Mining Savings from Existing Buildings Can Significantly Boost the Bottom Line

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You may be wondering what’s new, since you’re already well aware of the continuing cost-saving potential of energy efficiency strategies. However, you’re likely also under the assumption that investing in retrofits or facility upgrades is too expensive to justify or would require a dedicated budget or deep plunge into cash reserves.

What’s new, is that those assumptions aren’t necessarily valid. There may be a way to structure an off balance sheet, cash flow positive transaction that requires zero capital outlay while still providing impressive, ongoing financial returns. Those returns amount to major reductions in total cost of ownership (TCO).

It bears repeating: no cash investment, steady energy savings and reduced TCO.

“Virtually every warehouse in the United States that hasn’t recently retrofitted its lighting has the opportunity to effectuate substantial energy cost savings...”http://www.energytaxsavers.com/articles/Energy-Tax-Aspects-of-Warehouses-and-distribution-centers

Butler Manufacturing™ has proven the scenario works

As a global leader in design-build solutions with value-engineered building systems, Butler decided to practice what it preaches by looking at what could be done to demonstrate real, verifiable energy savings at one of its eight North American manufacturing facilities. The plant, located in Annville, PA, is a 500,000 ft2 large-span building with roughly half office space and half manufacturing. The building opened in 1976, and the lighting throughout the plant was outdated and insufficient according to Derek Storm, Plant Manager.

Not only was a lighting upgrade seriously needed, lighting is also among the highest impact, energy-saving targets. It typically accounts for approximately 20% of an average building’s total energy consumption – often as much as heating and cooling combined – depending on the type of building and climate/geographic location.

“Studies have repeatedly found that daylighting has the potential to realize very large reductions in lighting energy consumption... (additionally) dimming electric lights in day-lit spaces could reduce annual lighting energy consumption in existing commercial buildings by 40-60%.”TIAX Controls and Diagnostics Report titled “Commercial Building Toplighting: Energy Saving Potential and Potential Paths Forward” prepared for the U.S. Dept. of Energy (DOE)

In Butler’s case, lighting actually accounted for 40 percent of the building’s energy spend. So the company decided to optimize lighting efficiency by installing the SunLite Strip™ daylighting system, manufactured by Butler, in the existing roof. When combined with internal LED lights and lighting control systems (motion sensors), the energy savings were multiplied.

“Our initial motivation for the retrofit was better lighting,” said Storm, “but the more we analyzed it, we found that the projected energy savings well exceeded expectations. Also, to my surprise, the entire upgrade took only one month with no disruption in production, since the install work was done during off-shifts.”

The Butler retrofit solution increases the flow of natural sunlight into the plant, and efficient LED lighting and control updates help balance the energy output based on the amount of effective daylight that’s available. So when abundant daylight fills the facility, the fixture lighting output remains low to avoid unnecessary usage and expense. Similarly, the motion sensors control lighting output by turning off fixtures when a space is unoccupied.

Results Were Immediate and Substantial

Within months following the retrofit, the Butler Annville plant had reduced its energy expenditures by 63%, equating to $11,000 per month in savings. In addition, Butler received an upfront rebate of $108,000 (over and above those savings) from the local electric utility, which amounted to 28% of the entire retrofit cost. Furthermore, the unique prismatic design effects of the SunLite Strip daylighting system, which magnifies the natural light, enhanced the results of the retrofit and the savings earned.

In fact, the immediate decrease in energy usage was so dramatic that Storm said, “The utility company called us to make sure everything was okay. They wondered if we had dropped a shift or reduced our production.”

Perhaps the most significant factor in making all of this possible was the financing. Butler arranged for a buy-out lease to secure capital for the roof retrofit, lighting fixtures and control systems without earmarking any of their own money. Lease payments are $10,000/mo. But given that energy savings amount to $11,000/mo., Butler actually clears $1,000/mo. Once the lease is up, the total $11,000/mo. will go straight to the bottom line.

Imagine Duplicating Results of the Annville Plant Retrofit

  • 500,000 ft2 building retrofit for roof daylighting, LED fixtures & control systems
  • $0 capital investment
  • 63% reduction in energy expenditures
  • $11,000/mo. energy savings
  • $108,000 upfront utility rebate
  • Plus $300,000 in tax deductions*

* See below EPAct 179d.

Even Greater Financial Gains From Tax Deductions

Beyond the possibility of duplicating the TCO savings gained from reduced energy consumption and upfront utility rebates demonstrated in this case study, there is now the prospect for even greater financial impact gained from your company’s existing, large-span facilities.

In December, 2015, Congress passed an extension to EPAct 179D tax incentives that had expired in 2014. Just as in the original act, the amount of federal tax deduction is a total of $1.80 ft2, divided into thirds between lighting, HVAC and building envelope for companies that meet specified energy-saving requirements. Which means, in the case of the Butler 500,000 ft2 Annville plant, it can now qualify for a $300,000 tax deduction.

Two important and additional financial benefits can come from a day-lighting, energy-saving retrofit. They are much more difficult to quantify, but every bit as real. One is the potential for increased employee productivity and job satisfaction, which studies have shown can result from an increase in natural daylight in work areas. The second is increased resale value that can be realized if and when the property is sold.

With utility rates continuing to skyrocket, it’s now more important than ever for businesses to take a hard look at existing building assets and determine the amount of money that can be mined from them by way of energy savings, utility rebates and tax incentives. Projections may prove to be far more than you might anticipate.

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