ACEEE MT Symposium · Understand the Market If there is a 15%-30% ROI for an average MF Energy Efficiency Project why are owners / managers not doing it? ¾They don’t know or don’t

MMULTIFAMILY ULTIFAMILY PPERFORMANCE ERFORMANCE

PPROGRAMROGRAM

Multifamily Market TransformationMultifamily Market Transformation

ACEEEACEEEMT SymposiumMT Symposium

Luke Falk, NYSERDALuke Falk, NYSERDA3.31.093.31.09

SBCSBC““45 by 1545 by 15”” / EEPS/ EEPS

RGGI RGGI ““American Reinvestment and Recovery Act American Reinvestment and Recovery Act

of 2009of 2009””

““Create Green Collar JobsCreate Green Collar Jobs””““Promote Energy EfficiencyPromote Energy Efficiency””

““Commitment to SustainabilityCommitment to Sustainability””

Sounds good, now what?

• 72 Partners• 700 Applications in 20 months• ~141,000 units in, ~4,100 buildings• NC = 279 buildings, ~12,850 units• EB = ~3,800 buildings, ~128,600 units• Green Component = 19 projects,~1,300 units

Results to-date

72 PartnersIn 20 Months

Program Metrics

Program AccomplishmentsProgram Accomplishments

1st Energy Star MF High Rise in US

Over 270 More Buildings in Development

Myrtle Avenue Apts. – Brooklyn, NY

How did we get here?How did we get here?

How do you create Programs to How do you create Programs to move markets?move markets?

First try to understand the marketFirst try to understand the market

History History -- October 2006October 2006• Previous NYSERDA Multifamily Programs

• Assisted Multifamily Program (AMP)• ENERGY STAR® Multifamily Pilot Program (EMP)• Residential Technical Assistance Program (ResTech)• Comprehensive Energy Management Program (CEM)• Others

• Design a Single Multifamily Program to serve all NYS

• Hire Implementation Firm to take over 500+ projects in process• Take over programs from multiple implementation firms• Complete all existing projects

Understand the MarketUnderstand the Market

If there is a 15%-30% ROI for an average MF Energy Efficiency Project why are owners / managers not doing it?

They don’t know or don’t believe itFocused on other thingsEnergy Costs not high enough to be an issueAffordable - Don’t have the $Market Rate – Need to know savings and NYSERDA $ 1st

How did NYSERDA’s previous programs address these barriers? – Piecemeal

A Top 5 Owner of NYC Properties:Multifamily Heating Energy Usage ($/ft2/Year)

05

101520253035404550

1

$5

$4

$3

$2

$1

$0

$0

$200

$400

$600

$800

$1,000

$1,200

2002 2003 2004 2005 2006

Electric Gas Fuel W&S

Utility Costs: Actual vs. Projected

Rising Utility Costs 2002-2006:

Gas: 41%

Water & Sewer: 39%

Electricity: 40%

Fuel: 54%

Utilities are underwritten at 3% annual growth

Understand Your MarketUnderstand Your Market

Strengths, Weaknesses of what exists in existing programs and the marketplaceCompelling reason to buy? (Partners & Owners)What are the barriers?Running multiple programs & 500+ projects presented an opportunity to learn about the market

Huge amounts of Project data – cost, savings, etc. Lots ‘o’ Stories – the good, the bad and the ugly

Understand Your MarketUnderstand Your Market

Understand Your MarketUnderstand Your Market

Previous Program StrengthsPrevious Program Strengths

• Network of technical service providers to serve market rate and affordable housing

• Protocols & Guidelines for savings calculations and efficiency evaluation

• Significant data on previous projects • Success of new construction pilot program

