A three-year HVAC national replacement program that increased operational efficiencies, lowered overall expenses and maximized the customer experience was reviewed in depth at the SPECS workshop session, “National HVAC Replacement Program.”
The session speaker, L.J. Mohan, VP, facilities management and energy engineering, Ralph Lauren Corp., highlighted the data used to obtain capital funding for the replacement program against competing projects in the company, and the methods used to justify and prioritize HVAC system replacements.
In making the case for such a program, Mohan made it clear that facilities management can’t go it alone.
“The CFO and COO are two very important partners for retail facilities management,” Mohan said. “We need them and we must align ourselves with their priorities.”
In the case study example, the retailer started with a pilot program in stores whose HVAC units’ EER ratings were very low, which made the end result very attractive. When the pilot was done, and the CFO saw the dollars resulting from the energy savings, the decision was made to implement the program across the chain.
In addition to energy savings, the company benefits from not having to worry about the fall-out from equipment breakdowns and not being compliant with regulations.
“It gives the CFO budget certainty,” Mohan added. Mohan explained that before senior management makes a commitment to expend capital monies, there needs to be an understanding of how the investment will benefit the company.
Mohan explained that before senior management makes a commitment to expend capital monies, there needs to be an understanding of how the investment will benefit the company.
“It’s not enough merely to show it as a ‘good idea.’ You have to demonstrate that real savings can be achieved,” he said.
HVAC replacement is currently a top-of-mind concern for many retailers. Mohan explained why: “Capital rationing in the retail industry between 2008 and 2013 has resulted in a very old and aging fleet of HVAC units.”
As a result, retailers find themselves burdened with emergency repair costs, store downtime, costly “immediate” replacements, units with non-ozone friendly refrigerants and increasing energy costs due to old, low-efficiency equipment. With the phaseout of CFC and HCFC refrigerants, R-22 has nearly quadrupled in price over the past year, Mohan advised.
Regulatory agencies and concerns about the environment are also putting increased pressure on retailers.
“Approximately 40% of the energy consumption in a small retail store is attributed to its HVAC system,” Mohan said.
Retailers’ solution to the scenario outlined above: a strategic or optimized HVAC strategy that includes a national replacement program. This allows chains to benefit from energy-efficient systems that produce more heating or air conditioning for every unit of energy consumption, dramatically reducing a company’s carbon footprint while reducing its energy costs.
The first step in developing the strategy should be a detailed condition assessment of all HVAC equipment. The assessment should include location, age, run time, serial numbers, repair and maintenance costs, and SEER ratings.
“Gathering this information is a very laborious task,” Mohan warned. “You need a partner, either a manufacturer or service provider, to help you do it. But the repercussions of not doing it are very significant.”
Retailers should also consider optimal timing in repair versus replacement. “The need for major repairs starts at eight years of use,” Mohan said. “That is the time when the ‘known risk’ period shifts to a period of uncertainty.”
Mohan reviewed HVAC spend with regard to preventive maintenance (PM) versus repair spend. In companies with PM programs rated best in class, the repair spend as a percentage of PM was 250%. But repair spend as a percentage of PM spend jumped to 753% in retailers with poor PM programs.
HVAC optimization is good for store operations in that it helps to maximize the customer experience.
“It increases reliability and allows store personnel to focus on the customer, and provides for a pleasant shopping experience,” Mohan said.
It also provides significant financial benefits in that it reduces energy and maintenance costs, minimizes complaints and unplanned capital expenditures.
“These energy savings translate into real dollars,” Mohan said. “It’s positive cash flow with attractive net present value.”