Derby adds variable refrigerant technology is becoming an increasingly popular choice in commercial and residential buildings in the short term because it’s a reliable technology with a substantial payback.
The payback threshold that the industry will tolerate is very low—typically four years or less, according to Campbell. However, that doesn’t mean the retrofitting solutions can’t be robust. Case in point: When the Empire State Building was up for renovation, RMI designed a deep, custom retrofit that was integrated into the building’s repositioning—rather than just doing overlays—that resulted in a rapid payback for the client.
“The Empire State Building project was undertaken as part of a repositioning. It had a simple hard dollar payback from an energy perspective of under four years,” he explains. “In fact, it was closer to three years. In addition, as a result of the retrofit, they were able to get LEED Gold for the building. They had significant enhancement in building value because the quality of tenant that they could now attract.”
Building upgrades include solar and wind energy and geothermal heating and cooling, according to Derby. Windows, insulated roofs, and building envelope items are also very expensive to upgrade and require much longer payback schedules.
“They tend to be costly, especially the larger the square footage of the building, but they’ll pay for themselves over time,” Derby says.
Ultimately, given what we know about potential savings realized by retrofitting, Campbell suggests it is fiscally irresponsible not to update a building when it’s time. “One of my sayings is that when you’re doing a major renovation, capital refresh, repositioning of a building, it’s not only environmentally irresponsible to not integrate in a custom retrofit, it’s actually fiscally irresponsible. You only have that opportunity once every 20, 30 years. Boy, if you miss it, you miss that ability to get within the payback window that investors have an appetite for in the commercial building space,” he points out.
Incentives for the Early Bird
Fortunately, building owners don’t have to shoulder the entire financial burden for retrofits alone. There are a number of state and federal grants and other rebates that can help offset the costs, but timing is crucial.
“It’s fairly straightforward, but there are a lot of tax incentives that typically go to the contractor, which you can put on the table as a cost reduction,” Derby explains. “The grants are an interesting thing. You have to be very careful about promising things [to clients]. You’ve got to make sure the money is there when the work is done. That’s a real juggling act to make sure that those funds don’t dry up.”
Tench says the situation is the same at the state level in Texas, where privately held electric companies will offer incentives for energy retrofits on the open market. But again, it’s a case where the early bird gets the worm.
“The key to [grants] is, since the economic downturn in 2007, the amount of dollars they set aside for that stuff has been reduced. You’ve got to get on it quick. They’ll open up the thing in January, and you’ve got to be one of the earliest people in there to get a hold of it,” Tench concludes.