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Spotlight On: HVAC

BY Marianne Wilson

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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.”

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Spotlight On: Sustainability

BY CSA STAFF

Green leasing is surprisingly revolutionary. Despite the retail clamor for sustainable building and policies, leases rarely incorporate environmental standards into the legal language.

In the SPECS session, “Collaborating for Sustainability,” the Retail Industry Leaders Association (RILA) presented its case on the importance of building in leasing clauses that promote environmental efforts. Adam Siegel, VP sustainability and retail operations for RILA, was joined by a pair of retailers — Maria Barr, manager of global sourcing operations for The Disney Store, and Bob Jensen, director of construction for Family Dollar – to discuss where the industry is in terms of sustainable leases, and how they are working to help the movement gain traction.

“There is a disconnect between the landlord and the tenant,” RILA’s Siegel said. “Tenants want to install energy-saving devices and increase recycling rates, but most of the time those programs are not regulated by the lease.”

That’s not to say that landlords aren’t on board. In fact, that is where the greatest disconnect is, said the panel. The right hand (retailer) is unaware of what the left hand (landlord) is doing. And vice versa. The answer lies in green leasing.

According to Siegel, there are five reasons for a green lease:

1. Improve base building efficiency;

2. Align incentives for waste/energy reduction;

3. Improve tenant space;

4. Increase utility usage transparency; and

5. Clarify access and control of key spaces.

Disney has been a leader in the green leasing charge.

“At Disney, we knew we had to collaborate with our landlords, as well as our merchant teams and production/sourcing teams for all sides of the environmental equation,” Barr explained.

The company created a pilot project in several shopping center stores to test feasibility of increased recycling. It’s in the very early stages, but it’s about turning challenges into opportunities, Barr told the audience.

Bob Jensen, who wears the sustainability hat for Family Dollar, has set a goal to develop a thoughtful green lease that contains negotiable and non-negotiable items that are designed to impact a building’s environmental and energy goals.

“We have to keep asking, ‘What if?’ in order to move this initiative forward,” Jensen said.

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Spotlight On: Energy Efficiency

BY Marianne Wilson

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Think your company has done all it can with regard to energy conservation? Well, think again. Significant opportunities for energy efficiency still exist in the retail sector, with a 29% savings on average, Maria Vargas, director of the U.S. Department of Energy’s Better Buildings Challenge, told attendees at the SPECS session, “Introduction to the Better Buildings Challenge.”

“Despite the many cost-effective opportunities, however, persistent barriers still exist,” Vargas said.

These barriers include lack of senior management buy-in, lack of a skilled work force, lack of information (with a need for unbiased information) and an “I’ve already done it” mentality. Another big barrier: not integrating energy efficiency into business planning.

There are also some roadblocks specific to the retail sector, Vargas noted, including a tendency to over-light based on outdated assumptions of what is necessary to make a property and shopping experience attractive.

“Also, in retail, customer comfort and the shopping experience take precedence over energy performance,” she said.

To help overcome the barriers to greater energy efficiency and drive action, the U.S. Department of Energy has launched a program, called the “Better Buildings Challenge.”

“Better Buildings promotes energy efficiency as a top-priority energy resource,” Vargas explained.

The Better Buildings Challenge, which is part of the larger Better Buildings Initiative, is a voluntary leadership initiative that asks public, private and nonprofit organizations to make a public commitment to energy efficiency. With a goal of making America’s commercial buildings at least 20% more efficient by 2020, the program supports commercial and industrial building owners by providing technical assistance and proven solutions to energy efficiency. It also provides a forum for matching “partners” and “allies” to enhance collaboration and problem solving in energy efficiency.

“So far, more than 110 public, private and nonprofit organizations, including 23 commercial businesses, have committed to the Better Buildings Challenge,” Vargas said, “including such retail partners as Best Buy, Kohl’s, Macy’s, Walgreens, Starbucks, Staples and Supervalu.”

To become a partner in the Challenge, the company signs a voluntary partnership agreement with the Department of Energy.

“The main things we ask a partner to do is to set a 20% energy reduction goal by 2020 across its portfolio,” Vargas explained, “and to kick off a showcase project within nine months.”

Challenge partners also commit to sharing energy consumption data to measure progress against their pledge goal, and sharing information about the energy-efficiency implementation models (including the tools, technologies and processes) they are using to reach their pledge goal.

“An implementation model is a replicable process or solution that an organization has used to achieve its energy-reduction goals,” Vargas said. “It may be an organizational/business decision or process, financing or implementation strategy that has addressed a barrier within the organization and/or within the market.”

At Kohl’s, for example, despite a track record of successful projects, the energy team was having trouble getting and defending sustained corporate funding for under-budgeted energy-efficiency projects. To overcome this barrier, the retailer strengthened the relationship between the finance and energy teams by embedding members of the finance department into the energy team. This succeeded in expediting the communication of financial benefits and the approval of energy-efficiency projects.

“The result or outcome has been an annual ‘new technology’ budget to test emerging technologies and a financial analyst liaison to expedite expense requests,” Vargas said.

The budget allows Kohl’s to pilot two to three new programs for 10 to 20 stores annually.

For its part, the Department of Energy agrees to lend technical assistance and assist with the development of implementation models, and provide national and local recognition, among other things to Better Building Challenge partners. (For more details, go to betterbuildings.energy.gov/challenge).

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