CEFC finance and innovation help hotels keep costs down

From Hotel Engineer Volume 19 Number 3

Contributed by the CEFC

The posters in the elevators proudly tell visitors how Melbourne's CQ Citiclub is saving about $100,000 a year on energy costs, through a pioneering retrofit.

In Sydney, one of Australia's largest registered clubs is about to upgrade its air conditioning chiller system and install solar panels to reduce energy costs at two venues in the near future.

Both organisations accessed finance through the Clean Energy Finance Corporation (CEFC) which partners with other financial institutions to catalyse investment that will accelerate Australia's transformation towards a more competitive economy in a carbon constrained world. They've joined commercial property owners, food producers, councils, manufacturers and car park operators who have used CEFC finance for a host of equipment upgrades and installations to improve energy productivity.

Technology is changing rapidly and the market is becoming more competitive and customers more discerning, driving the need for more regular hotel upgrades and refurbishments.

A recent study out of Cornell University in the United States has pointed to the fact that improving the energy performance of hotels and their green ratings under LEED certification has bottom-line benefits. The study, The Impact of LEED Certification on Hotel Performance, compared 93 LEED certified hotels in the United States with a 514 comparable non-certified hotels, finding that LEED hotels had mean average daily rate $US20 higher than for non-LEED hotels significantly increasing revenue per available room.

CEFC CEO Oliver Yates said the CEFC offers innovative and affordable finance solutions to make it easier for hotel industry participants to make upgrades to improve the energy productivity and lower operating costs.

The bulk of hotel energy usage is for hot water and HVAC combined. The City Of Melbourne's research estimates that chillers and Heating Ventilation and Air Conditioning (HVAC) make up 62 per cent of hotel electricity use and 19 per cent for lighting. Space heating accounts for about 30 per cent of hotel gas use and 32 per cent to water heating.

The NSW OEH Energy Saver Registered Clubs toolkit confirms HVAC and lighting as the most significant energy users, also lists gaming, catering, hot water use and refrigeration as important components of total energy consumption.

Mr Yates said the CEFC's finance for proven technologies to reduce energy consumption was encouraging hotel owners to tackle these areas of rising costs head on.

"Clubs and hotels of all sizes can benefit installing more energy efficient plant and equipment or technology that provides an on-site energy source to better manage energy use and reduce reliance on grid electricity," he said.

"When you're talking about larger registered clubs paying annual energy bills of over $1 million, a consumption reduction of even 10 per cent becomes a six-figure saving."

Hotel leads the way on EUA initiative

Melbourne's CQ Citiclub complex, owned by Melbourne businessman and Climate Alliance director Dr Harry Chua, was the first in Australia to source finance through an Environmental Upgrade Agreement (EUA) to carry out improvements that have slashed energy costs by more than 50 per cent.

The Australian Environmental Upgrade Fund, involving National Australia Bank, the CEFC - then Low Carbon Australia - and Eureka Funds Management, provided $1.3 million towards the installation of a tri-generation system providing heat, cooling and power; double glazing to improve the building's insulation; and energy efficient sensor lighting systems. The tri-generation plant has clocked up more than 4,000 hours of operation since its installation in late 2012.

Dr Chua said the upgrades had converted his 15-storey Queen Street building from 2½ star National Australian Built Environment Ratings System (NABERS) property to one targeting 4½ to 5 stars.

"We're extremely proud of our achievements and we're hoping what we've done here sets a precedent for others to follow," he said.

"The EUA finance proved a cost-effective way of reducing our business costs on a large scale. The resulting reduction in energy use and carbon emissions will continue to benefit us, our tenants and the environment for years to come.

"It's been a promising start for us as we aim to be one of the first truly sustainable buildings in Melbourne and we're always working to find more ways to save energy."

Ahead, the hotel complex expects that by Christmas 2014 it will have installed Gen2 Otis elevators for a system that is up to 50 per cent more energy efficient than conventional ones. Planned improvements to boilers are aimed at reducing their gas use to a point where the tri-generation system is their only source of energy in summer.

The CEFC has also provided finance for a further six EUA agreements in Victoria and New South Wales for works to improve the energy efficiency for commercial properties. EUAs enable building owners to access competitive long-term finance to meet upfront capital costs of retrofit projects, with the loan repayments made through a local council charge on the land. Tenants can also benefit from reduced energy consumption costs.

