Articles
Client articlers 2008
USE A HELPING HAND TO CUT THE CARBON FOOTPRINT By Gary Perry, Divisional Managing Director – Corporate Services, Norland Managed Services. Published in Building Services and Environmental Engineer magazine in June 2008The world is a very different place than 100 years ago, and will be different again in another 100 years. A key change will be climate. Without getting into the debate on the extent of climate change, increasing numbers of organisations realise that they have responsibility for minimising the impact their activities are having on the environment. This is not philanthropy, this is common sense: why should organisations generate a profit at the expense of future generations?
Many organisations today outsource all but their core activities, so when the call comes down from the board room to reduce the carbon footprint of the organisation, they have to turn to the external specialist facilities management company to deliver. There are many ways that an organisation can reduce its carbon footprint in terms of buildings and facilities – they fall into three broad categories: engineering and maintenance, energy supply, and investment.
Engineering and maintenance is broadly optimising what is already being used. Ensuring all plant and equipment is properly maintained is an obvious step to make sure it is operating as efficiently as possible. Some FM companies will employ energy managers who will be able to take this process further by assessing energy usage across all buildings, plant and equipment, identifying areas of energy wastage and ways of making savings.
Energy supply links demand side energy efficiency improvements to supply side measures, resulting in a combined carbon reduction. Many organisations simply buy their utilities on standard tariffs and pay the bills when they arrive. They may not realise that they are paying far too much because of an inappropriate tariff, or paying bills that are incorrect, or that carbon savings could be made by switching tariff.
Procurement of utility services is becoming an ever more time consuming and complex task, especially so with sustainable/renewable fuels. Selecting the right tariff is a function most FM companies undertake: injecting experience of this type of procurement, with the ability to properly evaluate each tariff and offer, will allow the most appropriate tariff to be selected. Typical savings from this process could range from five to 40 per cent.
Another step would be to introduce additional systems for data collation and recording, enabling verification of the utility bills against actual consumption. This will immediately identify deviations from what would be expected, such as water leaks and excessive consumption, which would otherwise go unnoticed for long periods. Typical savings here could be between five to ten per cent.
This comprehensive data collection will also highlight areas of potential saving, with subsequent steps to improve the control of plant and processes. This is not switching it off, but perhaps optimising the usage. Other steps would include raising energy awareness within the organisation through training and campaigns – broadly good housekeeping. This kind of monitoring and targeting could save between four and 18 per cent.
Energy and carbon reduction investment runs on from the two previous groups and involves identifying projects that could improve efficiency, energy usage, carbon emissions, or a combination of these. Projects could include installing combined heat and power units or other cogeneration or tri-generation equipment, use of sustainable fuels, or simply replacing old or inefficient plant with the latest state of the art energy efficient plant.
Following the theme of outsourcing, organisations are choosing to secure these energy and carbon reduction investments through contract energy management agreements (CEM). A CEM agreement involves the installation and finance of improvements to plant and equipment that will reduce the client’s utility costs, and possibly other costs such as maintenance, water treatment and labour, as well as achieving efficiency and carbon improvements. There are several different types of CEM:
• Guaranteed savings
• Guaranteed and shared savings
• Shared savings
• Thermal charge
A guaranteed savings agreement, which is typically for five years, involves determining baseline consumption and emissions, based upon the last three years, and then entering into agreement to guarantee consumption and emissions savings. Savings depend very much upon individual circumstances: the potential for inherent savings (efficiency and usage), the required investment to achieve further savings and the contract term, but clients can typically expect between five to 10 per cent. This type of agreement is on a closed book basis as the costs will need to be reduced by such an amount that there is a margin after the company has paid the reduced utility bills, paid off the expenditure on the new plant and for the expenses of the contract.
A guaranteed and shared savings agreement is similar to a guaranteed savings agreement except it is on an open book basis. Savings in excess of the agreed target will be shared with the client via a negotiated split, eg 60:40.
A shared savings agreement is similar to the first two except all of the savings will be shared with the client on an agreed split. Under this agreement the split will be less favourable to the client than above as the CEM company has to recover its investment it has made in order to achieve those savings.
A thermal charge agreement involves the CEM company offering the client a fixed unit rate for energy, typically for a ten year term. This will often involve a saving of between five to 10 per cent on existing costs, although the plant and equipment alterations will remain the property of the CEM company at the end of the contract, but the client can usually purchase the ‘new’ plant and equipment.
Taking the holistic approach to buildings and facilities management, combining the demand side energy efficiency with supply side savings, and then investing through CEM, will enable organisations to not only reduce costs, but also address the responsibility they have for minimising the impact their operations have on the environment.