Leverage the strengths Don’t reinvent the wheel Remove barriers

Previous Program WeaknessesPrevious Program Weaknesses

• Confusion caused by multiple MF programs• Misinterpretations due to complex program rules• Gap grant incentives proved problematic• Lack of cash flow during project implementation• Incentives tied to project costs• Centralized structure network of technical service

providers that were assigned• All SIR >1.0 Required

Barriers – Cash flow, complexity, lack of time & expertise

RFP RFP -- Program GoalsProgram Goals

• Develop a market-based network of specialists (Partners)• Provide access to capital for energy related improvements• Reduce burden imposed by utility costs emphasizing low to

moderate-income residents• Improve health, safety and security of multifamily buildings• Package energy efficiency with other types of

improvements• Reduce multifamily contribution to system peak demand• Promote ENERGY STAR ® and NY Energy $mart brands

Program Design ComponentsProgram Design Components• Market-Based Approach

– Collaborate with Stakeholders and Energy Efficiency Agencies– Develop Partner Network– Allow owners to select Partner and negotiate fees– Provide market flexibility while ensuring comprehensive work scopes– Use existing standards and protocols where possible

• Performance-Based Incentives– Develop incentive schedules for affordable vs. market-rate properties– Determine number of incentive levels– Establish amounts and timings of payments

• Benchmarking & Performance Target– Create benchmarking protocol to accompany performance approach– Develop a benchmarking tool– Set minimum performance improvement level

Partner Network DevelopmentPartner Network Development““Green Collar JobsGreen Collar Jobs””

Partner Network DevelopmentPartner Network Development• What type of “Partner” firms are out there?Everything from HP Contractors to multi-national ESCOs to start-ups

to CBO non-profits

• What services are truly needed by owners?Comprehensive Project Management not just technical services

• How do we make the program attractive for business owners / entrepreneurs?

Empower Partners – charge whatever the market will bear, no limits on contracting services, streamline the program, respect their role – MF owner is their client not the programs

• Rolling Admission RFQ - took existing network, expanded and introduced healthy competition

• Shifted the Primary relationship - between Partner & Owner –applicant must interview and select a Partner before applying

• Allow Partners to serve selected markets – affordable vs. market-rate and new construction vs existing buildings, geography

• Co-fund training and certification for Partners – Program requires BPI Multifamily Building Analyst

• Encourage comprehensive services (turn-key) – CM & GC work• Attracted firms by streamlining and simplifying the program

without sacrificing comprehensiveness

Partner Network TodayPartner Network Today

Partner Network Development Partner Network Development SummarySummary

• Market-based Programs must truly understand the market– Identify Market Actors & their needs – Identify barriers and unmet needs of owners – Identify needs of owners and how market actors fill

those needs– Listen & filter

IncentivesIncentives““Promote Energy EfficiencyPromote Energy Efficiency””

$XXM per year to save$XXM per year to save……....

Developing Incentive LevelsDeveloping Incentive Levels

• How much $ is needed to move the market? If any?• How much does the avg. EE project cost? • Who gets the incentive $? Owner, Partner, Tenant?• What is the structure? Per unit, per building, % of

project cost, per unit of energy saved• What is the potential for “gaming”?• How do you reward for performance?• What were the previous NYSERDA MF program

incentives? • Total budgets & savings goals

Developing Incentive LevelsDeveloping Incentive LevelsWhat we learned from market / previous programs

• Must be easy to calculate !!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! • Reward for action not just plans – historically a lot of

plans • Avoid last $ in approach - Cash flow is a major barrier

especially in affordable • Avoid incentives based on project cost – change order

madness • Understand the cost of Partner services• Understand the cost of projects

Understanding Average Project Cost

Incentives Reward for Performance

• C&I Programs often pay for performance• MF none to date• C&I can support expensive M&V • MF cannot – tenants have their own metersWhat if We Benchmarked MF buildings as a means to

measure performance provide feedback

Benchmarking & Savings ThresholdBenchmarking & Savings Threshold

• Collaboration with ORNL and the EPA to develop benchmarking tool

• Inputs based on database of 500+ MF buildings• Key characteristics influencing energy use were evaluated• Tool refined through iteration with previous projects to its

current version• 20% minimum performance target set• Benchmarking tool used to determine projects’ reduction in

source energy use and calculate incentive payments

Benchmarking & Savings ThresholdBenchmarking & Savings ThresholdBuilding(s) Description Weather Description

