Contenu connexe Similaire à Getting Your Moneys Worth Out of Energy Efficiency (20) Getting Your Moneys Worth Out of Energy Efficiency1. Getting Your Money’s Worth Out
of Energy Efficiency
September 30, 2013
12:00 – 1:30 PM ET
www.TnEnergy.org
2. Agenda:
12:00-12:05 Welcome & Introductions
12:05-12:25 Monetizing Energy Solutions: The Road to Funding
Christopher Russell, ACEEE & Energy Pathfinder
Management Consulting
12:25-12:50 The Tax Incentive Environment for Energy Efficiency
CJ Alberin, KBKG
12:50-1:00 Q&A and Adjourn
5. About Christopher Russell, C.E.M., C.R.M.
Principal, Energy Pathfinder
Visiting Fellow, American Council for
an Energy Efficient Economy, 2012+
Energy Manager,
Howard County, MD, 2010-2012
Director of Industrial Programs,
Alliance to Save Energy, 1999-2006
MBA, M.A., University of MD;
B.A., McGill University
5©2013 Energy PathFINDER.com
About Christopher Russell
6. TAKE-AWAYS FOR TODAY:
6©2013 Energy PathFINDER.com
•Connect the dots between
energy solutions and business
performance
•Monetize energy solutions
•What’s in it for YOU?
…your business, your career?
7. Facility
Manager?
To Whom Does Energy Provide Value?
Project
Engineer?
Machine
Operator?
Corporate
Officer?
Each has a different definition of VALUE.
7©2013 Energy PathFINDER .com
8. Energy is a Small Portion of Costs?
YES, relative to the annual budget.
8
NO
Relative to total
cost of asset
ownership
Capital
(2%)
Energy
(97%)
Maintenance
(1%)
TOTAL COST OF OWNERSHIP
©2013 Energy PathFINDER .com
9. Energy is a Small Portion of Costs?
9
TODAY’S
2-YEAR
PAYBACK
“PROJECT”
ENERGY
CONSUMPTION
& LIABILITIES
FOR YEARS OR
DECADES TO
COME
©2013 Energy PathFINDER .com
10. Energy + Business:
A FORCED MARRIAGE
No ENERGY means…
No PRODUCTION…
and no REVENUE.
End of story.
10©2013 Energy PathFINDER.com
13. FACILITIES: A COST TO MINIMIZE…
…OR A CASH FLOW ATM MACHINE?
13©2013 Energy PathFINDER.com
14. ENERGY IS ALWAYS IN MOTION.
Energy that doesn’t create wealth destroys it.
WEALTH
DESTROYED
HEAT, FRICTION, &
CHEMICAL REACTIONS
DESTROY PLANT & EQUIPMENT,
CREATE LIABILITIES
WEALTH
CREATED
TRANSFORMATION
OF INPUTS INTO
FINAL PRODUCTS
HEAT,
PRESSURE,
& MOTIVE
POWER
FUGITIVE ENERGY
COMMITTED ENERGY
FUEL &
ELECTRICITY
14©2013 Energy PathFINDER.com
15. (c)2009 Energy Pathfinder Mangement
Consulting, LLC
www.energypathfinder.com
15
MONEYMONEY
FUEL &
ELECTRICITY
HEAT, PRESSURE
& MOTIVE POWER
PRODUCTS
TO SELL
WE TRACK MONEY.
WHY NOT ENERGY?
15
©2013 Energy PathFINDER.com
17. A BUSINESS FACILITY
IS A MICRO ECONOMY
FACILITY
(opportunity)
WEALTH
INPUTS
WEALTH
CREATED
EXPENSES,
INTEREST,
OR
INFLATION
Who will get superior returns from your facility assets?
YOUR BUSINESS or the UTILITY COMPANY?
17©2013 Energy PathFINDER.com
18. PURSUING ECONOMIC OPPORTUNITY
1. Benchmark current capital performance
2. Perceive opportunities for superior performance
3. Estimate investment risk/return
4. Reinvest capital
5. Continuous improvement. See Step 1.
For the ECONOMY…
For the FACILITY…
DYNAMICS ARE THE SAME
18©2013 Energy PathFINDER.com
19. BAD ECONOMY?
You can delay investment decisions…
But your CAPITAL is still in motion.
You still need to actively decide its
velocity and destination.
20. FREE CASH FLOW?
RATE OF RETURN?
COST OF
DOING NOTHING?
20©2013 Energy PathFINDER .com
What do executives need to know?
