Building Management Hawaii June/July 2013 - (Page 12)

Solar & More Beyond PV … The Power Of The Negawatt Using negawatts to boost PV financial returns. By Miles Kubo I n the past few years, the explosive growth of solar energy installations in Hawaii has been phenomenal. Our conditions are more than ideal—abundant sunshine, moderate temperatures, high utility rates, rising fuel costs, sizable tax credits, accelerated depreciation, declining panel prices, low interest rates, abundant finance capital and the state’s clean-energy initiative. Businesses and residents who invested in photovoltaic (PV) systems have insulated themselves against future increases in electricity rates and will earn a good return-oninvestment. It doesn’t get much better than that! Or, does it? Well, yes, it does … in fact, it gets much better. To get the most out of energy investments, it is important to think beyond PV power, and to invest in negawatt power (aka “negative megawatt”). A negawatt represents the watt that is never used. It is a measure of the electricity saved by increasing efficiency or reducing consumption as a business practice. For example, replacing a 60-watt incandescent light bulb with a 10-watt LED lamp that provides the same light output will eliminate 50 wasted watts per hour. Over a year, the elimination of wasted energy from just one light bulb will result in savings of about 440 kilowatt hours, worth about $150 in Hawaii. On a grander scale, replacing energy-intensive airconditioning equipment can result in the elimination of millions of wasted kilowatts, saving hundreds of thousands of dollars. The critical question is, “Does it cost more to invest in energyefficiency products to generate negawatts or to invest in PV power to generate new megawatts?” In other words, which energy investment provides the better economic return? If you chose the negawatt, then you’re right. Generally, the financial returns on energy-efficiency 12 June - July 2013 BMH projects are noticeably better than PV investment returns. While a PV project in Hawaii might yield a 15 percent to 30 percent internal-rateof-return (IRR), a lighting-efficiency project can provide significantly higher IRRs of 50 percent to 75 percent, or more. Why then is everyone rushing to PV? One reason is that negawatts are invisible and difficult to objectify. It is hard to “see” what one is getting, except perhaps in the monthly utility bill. On the other hand, PV systems are viewed by some as “sexy” and the new status symbol. Fortunately, it is not an “either-or” decision. In fact, the best thing to do is a combination of both—to reduce, then produce. This practice will yield the highest return for energy investments. After all, what good is it to generate new electricity from the sun, if it is simply wasted on lighting up a 60-watt incandescent light bulb when a 10-watt LED will do the job? Case Study: Hosoi Garden Mortuary To illustrate the point, the Hosoi Garden Mortuary in Honolulu recently renovated its building and invested in a PV array and lighting efficiency. Both will protect the business against future unexpected utility price surges—a savvy strategy. The company installed a SunPower PV system—one of the most powerful panels available— that generates approximately 150,000 kilowatt hours (kWh) of electricity each year. The system cost approximately $550,000. With investment tax credits and depreciation benefits, the estimated PV investment return over 20 years is 27 percent. In addition, the company invested approximately $32,000 in a lighting upgrade that saves about 60,000 kilowatt hours (kWh) of electricity each year. Receiving energy- efficiency rebates from Hawaii Energy, the estimated investment return over 10 years is 63 percent. The lighting project, while only a small fraction of the total cost of the PV project (6 percent), will generate about 40 percent as much of annual kWh savings as the PV system. When combined as a hybrid-energy project, the overall return-on-investment will increase to 32 percent. This is the power of the negawatt. In some instances, the reductions in energy consumption have resulted in the ability to install a smaller PV array, saving money on the cost of the PV system. The importance of a hybrid project is that the cash flow from energy savings will help support repayment of debt for the PV system. In essence, the payments needed for the project can come entirely from the cash flow from the project. How great is that? Imagine being able to implement energy and capital improvement projects and not have to dip into your pocket to pay for them. Some PV financiers have learned that efficiency projects will enhance value and are now including conservation measures in power purchase agreements (PPA) to boost returns. This helps the consumer by simplifying the way they pay for energy conservation measures and renewable energy. When considering renewable PV power, remember that a good project can become a great project by including negawatt power. Miles Kubo is executive vice president and COO of Energy Industries LLC, a Hawaii energy services company that specializes in energy cost reduction and renewable energy for the commercial building market. He holds an MBA in finance from The Wharton School of the University of Pennsylvania.

Table of Contents for the Digital Edition of Building Management Hawaii June/July 2013

Special Section: BIA Renaissance Awards
Solar & More - Made In The Shade
Solar Options For Condos
Beyond PV…The Power Of The Negawatts
Solar On The Highrise
On The Farm With PV
The Reality Of Exploring Solar
Steep-Slope Solar
Concrete & Asphalt - Fresh Surfaces for Work & Play
Pavement Maintenance 101
Asphalt Alternatives
Rocky Road
Pavement Preservation
Painting Top 5 Painting Tips
Painting & Exterior Finishes
Lead & Rules
On Site: Renting Delinquent Units

Building Management Hawaii June/July 2013