The first step is to conduct an energy audit of the building to identify potential energy efficiency upgrades that could be implemented. A professional energy auditor will inspect the building to evaluate areas where energy is being wasted through inefficiencies. They will examine the building envelope (walls, windows, roof), lighting systems, HVAC equipment, appliances/plug loads, and industrial processes (if applicable).
The energy auditor will document the existing equipment, materials, and operations and note where upgrades could result in energy and cost savings. Common areas of focus include improving insulation, upgrading to higher efficiency heating and cooling systems, installing programmable thermostats, switching to LED lighting, improving building automation controls, installing variable speed drives on motors, and upgrading refrigeration equipment. The energy audit report will present recommended energy conservation measures (ECMs) that are technically feasible for the building.
Once potential ECMs have been identified, the next step is to research the costs and potential savings associated with each measure. Obtain quotes from contractors to understand capital costs for purchasing and installing new equipment. Be sure to account for soft costs like design fees, permitting, and commissioning. The energy auditor or contractors should provide estimated annual energy savings in units (kWh, therm, etc.) for each ECM based on building usage patterns and efficiency improvements.
To calculate potential cost savings, the annual energy cost savings must be determined for each ECM. Take the estimated annual energy savings and multiply by the current energy rates paid for that utility. Be sure to use the most recent 12 months of energy bills to establish an accurate baseline for current consumption and costs. Sometimes an ECM may reduce demand charges as well, so accounting for any demand-based cost reductions is important.
Calculate simple paybacks by dividing the installed project cost for each ECM by its annual energy cost savings. Compare simple paybacks to average equipment/material life spans to evaluate if savings will cover costs over the effective life of the improvements. ECMs with paybacks less than 5-7 years are generally good candidates for implementing from a financial perspective.
In addition to paybacks, the expected useful life and expected maintenance costs of new and replaced equipment should be considered. Switching to longer-lasting, more durable products may lower life-cycle costs even if initial paybacks are longer. Potential incentives or tax credits for improving efficiency must also be accounted for as these can significantly reduce upfront project costs and improve overall economics.
To evaluate the total potential benefits, the annual energy cost savings from implementing all recommended ECMs should be summed. This will provide the estimated total amount that could be saved each year by making all of the upgrades. Calculate cumulative savings over time by multiplying annual savings by the analysis period, usually 10-20 years based on average equipment/component lives. Also consider non-energy benefits like improved comfort, air quality, operational savings from optimized controls, reduced maintenance needs, or increased property value.
Performing a detailed energy audit and thorough economic analysis of potential cost savings from efficiency upgrades provides building owners the information needed to prioritize projects, optimize investment decisions, and accurately forecast returns on investment from implementing energy conservation measures. With the growing incentives and shortening paybacks available, comprehensive energy efficiency projects can deliver significant cost reductions while also reducing environmental impact.
Carefully researching and quantifying potential energy and cost savings is key to properly evaluating a building’s efficiency improvement opportunities. A full energy audit followed by thorough analysis of costs, savings, incentives, and financial metrics like payback and return on investment allows owners to make well-informed decisions about optimizing their building’s performance through strategic energy efficiency upgrades. With accurate savings estimates, projects can deliver verified financial and operational benefits year after year.