Building Name: "optional entry" Typical Pre-Retrofit Post-Retrofit5-digit Zip Code: 14609 Annual HDD: 6734 6107

Mapping Location: Rochester, NY Annual CDD: 425 310

259,255 320 100.0 60.0

Annual Energy Consumptions and Costs ----- IMPORTANT: Entries should represent 12 continuous months of consumption

Electricity Natl Gas Fuel Oil District Steam Electricity Natl Gas Fuel Oil District SteamUnits:

Energy 1,369,700 183,360

Cost ($) 166,831 256,246

No. of buildings 31 31

IMPORTANT: Number of buildings represented by the reported energy use values above should always be equal for all reported fuels.Calculated 0.12 1.40

unit cost: $/unit $/unit $/unit $/unit $/unit $/unit $/unit $/unit

ResultsYour Building Average Your Building Average

Score Against Peers 56 50 50Building Site Energy Use (MMBtu/year) 23,009 NA NA

Building Source Energy Use (MMBtu/year) 34,812 38,108 32,688Site Energy Use Intensity (kBtu/ft2-year) 88.8 NA NA

Source Energy Use Intensity (kBtu/ft2-year) 134.3 147.0 126.1

Weather-normalized Percent Source Energy Use Reduction After Retrofit

Design AssistantElectricity Natl Gas Fuel Oil District Steam

Units:

Energy 1,153,853 121,469

Projected Percent Source Energy Reduction 26%79

Projected Building Site Energy Use (MMBtu/year) 16,084Projected Building Source Energy Use (MMBtu/year) 25,872

Projected Site Energy Use Intensity (kBtu/ft2-year) 62.0Projected Source Energy Use Intensity (kBtu/ft2-year) 99.8

NYSERDA Multi-Family Building Performance Benchmarking Tool - Ver. 2.0

Number of Family Units

IMPORTANT: Annual entries should correspond to the same time period as the pre-/post-retrofit annual consumptions reported below. Pre- or post-retrofit values must be provided to score your building.

Percent of Gross Floor Area Cooled

Entire Building Gross Floor Area (sqft)

Percent of Gross Floor Area

Heated

Projected Score Against Peers

Projected Annual Energy Consumption

The Greens

Percent of Units with Laundry

Hookups

Pre-Retrofit Post-Retrofit

Pre-Retrofit Post-Retrofit

The NYSERDA Multi-Family Building Energy Use Benchmarking Tool quantifies the projected performance of a user-defined building relative to all HUD 5-plus unit multi-family residential buildings nationwide. A score of 75 denotes performance at the top 25th percentile of 5-plus unit multi-family buildings. A score of 50 denotes performance at the 50th percentile (the mid-point). To use this tool, you will need to calculate your building's annual energy consumption. Provide entries for your building in the "white cells" below. Click on underlined headings for help.

Not Sure?

kWh kWh MMBtu

kWh Gal #2Therms

Therms Gal #2 Gal #2Gal #2kLbs kLbs

kLbs

Benchmarking & Savings ThresholdBenchmarking & Savings Threshold

Benchmarking and Savings Thresholds

Developing Incentive LevelsDeveloping Incentive LevelsIncentives:Incentives:

• Energy Reduction Plan (Incentive #1)

• Construction Incentives (Incentives #2 and #3)– 50% Completion– Substantial Completion

• Energy Performance Incentives (Incentive #4)

• Advanced Measure Incentives (adders) – Advanced Metering Equipment– Combined Heat & Power– Building Operator Training & Certification– Photovoltaic Systems– Owner’s Manual

