A Word on Energy Audits

By Fred Fastiggi, CEM
Senior Vice President - Energy Services
Birdsall Services Group

Energy Audits are becoming more commonplace as the price and volatility of the various forms of energy (fuels and electricity) used in a building continue to rise. This upward trend, coupled with the proliferation of programs, grants and incentives offered by various governmental agencies or other sources, have greatly increased both the need for energy audit services and the number and types of consulting and audit firms chasing this work. If you ask one hundred people for the definition of an energy audit, you will get one hundred answers. The American Society of Heating, Refrigeration and Air-Conditioning Engineers (ASHRAE) has been at the forefront of providing a baseline and standard for defining energy audits. The energy user who seeks the efficient supply, demand and conversion of energy should understand the various types of energy audits and should know how to look for the differences in work scope and pricing that can make the difference between a successful and unsuccessful energy audit.

ENERGY AUDIT TYPES

A Level I audit is also known as a “one-day” or “walk-through” audit and involves an analysis of energy bills and a brief survey of buildings to produce a rough estimate of how efficiently energy is used in the building. This level of effort will detect some “low hanging fruit” and may suggest other options worthy of more study, but should not be viewed as comprehensive. They are merely geared toward pointing you in the right direction.

A Level II audit invests more effort in the building survey and energy analysis and often includes some level of performance testing or benchmarking versus similar buildings. This level audit provides a breakdown of how energy is used in the building as well as a broader range of savings options, including simple capital budgeting analysis with payback calculations. It may address the “people factor” and its’ effect on the uncertainty of savings. It may explore maintenance procedures and assesses any impacts energy conservation measures may have on savings. The current New Jersey Board of Public Utilities Local Government Energy Audit program is largely based on a Level II audit specification.

A Level III audit, also known as an “Investment Grade Audit,” digs into the details on large capital projects that may have been discovered as part of a Level I or Level II audit, or are the result of a specifically commissioned Level III audit. More detail is gathered from field equipment inventories, extensive test measurements and interviews with operating and maintenance personnel. Sometimes utility data is logged over a period of time. Always, a sophisticated energy model is developed based on the physical audit of the building. Once this model is developed, the projected energy use and demand is compared to actual bills, and if there is a significant difference (>10%) the model is “calibrated” or adjusted until it produces energy projections which are within some elected level of accuracy (often 5-10% of the actual building usage). At times the client may want an even greater level of accuracy in the model, and in these instances, the recurring “calibration” effort can be costly and time consuming. Once an acceptable level of accuracy in the model is achieved, possible reasons for variation are highlighted, the capital requirements of proposed energy conservation measures are estimated (with a higher level of confidence), and the investment decision can be made with a significantly reduced amount of risk.

MARKET FOR AUDIT SERVICES

Needless to say, a client contemplating ESCO financing or any of the Performance based Incentive Programs like the NJ BPU’s Pay for Performance Program, should be sure to hire someone to perform its’ appropriate level of energy audit who understands the audit process. While the definition of the various levels of audit seem relatively straight forward, every company has a different idea of what an energy audit is, and the client would be well advised to make a clear distinction between what is being offered by the various vendors or consultants.

With the slowdown in the national and regional economies, companies who are slow in their core businesses are looking for ways to make money and are increasing turning to the energy auditing business. Energy consulting/auditing companies are doing well today despite the economy. This is the result of several factors: 1) With the focus on cost cutting, companies or government entities are realizing that energy costs don’t have to be a fixed cost but are actually a cost that can be reduced by 10-30% or more with a little analysis and planning, and; 2) With the availability of ARRA funds and/or state or utility funded programs, companies who are not in the energy consulting business see a prime target area for keeping staffs busy by energy auditing.

It is often we see architects, real estate management companies, real estate brokers, electrical and mechanical contractors and equipment vendors all trying to sell and perform energy audits. Giant engineering companies have also entered the market to offset the slowdown in their primary markets.

For potential buyers of audit services, there is a good and bad news from this rush into the market by new potential suppliers. With more competition, prices go down, but with decreased costs, the quality of work being done by unqualified suppliers can go down as well. Companies that are new to auditing often don’t have experienced auditors and produce poor quality audits. Often, contractors, real estate companies and giant engineering firms don’t even do the audit themselves, but contract the vast majority, or all of their work, out to others. They just take a cut off the top.

Sometimes equipment vendors or contractors offer audits at a deep discount, or even for free. They do this because their primary objective is to sell equipment and installation services and the audit serves as a loss leader to secure the more lucrative equipment sale or installation contract. Invariably these audits lack the depth of analysis and completeness to get the best solutions for the customer. The recommendations from these audits end up being the equipment (controls, automation, software, chillers, etc.), installation services, or projects requiring detailed engineering services, that the provider of the audit wants to sell.

The level of variation, and occasion for conflicts of interest, is even greater for a Level III audit because there are so many more elements of the job that need to be addressed (with varying levels of diligence and expertise). As a rule of thumb, experienced field auditor should be billed out at a rate of at least $100 per hour with specialists in various technical areas, project management or upper management at rates much higher than that. For a rough comparison on effort, if you take the price of labor the audit firm is giving you, and divide by $100, you will have a rough idea of how many hours are being spent on your audit job.

Want to learn more about energy audits? Feel free to contact Fred at 732-751-9592, ext. 6503, or email him at ffastiggi@birdsall.com.