New Tricks for Old Buildings

OP INSITUTIONALBy Matt Worth

Schools, libraries and museums house the best and brightest of our society. However, the buildings that contain these institutions could afford to be quite a bit smarter.

The commercial building infrastructure in America is aging, with as many as 72 percent of U.S. buildings being more than 20 years old. Although the idea of "smart buildings" is gaining traction, out-of-date HVAC and building controls equipment are still the norm. Now is the time for an HVAC/controls retrofit.

What is a Smart Building?

Phrases like "smart grid" and "smart lighting" are becoming commonplace. To be "smart" in this context, commercial building equipment must incorporate advanced technologies that automatically receive and respond to instructions, according to programmed or learned conditions. This equipment can include HVAC, lighting, air quality, security and more.

As consumers, we want lighting that adjusts to the amount of daylight. We want thermostats and fans that respond automatically to changes in temperature. Smart control equals comfort, and comfortable tenants keep buildings occupied.

You, the building owner, want occupied buildings to keep real estate assets profitable. Good control of HVAC systems is also one of the best ways to manage utility costs. By turning down or off major energy-consuming systems when not needed, you can participate in load shifting, demand response and time of use programs for additional cost savings.

Managing Cost and Complexity

Smart HVAC/controls projects are often more expensive and more complicated than lighting fixture upgrades or like-for-like equipment replacements. You can manage cost and complexity by determining whether you need new hardware, software or both.

If your building uses modern devices with modulating capabilities and digital controls, you likely won't need to buy any new equipment. You can layer advanced control strategies on top of these technologies at a relatively low cost and reap the benefits of energy savings, tenant comfort and improved productivity.

However, if your energy systems are outdated, you will need to buy new equipment. You can still manage cost and complexity in this scenario by deciding whether to buy or finance.

Let's review two options:

* Cash Purchase: Your first option is to pay for the equipment and upgrades in full at the time of their installation. The advantage of purchasing your equipment is just like when you pay cash for a car the car is yours, and you dont owe any interest or fees to the bank. The disadvantage of purchasing is that you won't have that cash for strategic investment or a rainy day.

With an outright cash purchase, you will make a large capital investment in year one. Energy savings and incentives will offset part of this cost, but most savings will occur in the years that follow, over the life-cycle of the equipment. Purchasing equipment outright is a great option if you have the cash on-hand. If not, consider financing with an equipment loan or lease.

* Equipment Financing: Your second option is to finance the equipment and pay for the upgrades over time. "Equipment financing" has become the industry catch-all term for equipment loans and leases. The two most commonly used forms of equipment financing for HVAC/controls are bank loans and capital leases. With capital leases, you can replace or upgrade your HVAC/controls with no cash out of pocket. Your monthly payments in many cases will be less than your anticipated energy savings, making the project cash flow positive from month one.

Consider a situation, for instance, where a chiller breaks in the middle of the summer in a large-scale apartment building. This will quickly result in a chaotic situation for you and a frustrating predicament for tenants if the issue is not remedied swiftly. The repairman recommends a new, high efficiency unit but the pricey replacement will place strain on your cash flow. In this case, equipment financing is the smart choice to fix a costly and unexpected issue without breaking the bank.

Smart buildings are the future. Advanced HVAC/controls systems generate energy savings, fuel tenant comfort and spur economic growth for you, the building owner. Although upgrading to "smart" equipment can be an expensive and complex process, there are simple ways for you to manage cost and complexity to get the equipment you need. Cash purchase is one option. Equipment financing is another, and making financing accessible for the commercial building industry is vital not just for our infrastructure, but for those who live and work within it.

Matt Worth is vice president and general manager of Noesis, a LeaseQ company. He has 20 years of experience in professional services leadership and has worked in Software as a Service (SaaS) since 2001. 

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