21. Think INVESTMENT, Not PROJECT
• PROJECTS:
– Cost money
– Take up time
– Distract from operating goals & procedures
• INVESTMENTS:
– Produce a cash flow
– Earn a rate of return
– Grow the business, create wealth
21©2013 Energy PathFINDER.com
23. EXAMPLE: You want
a 2-YR Payback
23
ENERGY IMPROVEMENT COST: $1,000,000
ANNUAL ENERGY SAVINGS: $250,000
AMT FINANCED: $500,000/8%/25YRS
MARGINAL INCOME TAX: 35%
ECONOMIC LIFE: 25 YRS
SIMPLE PAYBACK: 4 YRS pre tax
8 YRS post tax
©2013 Energy PathFINDER.com
25. 0% -
20% -
25
ENERGY PROPOSAL IRR = 12% POST-TAX & FINANCE
ENERGY PROPOSAL IRR = 25% PRE-TAX
MUTUAL FUNDS = 3%
COST TO BORROW = 4%
CURRENT RoR ON INVESTED CAPITAL = 8%
IRR = -12.6% REJECT PROJECT, NEGATIVE CASH FLOW
10% -
TWO-YEAR PAYBACK = 50%
©2013 Energy PathFINDER.com
30% -
40% -
-10% -
50% -
Ex: 8-YR PAYBACK POST-TAX
Cost: $1 million
Savings: $250,000/YR
25-YR Economic Life
50% -
26. You cannot “walk away” from an energy
efficiency investment
26
Purchased Energy
COMMITTED
ENERGY VOLUME
ANNUALENERGY
CONSUMPTION
CURRENT ALTERNATIVE
ENERGY
WASTED
ENERGY
AVOIDED
VOLUME AT-RISK:
PAY FOR IT
EITHER WAY.
©2013 Energy PathFINDER.com
27. Monetize Energy Solutions:
KNOW YOUR INVESTMENT OUTCOMES
27©2013 Energy PathFINDER.com
REJECT ACCEPT
GET
Satisfaction of no
capital expenditure?
Gross energy savings
GIVE
UP
Total cost of doing
nothing
Amortized project cost
-PENALTY +FREE CASH
FLOW
28. Facilities Management 1.0
• Facilities = cost center
• “Cost of doing business”
• Do more with less
• That’s the way we’ve always
done it
• Budget hoarding
• Success = “don’t get noticed”
28©2013 Energy PathFINDER .com
CHANGE
29. CHANGE…
RISK or OPPORTUNITY?
• Energy price volatility
• Smart grid technologies
• Evolving emissions &
safety standards
• Green & sustainable
markets
29©2012 Energy PathFINDER .com
30. Facilities Management 2.0
• Facilities = a profit center
• Monetize your energy position
• No more energy audits
collecting dust…
• Success = show value created
• Contribution to cash flow and
growth
FUTURE-PROOF
YOUR BUSINESS
PERFORMANCE
…and your job.
30©2013 Energy PathFINDER .com
31. Keep pushing the same buttons….
Keep getting the same results!
31©2013 Energy PathFINDER.com
33. The State of the Tax Incentive
Environment for Energy Efficiency
CJ Alberin
Shareholder, KBKG
www.TnEnergy.org
34. SOLUTIONS FOR TAX PROFESSIONALS AND BUSINESSES
TAX CREDITS • INCENTIVES • COST RECOVERY
PRESENTED BY:
CJ Aberin, CCSP
Shareholder
Energy Efficiency Tax Incentives – Insight into
the § 179D Tax Deduction & Other Opportunities
35. NATIONWIDE SERVICE Tax Credits · Incentives · Cost Recovery
© KBKG inc 2013
The Problem = Buildings
are responsible for
almost half of all US
energy consumption
Buildings consume
77% of all electricity
Large contributor of
carbon dioxide
*Source: Architecture 2030
49%
28%
23%
BUILDINGS
TRANSPORTATION
INDUSTRY
Energy Consumption (2011)
36. NATIONWIDE SERVICE Tax Credits · Incentives · Cost Recovery
© KBKG inc 2013
275 billion sf of buildings
as of 2010
Every year:
1.75 billion sf torn down
5 billion sf renovated
5 billion sf newly
constructed
By 2035, ~70% new or
renovated
*Source: Architecture 2030
0
100
200
300
400
500
600
0
100
200
300
400
500
600
0
100
200
300
400
500
600
0
100
200
300
400
500
600
0
100
200
300
400
500
600
As of 2010, the US
building stock is 275
