It is a very common occurrence in the experience of Efficiency Engineering for there to be 1-3 years between a recommendation/design being made and it’s actual implementation. Many of our retrofits cost well into the 6 figures and even 7 from time to time, as such there is an understandable reticence to launch a project. It is however, almost always a good idea to implement a design or recommendation at the time that it is done or given. There are several good reasons for this. An example of this is a chiller retrofit we recently did at a Multi-Residential, Designated Social housing building in Toronto, Ontario. The chiller installation at this location was delayed for an entire cooling season, resulting in the loss of certain benefits and savings. Luckily the chiller had been purchased during 2014… see below:
- Lost savings due to the higher efficiency of new equipment, resulting in higher utility bills and greater operating costs. The savings at this location was estimated at 21.6 kW peak per billing period and 38,495 kWh annually, which would result in a lost dollar savings of $5,908. This savings is a lost opportunity due to the delay.
- Inflation in the cost of equipment as time goes by. Although the CPI inflation rate has been very low in recent years 1.06% and 1.91% in recent years, construction costs have been going up much faster. From conversations with vendors and manufacturers the increase in cost of a chiller over the course of a two year period can be up to 6-8% for labour and 2-3% for materials.
- Another issue is the potential for price shocks, due to economic volatility. The recent drop in oil prices, caused a significant decrease in the Canadian Dollar relative to the American. Resulting in a thirty percent rise in prices. The chiller which was bought for $48,830 in the spring of 2014 could easily have cost about $59,000 in the spring of 2015 as it was imported from the United States. Factoring in the costs discussed in point #2, this cost could be $69,000.
- Indeed this year EE did another chiller retrofit, where we were given a budget number for a similar chiller (by the same manufacturer) of $80,000.
- Another issue is that with many older chillers (once they get above 20 years in age) it becomes increasingly difficult to obtain replacement parts. Repairing them in the event of a breakdown can be a very costly endeavour. With a new control board (the most likely item to breakdown) for an old chiller potentially being 1/3 the price of a full chiller installation, not simply the equipment. Keep in mind that the assumed lifespan of a chiller by most manufacturers is 20 years. Delaying a retrofit after this period means taking a significant risk that a major failure will occur.
- If you wait until the unit fails to replace it, you will likely wind up having to pay far more for installation. As you will be under tremendous pressure to get it up and running. Prices go up when you are rushed.
Keep in mind that the above does not include the full installation, but the chiller alone. The entire project cost was in the neighbourhood of $350,000. The lost savings and increase in equipment costs (in points 1-3), add up to about 23,500 or about 7% of project costs.
It is well known that comfort cooling equipment retrofits do not payback quickly in Southern Ontario as we have few operating hours for cooling in this region. Payback is typically 20 years or so. In this instance the delay in the project, cause the Net Present Value (over a 20 year life cycle cost) to be reduced by $15,723.