that you can calculate. In some cases, a lot of the Inside IQ organizations will guarantee those savings,” Derby notes.
The cost-benefit analysis can sometimes be as simple as looking over an old power bill to determine the savings per kilowatt-hour after installing variable frequency drives or building control systems, according to Tim Tench, chief estimator at C1S Group, Dallas.
“Then we’ll do a standard payback analysis, like any company would do,” Tench explains. “You do your due diligence. You say, ‘Hey, this is going be an output of a million bucks, but over five years you’re going to save $300,000 per year. So your payback is a little more than three years’.”
Tench also notes the process can work backwards from the client’s end. Many Fortune 500 companies will come to the table with a payback schedule in mind, and C1S Group will look for solutions tailored to their timetable, for example.
Short- and Long-term Solutions
All the experts retrofit spoke with agreed that LED lighting is among the first things building owners and facility managers should consider due to their long lifespan. However, as Murphy observes, just because LEDs are a relatively simple upgrade doesn’t make them right for every client.
“LED lighting—depending on what you’re paying for electricity—you go from anywhere from a five-year to a seven-year payback,” he says. “If the customer is planning on moving in four years, LED is probably not for them, but if they plan on being there for the next 15 or 20 years, LED lights are probably a good choice.”