billion sf
By 2035:
44 billion sf will be
demolished
125 billion sf will be
remodeled
125 billion sf will be
new construction
Therefore, by the year
2035, ~70% of the
building stock will be
new or renovated
BillionSquareFeet(sf)
Source:EnergyInformationAdministration
Opportunity to Solve Problem
37. NATIONWIDE SERVICE Tax Credits · Incentives · Cost Recovery
© KBKG inc 2013
§ IRC 45L – Energy Efficient
Dwelling Tax Credit ($2,000 per
Unit)
§ IRC 179D – Energy Efficient
Commercial Building Deduction (up
to $1.80/sf)
§ IRC 48 – 10-30% Tax Credit for
Renewable Energy Property
Other State and Local Incentives
Federal Tax Incentives
38. NATIONWIDE SERVICE Tax Credits · Incentives · Cost Recovery
© KBKG inc 2013
179D Timeline
2006 2007 2008 2009 2010 2011 2013
Rev Proc
2011-14
Form 3115
for 179D
IRS revises
179D rules
IRS revises
guidance
179D extend
thru 2013
2005 EPACT
goes into
effect
IRS issues
initial
guidance
2012
179D Will
Sunset at
End of
2013;
Future
Extension in
Works
39. NATIONWIDE SERVICE Tax Credits · Incentives · Cost Recovery
© KBKG inc 2013
Increased 179D Benefits for 2014 & Later
Obama’s Better Buildings Initiative aims to transform §179D
Deduction into a larger tax deduction
Trying to make permanent
Future Outlook
40. NATIONWIDE SERVICE Tax Credits · Incentives · Cost Recovery
© KBKG inc 2013
IRC Section 179D allows for an immediate deduction
of up to $1.80/sf for “commercial buildings” that
achieve a 50% reduction in total energy and power
costs for lighting, HVAC & hot water systems in
comparison to 2001 energy standards.
Building Envelope
HVAC & Hot Water
Interior Lighting
§179D Tax Deduction Energy
Efficient Commercial Building
41. NATIONWIDE SERVICE Tax Credits · Incentives · Cost Recovery
© KBKG inc 2013
Whoever makes investment and places in
service for first use
Building owner or landlord
Tenant
OR
Designers for government buildings
§179D Tax Deduction
Who Benefits?
42. NATIONWIDE SERVICE Tax Credits · Incentives · Cost Recovery
© KBKG inc 2013
“Commercial Buildings” includes
Public & government buildings (i.e schools,
prisons, etc…)
Typical commercial buildings (i.e. office,
retail, industrial, etc…)
Housing that is 4 stories or higher
Must be located in the United States
§179D Tax Deduction - What
Building Types are Eligible?
43. NATIONWIDE SERVICE Tax Credits · Incentives · Cost Recovery
© KBKG inc 2013
Ground up construction
Renovations and retrofits
Applies to affected square footages (rate x sf)
PIS between 2006 through 2013
§179D Tax Deduction - What’s
Type of Construction is Eligible?
44. NATIONWIDE SERVICE Tax Credits · Incentives · Cost Recovery
© KBKG inc 2013
§179D Tax Deduction - Various
Ways to Achieve Deduction
Fully
Qualifying
Property
Partially Qualifying Property
Envelope HVAC Lighting
(Permanent
Rule)
Interim Lighting Rule
(PIS before publication of
final 179D regs)
1/1/06 to 12/31/08:
Energy Cost Savings*
50%
16-2/3%
or
10%
16-2/3%
or
20%
16-2/3%
or
20% 25% to 40% LPD Reduction
(50% LPD Reduction for
Warehouse) + other factors
1/1/09 to 3/11/12:
Energy Cost Savings* 10% 20% 20%
3/12/12 to 12/31/13:
Energy Cost Savings*
10%
20%
or
15%
20%
or
25%
Tax Deduction $1.80/sf $0.60/sf $0.60/sf $0.60/sf $0.30 to $0.60/sf (using
applicable % from 2006-52)
* Compared to a Reference Building that meets 2001 energy standards.
