Background

The City of Toronto has spent around $20m retrofitting 89 buildings, and according to newspaper The Globe and Mail no one knows if the program produced “any real savings”. Particularly criticised in the audit of the program were the Building Automation Systems (BAS) installed in the arenas (particularly ice skating rinks), which “malfunctioned badly.”

The National Post provides more clarity than the Globe and Mail, however, and quotes the projects auditor’s report as saying that “it is not possible to determine whether or not the amount of the energy savings realized were adequate to finance the original capital costs as required by the program.”

This is bad news for the City of Toronto, both because of the bad publicity and because of the uncertainty around the savings.

Bad publicity

The Globe and Mail report, which was picked up by the Environmental Leader, tells the story a very different way to the National Post.  It insinuates that there were no real savings and that the $20m was wasted. The National Post indicates that there were some savings, but is uncertain as to whether it was enough to cover the financing costs for the program.

The truth is that the energy efficiency works did achieve some savings, but it remains unclear as to whether the amount saved will be enough to pay capital and financing costs. The project had apparently expected a positive financial return (payback) after 10 years.

Savings

Without knowing the full details of what went wrong it appears to me that several reasons exist as to why the savings may not have been achieved:

Failure for the contractor to work well with the facility managers at the sites.

The Globe and Mail article leads with a facility manager at one of the sites saying “he warned early on that the estimated savings were ‘incredibly ambitious.’”  Henry Ford said “if you think you can, or you think you can’t, you’re right.” Energy efficiency is not something that can be totally outsourced, and facility managers play a very important role in saving energy. By failing to effectively engage with and get the facility managers on side, it appears that the contractor made a significant mistake. In this case it appears that at least one facility manager didn’t believe the savings were possible.

A mistaken belief – all too common – that the BAS systems installed would save energy.

A BAS doesn’t save energy. What saves energy is the appropriate programming of the BAS, then good use of the BAS once it has been properly commissioned. It seems as though the BAS systems may have been poorly specified and possibly inadequately commissioned, with inadequate training. A BAS is complex, and to be effective in saving energy a good investment has to be made in properly configuring it and in training operators how to use it. By not effectively engaging with the facility managers the BAS systems were possibly doomed from the start.  Particularly if the new BAS systems made it harder for the facility managers to maintain comfortable conditions in the facilities.

Failure to extend the contract for the full payback period.

It appears that the projects were completed in 2007 under an energy performance contract (EPC). Possibly what happened was that the formal monitoring and verification (M&V) of energy savings under the EPC went for a year afterwards. Then, with the contract finished and the contractor no longer around, the facility managers then turned off the BAS systems (that they had never liked and potentially made life harder for them), and the savings evaporated. Had the contract been extended to run and provide full monitoring and verification for the full term of the payback, then this may not have happened. But this would have added further costs which the city may have been keen to avoid.

Poor monitoring systems, and failure to institutionalise energy efficiency into annual performance requirements.

Possibly the City of Toronto failed to adequately monitor the savings on an ongoing basis, and it may not have incorporated energy efficiency as a KPI in its management systems. Had it done so, the problems may have been picked up a lot earlier.

Lessons for Australian local governments

This story contains some important lessons for Australian local governments who are  pursuing energy efficiency works.  These lessons are:

Have a strong framework for energy efficiency, with a corporate energy management plan that is reviewed annually, including measurement against targets and allocation of responsibility

Understand that there needs to be a strong corporate commitment across the organisation to energy efficiency. If the facility managers aren’t on board you have a problem

Put in place robust measurement systems

Understand that energy efficiency is an on-going investment

Be careful as to how the real results of your programs may be distorted in the media.