Saturday, 2 January 2016

Chasing energy savings in commercial buildings - real life success stories

It is usually difficult to roll out energy efficiency upgrades in rented accommodation because of the split incentive – the tenants pay the bills and would benefit from efficiency except they aren’t usually there for long enough while the landlord gets no benefit unless you count an increase in value – but that is highly uncertain. In a perfect market there ought to be an increase in rental value from an improvement in energy efficiency, but in real life there are many factors involved in setting rental value and energy efficiency is not high up on the list.

The problem is bad enough in residential tenancies but in commercial ones it is even worse, because there are many tenants in a building, rental agreements are more complicated and lawyers tend to get involved too. None the less there are cases where landlords have achieved energy savings, or at least they say they have. So early in 2015 I teamed up with my friend Ray Galvin to find out how they do it.

This research is published in Energy Research and Social Science (Ray Galvin, Nicola Terry (2016) Selling energy savings in the United Kingdom: A case study of top–down pro-environmental behaviour change in commercial office buildings) but I don’t recommend you try to read that unless you are fluent in the language of academics. Here is an accessible version for my blog readers. It’s a bit longer than usual but I think you will find it entertaining enough.

The context – two prestige commercial office buildings in London
I can’t say exactly where they were because the research is anonymous but we found a number of cases on the internet where landlords of large, high prestige buildings in London claimed to have achieved big savings in energy use. In two cases the building managers (BMs) agreed for us to interview them to find out how it was done – and we also spoke to one tenant representative and an engineer. We asked them for their story. (We also asked for data to check that they really had made the savings claimed – so we know their strategies were genuinely successful).

The landlords were driving the process – but the tenants had to pay for it and the managers had to make it happen.
The pressure came from the landlords, large corporations with international estate portfolios. We were told they wanted to protect their reputation rather than to make more money. This fits with our understanding of the market, because there is little firm evidence that energy efficiency adds capital value. Whatever their reasons they told their BMs to make it happen - but they didn’t want to spend any money on it. Any financial investment would have to come from the tenants via their service charges, but increasing the charge needs agreement from the tenants so they would have to be persuaded first.

… in every single pitch document, in every single request or proposal they are asking "What are the sustainability credentials in your organisation? What do you do in similar buildings? How are you improving the performance of these building?"

To make sure the BMs delivered they were given targets – for example a certain level of energy savings in 5 years – and informed that meeting these would be an important part of their performance appraisal.

We have got this sustainability criterion instilled in appraisals, so there is something nagging away, saying, you will be appraised on your performance of managing the building

How to sell energy efficiency to your tenants – first identify your product and your target customer.
Effectively they were doing a sales job. First they had to identify a ‘product’ that could deliver energy savings. This could be new equipment such as more efficient lighting, or a change to the service schedules to reduce energy use out of hours, or it could be some new monitoring equipment that could help to identify where savings could be made. Some of these ‘products’ are easier to sell than others.

If the facilities manager isn’t enthusiastic try to find someone else who is.
Secondly they had to target the right person to sell it to. This person has to have the authority to buy or deliver the change, but also it helps if they are interested in the product. Most tenants have a facilities manager (FM) who normally deals with this stuff – but they aren’t always very interested. We noticed that where the FM was hard to enthuse the BM would look around for someone else - another employee with a keen interest in sustainability who they could encourage to nudge their managers on the subject.

Developing customer relations – ways to build trust
Building managers and FMs already talk to each other and should have some level of trust but when it comes to spending extra money this is more important than ever. We noticed several techniques deployed.

  • Introduce changes gradually.
  • Demonstrate and run pilots.
  • Collaborate.
  • Get a savings guarantee.

Making changes gradually – the saga of the override button
One of the cheapest changes to make, generally, is to cut down the hours of building services such as air conditioning. But in one particular building there was an override button that could be used to turn on the services out of normal hours. Pressing the button activated services for 4 hours. Not surprisingly this was used overnight by cleaning staff and security staff who liked to be warm – but it is ridiculously expensive to run the whole building all night for half a dozen people and they weren’t supposed to do it.

The BMs showed the tenants the problem, as evidenced by monitoring data, and to start with they suggested just a small change, to reduce the override time to 2 hours. That didn’t work so they turned it down to 1 hour but of course it still didn’t work - only whoever was pressing the button had to do it more often. So eventually they got agreement from the tenants to take the button away completely. Now, to get out of hours services the tenants have to put in a request in advance that is suitably authorised. This has made a big difference to the energy consumption.

Collaboration and pilots – the saga of the disappointing variable speed drives.
Another way that the BMs built trust was by running pilots or demonstrating the systems on their own facilities first. Also they collaborated with the tenants where possible. For example, in one case, a pilot installation of variable speed drives in air handling equipment was very successful but when they rolled out the same equipment on other floors the savings were negligible. The only way this could happen was if the A/C was running flat out all the time. So the BMs consulted with the tenants and they did a walk through audit together. It turned out the A/C was cooling vigorously all the time – so much so that some of the staff in desperation from the cold ran electric heaters under their desks. This of course generated more heat that the A/C systems had to remove – so it was not surprising they were working full blast. All that was needed was to adjust the thermostat settings so the staff were warm enough and they could take away the heaters –and then the expected savings appeared.

