Monday 14 April 2014

The retrofit of the Empire State Building (ESB) a few years back deservedly got a lot of publicity and helped put energy efficiency on the agenda for commercial property owners – at least in the US.  Once completed in all tenant spaces savings are projected to be 38%.  The measured savings have exceeded the targets in the first two years.  The savings were 5% higher than the target level in year 1 and 4% higher in year 2.  The ESB is a brilliant case study of what is possible using state-of-the-art retrofit practice and is now widely referred to.  Some commentators, however, seem to miss the real lessons of the ESB project.  Based on my readings of the project and talking directly to some of the participants these are my take-aways.



The ESB project was part of a much larger $500m refurbishment designed to bring the ESB into the 21st century, reduce voids and increase rentals.  This is an important point, the best time to do deep energy retrofits is during a major refurbishment.  Expecting building owners to do them at any other time is simply unrealistic.  Therefore we need to ensure that these opportunities to improve energy (and water) performance are not missed and at that point integrated design techniques are applied.  Policies need to be put in place to ensure that the highest energy performance standards apply to major refurbishments as well as new buildings.  Right now buildings are being refurbished and major opportunities to do deep retrofits are being missed – locking in excessively high energy consumption and costs for at least the next twenty years until the next major refurbishment.


Energy efficiency can improve yields but it is only one factor

The effect of the energy efficiency projects in the ESB means that tenants have electricity bills about half of those in unimproved buildings.  This has a definite effect on the attractiveness of the office space but at the end of the day other features such as location, design, the overall fit with the organisation’s needs and ultimately price are likely to be bigger drivers on a  relocation decision.  The real driver of improved yields at the ESB was that the office space, which had been dated, was brought into line with the needs of 21st century clients.


The need for holistic or integrated design. 

The ESB retrofit is a great case study of how to implement integrated design and the great benefits that come from applying it.  Integrated design gets us away from the argument “efficiency costs more” – in many cases it can cost the same or less when integrated design is applied properly.  Integrated design has been promoted by Eng Lock Lee in Singapore, the Rocky Mountain Institute (RMI) and others for many years now but the uptake remains low – at least in the UK – despite the proven benefits of reduced energy usage and often reduced capex.   We need to promote the use of integrated design and step-up training amongst engineers and architects as well as clients.  Supply of integrated design solutions would be improved if more building owners demanded it.  In the case of the ESB it was lucky that Tony Malkin, the owner, was an informed and determined client.  Original proposals for the refurbishment did not include integrated design and Tony made it very clear that if vendors and contractors wanted to be on the job they had to do it this way or they would be shown the door.  We need more clients who know enough to do this.


The power of leadership and open source information

Tony Malkin is a committed environmentalist but he also insists on a three year payback period on any investment.  The use of integrated design and techniques such as remanufacturing the windows on-site meant that the additional capital required for energy efficiency, (net after all additions and subtractions of $13m on top of an original $93m for energy related work), had a three year payback.  One of the great things about the ESB project is that all the other New York City property owners know that Tony Malkin insists on a three year payback – this gave the project great credibility and helped lead to other owners starting similar projects on their buildings.  Tony also insisted on the project being “open source” and all the contracts and M&V reports are available on-line.   He has also spoken widely about the project.  As a result of this leadership and the work of RMI and the other companies involved there are now many other similar integrated design retrofit projects now being worked on.


The importance of Measurement and Verification (M&V). 

M&V was built into the process right at the beginning and independent M&V professional report on the savings – calculated using techniques under the International Performance Measurement & Verification Protocol (IPMVP).


Look at all the costs.

When looking at energy costs it is important to look at all the costs associated with energy usage.  This includes electricity and fuel costs, capex of energy using equipment, operations & maintenance costs and any other associated costs e.g. energy taxes etc.  Only a full consideration of all the costs can give the building owner (or an external investor) an accurate investment analysis.


EPC does not need to be externally funded

The ESB often comes up in discussions of energy performance contracts (EPC) in the commercial building sector.  The work was undertaken under an EPC but entirely financed by the owner.  It does raise the prospect of an externally financed energy retrofit using the same kind of techniques.  Integrating external financing into the financing needed for the building itself or a major refurbishment can be challenging but is certainly possible.  By adopting more integrated design techniques EPC contractors can differentiate themselves and make externally financed solutions more attractive than they often are now.


So to sum up, the lessons of the ESB for building owners are:

  •  use the opportunity of major refurbishments to implement deep energy retrofits and don’t just accept “business as usual” solutions
  • use integrated design – it can reduce capex as well as energy costs
  • count all the costs including energy, maintenance and capex in evaluating alternatives
  • use independent M&V to prove results and manage contractors.

For policy makers:

  • work with the design professions and building owners to improve capacity in integrated design – both on the supply and demand sides
  • enact policies (building regulations) to ensure that the opportunities for deep retrofits presented by major refurbishments are not missed.
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Dr Steven Fawkes

Welcome to my blog on energy efficiency and energy efficiency financing. The first question people ask is why my blog is called 'only eleven percent' - the answer is here. I look forward to engaging with you!

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