CEFC-financed EUA projects have involved installing improved air conditioning, building management systems and lighting; new energy-efficient elevators; and the installation of tri-generation plants. EUAs are available for commercial properties in Sydney and Melbourne, and a number of regional centres in New South Wales. Legislation is in train in South Australia to enable EUAs in that state.

Club uses energy efficient loan for two energy cost saving projects

Bankstown District Sports Club has recently accessed $2.2 million in finance through the Energy Efficient Loan (EEL) - a CEFC and Commonwealth Bank joint initiative. The loan is being used to replace two of three water cooled chillers with a new energy-efficient chiller and cooling tower at Bankstown Sports, saving the club more than 6.6 per cent annually on energy costs and reducing carbon emissions by more than 700 tonnes a year. The club has also committed to installing an 85kW solar photovoltaic (PV) system at its Baulkham Hills Sports Club premises, which is anticipated to generate about 10 per cent of that site's energy needs. Bankstown Sports CEO Mark Condi said club's new equipment should be operating by the end of the year.

"This project is helping us save on our energy costs while showing our community that we place an importance on operating in the best interests of the environment," Mr Condi said.

"It is in line with our other sustainability initiatives including upgrading to energy efficient lighting and installing Australia's largest indoor composter to recycle kitchen waste."

The $100 million EEL program is designed for not-for-profit organisations and can cover the full value or part of a project. Aimed at projects over $500,000 with terms offered up to 12 years, EEL finance can be used for solar installations as well as new, more energy efficient equipment, including lighting system upgrades, building management systems, air conditioning upgrades, refrigeration and cogeneration for aquatic and leisure centres and sporting venues.

CEFC finance delivers further saving results

Lighting upgrades are an effective way of reducing costs. Metro Parking, which operates St George Hospital's Belgrave Street and Gray Street car parks and the Sydney Eye Hospital's car park, installed more efficient lighting at all three car parks using finance through the CEFC and Commonwealth Bank. The upgrade reduced lighting energy costs by 30 per cent per year and resulted in further savings through reduced maintenance of an estimated $50,000 per annum.

Australia's largest building and construction materials supplier Boral Ltd reduced building energy costs by 25 per cent through a major lighting upgrade as part of a larger refurbishment at a shared service facility in western Sydney. Boral used CEFC finance for $420,000 toward the project, which upgraded car park lighting and involved installing motion sensors. Boral was eligible to generate NSW Energy Savings Certificates (ESC) which further reduced the projects costs.

CEFC finance has also helped a number of businesses significantly lower refrigeration costs.

New finance to accelerate solar revolution

Solar PV is also a means that many hotels and resorts can reduce energy costs and lower their environmental footprint. In particular, many resorts are in locations where they rely heavily on gas or diesel power generation for their energy needs. The CEFC has announced three new solar programs totalling $200 million to accelerate the take up of solar for businesses, which can yield significant energy costs savings.

The new financing models are being offered by established, experienced and accredited installation companies and suppliers. The programs offer a no-money down way to finance solar installations involving solar leasing or power purchase agreements. Payments can be structured such that savings from electricity bills are greater than monthly solar payments, making the investment cash-flow positive from day one.

Mr Yates said customers save money on energy while leaving the issues of installing and maintaining the most suitable systems to the solar energy providers.

"It makes sense, with Australia's solar resources offering a natural competitive advantage, that Australian businesses including operators in the hotel and tourism industry are offered as many different avenues to take up solar as possible," he said.

What's ahead

The Clean Energy Finance Corporation has invested $900 million to catalyse clean energy investments of more than $3 billion since it began investing in renewable, energy efficient and low emissions technology in July 2013.

The CEFC invests for a positive return, with its more than 40 direct investments and 25 projects co-financed under aggregation programs expected to achieve a positive return for the CEFC and for the taxpayer.

These CEFC investments are expected to achieve abatement of 4.2 million tonnes of CO2e per annum with a positive net benefit to the taxpayer in the order of $2.40 per tonne CO2e. They help to improve energy productivity for businesses across Australia, develop local industries and generate new employment opportunities.

The CEFC is continuing to explore opportunities that catalyse investment to help Australian businesses, including the hotels sector, reap the energy productivity benefits of low emissions technologies.

For further reading

The Impact of LEED Certification on Hotel Performance, by Cornell University's Center for Hospitality Research
New South Wales Energy Savings Scheme
New South Wales Government's OEH Energy Saver Registered Clubs toolkit