Guaranteed savings helped to sell monitoring equipment
The most difficult sell is often the monitoring equipment, because the monitors by themselves don’t actually make any savings. From past experience you can be pretty sure that they will allow you to identify savings opportunities but you can’t be absolutely certain in advance in any particular case. However, one of the BMs managed to get a deal from a monitoring supply company whereby equipment was paid for over 3 years and over that time the savings were guaranteed to cover the extra cost. This deal was so successful they repeated it for other buildings in the portfolio – but even with a savings guarantee there was one block where the tenants would not agree.

It isn’t irrational for a company to choose not to implement energy savings even when there is a reasonable payback – they might have other opportunities to spend the money on that are even more profitable. (see Why companies don’t have to implement Energy Saving Opportunities)

The importance of good communications and tailoring the message to the audience - how to justify low flow shower heads
People who work in a building get to know it very well and notice even small changes so it is essential to warn the tenants (usually via the FM) in advance and explain the reason for the change. Also you have to tailor the message to the audience.

For example, in one of the buildings there was a big increase in gym membership, and hence more hot water used in the showers, so the BMs decided to trial low flow shower heads. They justified this to the tenants’ finance people on cost savings but the gym users would not take kindly to the idea of exchanging the luxury of a tropical storm-type shower for a ‘miserable’ low flow shower just to save a few pence. They might think they are worth more than that (and of course they would be right). For the users, the message had to be about benefits for the planet - the water savings and CO2 emissions avoided.

The grumbling manger – are we second class citizens now?
The key is that you have to be careful to tailor the message in such a way that people feel good about doing the planet a favour and don’t think they might be losing status or benefits. In another case the change was to improve recycling rates by installing rubbish collection points with multiple bins so the different kinds of recyclable and other rubbish could be segregated. This meant staff couldn’t have bins under their desks any more – they would have to walk a few meters to the nearest collection point. The sustainability benefit was from less material going to landfill, and the financial benefit was from less landfill tax. Maybe there are health benefits too, from the extra exercise getting up and walking to the bins ☺. However there were grumbles from one manager who complained ‘Are we second class citizens now’ because he couldn’t keep his personal bin.

When and how to deploy a charm offensive.
We were very impressed by a contract lighting engineer who was also a very talented salesman. Managers don’t like to make changes if they think their staff are likely to complain, but this chap had a sure-fire tactic he didn’t mind sharing with us. He would ask the manager who among the staff was mostly likely to make a fuss, and then he would make a special project of that person – making absolutely sure they felt they were being listened to and all their concerns were answered. (Having listened to him we could well believe this was very effective because we found him utterly charming.) Then having won that person round the rest were generally easy and the manager didn’t have to worry about complaints.

Ellen, let’s call her, I will ask Ellen what her concerns are about the lighting, about the changes. Normally, I would target the most objectionable person in the room, because normally, once they’re won over, everybody else normally will follow suit.

Keeping up the momentum: green groups and awards.
Our BMs had targets to meet and to do that they had to keep nibbling away at the problem from all angles. In one case the pressure was on to keep and maintain ISO 14001 certification for the building. This means every year the targets are set a little tighter and to meet them requires new ideas and follow-through. But the BMs can’t achieve much alone so they have to keep the tenants interested too.

One of the buildings had a quarterly green group meeting where at least the enthusiastic tenants would meet and exchange ideas, successes etc. The other building used an award scheme to reward tenants who had made savings and to showcase successful projects.

In all the buildings energy saving was a key part of the regular maintenance plan. All scheduled equipment replacements were treated as opportunities for efficiency improvements and whenever these plans were discussed with the tenants the sustainability advantages could be highlighted, as well as the business case from cost savings.

Roles have changed – new skills are required – it's all about relationships.
What all this means is that the role of the building engineers and managers has changed and new skills are required. It isn’t enough any more to just be reactive, solving problems as and when they arise and hiding in the plant room the rest of the time.

To deliver energy savings engineers have to be proactive: they have to look at the monitoring data and identify problems or saving opportunities. They have to go out and meet with the tenants and work with them – for example to find out why the A/C was on full blast all the time, or to determine if the out of hours services were really needed or not.

The engineer’s no longer some bloke in an overall that scuttles around the back corridor bashin’ an ‘ammer an rattlin’ a spanner. He’s now a front facing, suit and jacket wearing member of the property management team.

Building managers have to use sales techniques to ‘sell’ sustainability measures to their tenants. They have to organise green groups for the tenants to share ideas and make sure that sustainability opportunities are aired at regular meetings. When the tenant FM is not enthusiastic they have to find someone else they can use to keep the pressure on. Even when the FM is enthusiastic they sometimes need help in making a business case to their management for the necessary investment. They have to think carefully about how to communicate sustainability measures – with at least two versions, one for the finance people and one for the staff.

The people we spoke to clearly relish these new challenges, and we came away from our interviews delighted and with new optimism about what can and is being achieved. However, our interviewees were recruited specifically with these roles in mind and the whole process was driven by the landlords’ demands. It takes powerful people to set ambitious (but feasible) targets and make sure that their staff have the incentive to meet them. It only happens if someone makes it happen.

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