6 steps to modernizing energy infrastructure
Over the past few years, I've met with dozens of industry leaders to discuss energy infrastructure in the modern senior living Facility, and nearly all share the same three primary concerns:
Resiliency: Following Superstorm Sandy, a survey conducted by the Organization of Residents Associations of New Jersey found that one factor was consistently highlighted by both residents and staff: “the absolute need for adequate backup electrical generation facilities and fuel supplies.” Nearly two years after this report was issued, however, many facilities are still exceptionally vulnerable in the face of extended grid outages.
Sustainability: Increasingly concerned about their carbon footprint, a facility's environmental footprint is becoming a key issue for residents. Especially in older facilities, senior living executives are struggling to implement the “green” solutions needed to satisfy resident demands.
Economics: Energy infrastructure and utility costs are significant line items in a senior living facility's operating budget. Organizations face a significant challenge in attempting to address the resiliency and sustainability concerns, without jeopardizing financial stability.
For those of you who share these concerns, I have good news and bad news.
The good news is that (for most facilities) it is entirely possible to simultaneously improve resiliency and sustainability in your facility without jeopardizing financial stability (aka a “Triple Bottom Line” project). While the types of projects may seem too good to be true, I know they exist because in just the last year, ENER-G Rudox has helped develop, construct, and commission projects for several facilities that meet exactly this criteria.
The bad news, unfortunately, is that there is no simple, one-size fits all solution that you can implement to achieve these results. Frankly, anyone who tells you that they have a quick and easy way to deliver Triple Bottom Line energy solutions for your facility is at best oversimplifying.
While there is no cookie cutter solution, however, following the 6 steps below will get you on the right track to realize Triple Bottom Line results.
- Think solution, not component
There are many independent technical components that can potentially be utilized to improve the energy infrastructure of your facility (solar PV, LED lighting, Combined Heat & Power (CHP), high efficiency boilers, etc.) The key to getting Triple Bottom Line results, however, is blending the optimal mix of components together into a comprehensive solution. While it might seem easier to address energy infrastructure concerns by upgrading individual components as needed, that approach will generally cost your facility more time and more money in the long run.
- Hire an independent consultant/owner's rep
Unless you're part of a larger organization that has in-house energy infrastructure expertise it is likely in your best interest to hire an independent consultant. Evaluating the merits of an advanced energy solution is complicated and requires an understanding of technical, financial, legislative and legal parameters that are, in many cases, state (even town) specific. When it comes time to make decisions, you want to be able to rely on an expert, whose only incentive is to maximize value for your facility.
- Solicit multiple proposals
When it comes to finding the right project development firm to work with, it's a buyer's market, and senior living executives can take advantage of that. A quick Google search will likely unveil up to four firms that potentially meet your needs. Invite each firm to submit an initial project proposal. In most cases, the proposal will be free of charge. Make your decision based solely on evaluating the quality of their work; it will be the best indication of their ability to develop a quality solution.
- Evaluate both capital sale and energy services contracting opportunities
Without getting into too much detail, while there are many ways to fund energy upgrades, the two most applicable to senior living facilities are the traditional capital sale model and the Energy Services Performance Contract (ESPC). The ESPC model can be utilized to alleviate the up-front capital burden of facility energy upgrades by allowing the client to pay for the output of the on-site generation assets as opposed to the assets themselves. In most cases, making the ESPC vs Capital Sale decision can't really be evaluated until later in the development process, so make sure that the owner's rep/development team you select is well versed in both approaches.
- Value the life-cycle
Up-front cost is obviously a huge consideration, but it is also important to keep life-cycle costs in mind throughout the project evaluation process. When it comes to energy infrastructure, ongoing operations and maintenance (O&M) costs can be significant drivers of value that many end-users don't evaluate in enough detail. Ask the project development firms you're considering to provide a cash flow analysis for each year over a 15-20 year term.
- Right partner > Right spreadsheet
It is really important to have accurate, detailed, well thought out projections prior to committing to any major energy infrastructure upgrade. However, like any other type of construction activity, reality always presents obstacles that haven't been accounted for in Excel. When evaluating the right firm to work with, make sure that you're not only comfortable with their analysis, but that you're also comfortable that the selected team is going to be a good partner for your organization. If given the choice between the best partner and the best initial projections, go with the best partner.
At ENER-G Rudox, we guide you throughout the process to make the best choices for your facility. While there is no simple solution to building a modern energy infrastructure, following the steps laid out herein, with the right partner, will put you on the right path to success. At a minimum, the next time someone tells you that they have a “miracle” solution, or a “quick fix” for your facility's energy problems, ask a lot of questions.
Tim Hade is the senior business development manager at ENER-G Rudox.