45. NATIONWIDE SERVICE Tax Credits · Incentives · Cost Recovery
© KBKG inc 2013
Assume Federal Tax Rate = 35%
** Discount Rate = 8%
1 system
$0.60 / sf
2 systems
$1.20 / sf
3 systems
$1.80 / sf
Tax Deduction $60,000 $120,000 $180,000
NPV Benefit**
(Owners)
$14,348 $28,696 $43,044
§179D Tax Deduction - Benefit
Example of 100,000 sf Building
46. NATIONWIDE SERVICE Tax Credits · Incentives · Cost Recovery
© KBKG inc 2013
Envelope
Better insulation & windows
Cool roof
HVAC
More efficient HVAC equipment
& controls
Geothermal systems and heat
pumps
Right sized
Lighting
More efficient luminaries,
ballasts, and lamps
Bi-level switching
Lighting retrofit project can
range from $0.60 to $2.00/sf
And more…
HVAC
Envelope
Lighting
§179D Tax Deduction
Design Strategies
47. NATIONWIDE SERVICE Tax Credits · Incentives · Cost Recovery
© KBKG inc 2013
Warehouse Retailer in MD
Tax Deduction = $261,000
145,000 sf * $1.80 per sf
Whole Building Qualified
53.2% Reduction in power cost
Envelope primarily concrete block
Mechanical Systems
Rooftop A/C’s with EER ranging
from 10 to 15
80% AFUE Gas Heat
Lighting consists of
T-8 Fluorescent & Metal Halides
Skylights & Daylighting Systems
§179D Tax Deduction
Example – Big Box Retailer
48. NATIONWIDE SERVICE Tax Credits · Incentives · Cost Recovery
© KBKG inc 2013
Student Housing in CA
Tax Deduction = $151,200
84,000 sf * $1.80 per sf
Whole Building Qualified
53.3% Reduction in power cost
Envelope
R-30 Roof
R-13 Walls
Double paned Low-E windows
Mechanical Systems
8.0 HSPF / 13 SEER Split Heat
Pump
Gas Fired Boiler 85% AFUE -
DHW
Energy efficient lighting – CFL’s
§179D Tax Deduction
Example – Student Housing
49. NATIONWIDE SERVICE Tax Credits · Incentives · Cost Recovery
© KBKG inc 2013
Parking Garage in TX
Tax Deduction = $180,000
300,000 sf * $0.60 per sf
1 system Qualified
Interior Lighting Systems
44% Lighting Power Reduction
48” T8 2-tube Fluorescent
Lighting throughout
§179D Tax Deduction
Example – Parking Garage
50. NATIONWIDE SERVICE Tax Credits · Incentives · Cost Recovery
© KBKG inc 2013
Building type
Building size & number of stories
Physical orientation
Climate Zone
Utility Rates
§179D Tax Deduction
Key Variables
51. NATIONWIDE SERVICE Tax Credits · Incentives · Cost Recovery
© KBKG inc 2013
Process:
Obtain certification package
No special form required
Reported on the “Other Deduction” line with a description of
“Section 179D Deduction
Considerations:
Deduction can reduce AMTI
Can either amend or file Form 3115 to retroactively claim
deduction
Deduction limited to amount invested in energy efficient
property
***Potential for additional deductions on retrofits***
§179D Tax Deduction
Tax Process & Considerations
52. NATIONWIDE SERVICE Tax Credits · Incentives · Cost Recovery
© KBKG inc 2013
Analysis of drawings & as-built specifications
Energy simulation modeling or lighting
analysis using DOE-approved software
Onsite verification
Signed certification by qualified third party
that meets all IRS requirements
§179D Tax Deduction
Certification Process
53. NATIONWIDE SERVICE Tax Credits · Incentives · Cost Recovery
© KBKG inc 2013
Minimum Criteria
Large square footages (50,000 sf+ ideal)
Improvements placed in service in 2006 or later
Other Factors That Help
LEED Certified / Energy Star / high performance helps but
not required
Stringent state or local energy codes
§179D Tax Deduction
Identifying Good Opportunities
54. NATIONWIDE SERVICE Tax Credits · Incentives · Cost Recovery
© KBKG inc 2013
Other State & Local
Incentives
Rebate from utility energy-efficiency program
Rebate from city or county
Expedited permits
Marketing/publicity awards
State income tax credit
Property or sales tax rebates or abatements
Density bonus
Access loans/loan funds
Full or partial refunds for development fees
1,064+ Financial incentives for renewable energy
1,430+ Financial incentives for energy efficiency
55. NATIONWIDE SERVICE Tax Credits · Incentives · Cost Recovery
© KBKG inc 2013
CJ Aberin, CCSP, Electrical Engineer
Shareholder
877-525-4462 x148
cj@kbkg.com
KBKG SERVICES
R&D Tax Credits
Asset Retirement
Green Tax Incentives
Hiring Tax Credits
Cost Segregation
Fixed Asset Review
Repair v. Capitalization
Property Tax
Sales & Use Tax
Expense Recovery
QUESTIONS & ANSWERS
Notes de l'éditeur The calculator provides three groups of metrics. The first are the “simple” metrics, grouped together because they don’t involve discounted cash flow. This group includes simple payback, accounting rate of return, and life-cycle cost. These are metrics that are most often used by staff at the facility level.