Plan

Install

Measure

Extra

Developing Incentive LevelsDeveloping Incentive Levels

AFFORDABLE HOUSING*

MARKET-RATE HOUSING*

$5,000 / project $2,500 / project$10,000 / project $5,000 / project

$20 / unit over 100 units $10 / unit over 100 units

$800 / unit $300 / unit

$400 / unit $300 / unit

INCENTIVE #4Initial Benchmark Score Per unit Per unit

<= 25 points 20% $400 $200>=26, but <= 50 points 20% $375 $175>= 51, but <=75 points 20% $350 $150

> 75 points 20% $325 $125$40 $20

INCENTIVE #3

Performance Target

*Total incentives cannot exceed 100% of project cost as listed in final Energy Reduction Plan.For every % exceeding the Performance

Incentive payable at substantial completion of construction, based upon a successful post-construction inspection and performance test(s) (as applicable).

Incentive payable upon submission of a draft Proposed Energy Reduction Plan.

Incentive payable at 50% construction completion, based upon a successful interim inspection.

INCENTIVE #1

Base Incentive (for buildings from 31 to 100 Incremental Incentive

Base Incentive (for small buildings up to 30

INCENTIVE #2

MPP Incentive Structure for Existing BuildingsMPP Incentive Structure for Existing Buildings

Plan

Install

Measure

New ConstructionNew ConstructionMPP Incentive Structure for New ConstructionMPP Incentive Structure for New Construction

AFFORDABLE HOUSING MARKET-RATE HOUSINGPAYMENT #1 $30,000 $20,000

PAYMENT #2 $1.50/ghsf* $1.00/ghsf*

PAYMENT #320-22%... $0.25/ghsf* minus 10% retainage23-25%... $0.35/ghsf* minus 10% retainage

26% and up…$0.50/ghsf* minus 10% retainage

PAYMENT #4Payable upon receipt of the Fuel Release Forms as detailed in the Participation Agreement.

10% retainage held from Payment #3

Payable upon receipt of the signed contract between the Developer and the Partner and receipt of a draft proposed Energy Reduction Plan and evidence that the developer has paid at least 75% of the

design team's fees.

Payable upon approval of the proposed Energy Reduction Plan that indicates achievement of a performance target of at least 20% by the proposed design.

Payable upon approval of the final Energy Reduction Plan confirming a performance target of at least 20%.

For final Performance Targets within the following ranges:

Plan

Install

Measure

Expectations Vs. Reality

NYSERDALEED

for Homes

LEED-NC

NYS DHCRUnified Funding Round

NYSHousing Finance Agency

NYS DHCRWeatherization Assistance Program

NYC HPD

NYCHousing Development Corporation

USGBCEnterprise

Green CommunitiesCriteria

U.S. EPA

New York State DHCR – Unified Funding Round / WAPNYC HPDEnterprise Community PartnersLISCNYS HFANYC HDC

NYSERDA’s Multifamily Performance Program

LEED

Green Communities

EPAENERGYSTAR

ConclusionConclusionKeys for Successful MarketKeys for Successful Market--Based Energy Based Energy

Efficiency ProgramsEfficiency Programs

• Market-based approach– Partners “embed” skills and specialized knowledge– Network of recognized Partners expands reach of Program– Branding, marketing, and advertising key to outreach– Flexible approach to achieving program goals

• Performance-based incentives– Incentives complement cash-flow of project– Based, in part, on achieved savings; not projection

ConclusionConclusionKeys for Successful MarketKeys for Successful Market--Based Energy Based Energy

Efficiency ProgramsEfficiency Programs

• Benchmarking & Performance Target– Reduction target easy to explain and understand– Clear and transparent methodologies (for modeling in new

construction and calculating usage in existing buildings) is critical

• Transition Strategy to Full Market Transformation– Shift “incentive” from handouts to other motivational factors– Adopt evaluation strategies to measure success– Role of government/utilities to connect demand with supply

and to promote advanced measures

ConclusionConclusion

ConclusionConclusion

ConclusionConclusion