When the lights went out in the Big Blackout of 2003, the power at Penn South burned on, all through the night. The reason? A new, gas-fired three-megawatt cogeneration plant was fueling Penn South. Installed in 1986 by KeySpan Energy, it promised to save the multi-building limited equity Manhattan co-op around $560,000 annually on maintenance and fuel, reduce emissions by about 30 percent, and produce 28 percent more useful energy for cooling and heating year-round. Oh yes, it would also keep the lights on during a major power failure, like the one New York City experienced on August 14, 2003.
Electricity is on everyone’s mind, thanks to the dark days of August. “I have been overwhelmed by calls and requests for information,” says Herb Hirschfeld, an engineer and energy consultant who works closely with the New York State Energy Research and Development Authority (NYSERDA) to implement both cogeneration and submetering systems. “Everyone wants more information.”
The challenge, though, is finding the steps to take now. Cogeneration and electrical submetering are building-wide measures that can generate cost savings and energy independence. How practical are these systems for you? And how does a board go about evaluating what’s right for its building? This is the story of two entrepreneurial boards that answered both questions.
The 12 red brick buildings of Clinton Hill Apartments sit on two campuses, the north and the south, and those are separated by two blocks. Originally built in the mid-1940s as navy housing, the property became a cooperative in 1984. The 1,221-unit complex had a number of financial and structural problems to face and because of that, refinanced for $17 million, setting aside a portion of the money for capital repairs. Because of frequent brownouts, an electrical upgrade was crucial. But more power could also mean higher costs to the co-op overall: new wiring could handle increased capacity, and thus more residents might install air conditioners. That, in turn, would increase the electrical bill, which was paid for by the master-metered cooperative.
Concerned, the board hired Herb Hirschfeld, the energy consultant. Among other things, he suggested that the complex switch to submetering. Submetering made sense. The system itself doesn’t save energy but it would force owners to conserve by getting them to pay for what they use.
Here’s how it works: electricity comes through a master-meter and is then distributed to individually metered apartments. New York City apartments are either directly metered or the building is master-metered. In a directly metered building, the meters are owned by the utility, and the user pays the utility directly at the individual residential retail rate. In a master-metered building, the electricity comes in through one master-meter, and then flows through individual apartment meters. The building receives one electric bill, often at the bulk residential utility rate.
With submetering, co-ops buy their electricity in bulk from a utility or energy service company and sell it individually to the shareholders. When submetering in a directly metered building, the utility no longer bills the apartment, it bills the whole property in accordance with the newly installed building master meter.
Coincidentally, Park Ten, a 180-unit Manhattan cooperative at 10 West 66th Street, had also turned to Hirschfeld when it faced its own electrical concerns. The residents were wantonly using electricity and the board was getting tired of paying the bills. Former president Juliette Moran remembers talking to a neighbor. “There was this fellow who went away to the country every weekend and told me that he left the air conditioner on during that time so it would be cool when he returned. I thought to myself, ‘I’m glad it’s cool, but I don’t want to pay for it.’”
Constructed in 1969, the building was intended to demonstrate the miracles of modern technology and how you could run, in Moran’s words, “everything by electricity. There were individual heating and cooling units that were controlled by the owners of each apartment. If you wanted to turn the heat on in July, you could.” And the landlord paid for it.
What worked well for a rental, however – there would be no complaints to the landlord about lack of heat on a cold day – spelled trouble when the building went co-op in 1980. The costs were high and the owners were now the landlords. The board set up an energy committee to look into alternatives. Hirschfeld suggested submetering.
Both the Clinton Hill and the Park Ten boards were impressed by the advantages, as outlined by Hirschfeld. The shareholders would pay the corporation directly for their share of the electricity, which would be an incentive for them to save, he told them. In addition, electricity sold through one main meter costs less for residents than when each resident is metered and billed directly.
He also pointed out that submetering (1) would address the “80/20” tax issue as shareholders would now pay the corporation instead of the utility for electricity, which would increase the amount of “good money” – i.e., shareholder income – for the corporation; (2) would not be prohibitively expensive to install since NYSERDA would pay a large percentage of implementation costs; and (3) would cut costs, since the building could now purchase electricity at the utility bulk rate, saving about 25 percent on electricity bills.
THE NEXT STEPS
There can be a long road between choosing to submeter and implementing the program, however. The first hurdle each board had to surmount was the owners. The Public Service Commission requires that, if the building is directly metered, 70 percent of the shareholders who participate in the vote to switch to submetering must agree, and, if the building is master-metered, over 50 percent of the shareholders who participate in the vote need to approve.
At Clinton Hill, there were typical and predictable objections by some. “With 1,221 residents, there’s bound to be opposition,” explains John Dew who joined the board in 1995 and became president in 1998. “We suspected that people with a proclivity for having large air conditioners, computers, and subfreezers, and those using more than their fair share would not be in favor of metering, whether direct or submetered. Also, you have residents resistant to change irrespective of what the change is.”
But Dew and his fellow directors sold it as a way for residents to control their own destiny, arguing that people who know they are paying exactly for what they are using tend to turn off their lights. If the building residents use much less electricity after the meters are installed, Dew pointed out, it would pay for itself quickly.
To bolster these arguments, the board staged several informational meetings for the shareholders, at which Hirschfeld presented models of electricity costs and savings on a per-unit basis. The data showed that the current utility charge on a standard one-bedroom apartment was $64 a month and that the expected utility charge after submetering when the shareholder would be directly responsible could be as low as $48, a savings of $16 a month. Informational newsletters were also distributed.
There were two meetings at which the shareholders voted. On both occasions, the individual owners cast ballots overwhelmingly in favor of submetering. The sponsor voted against it on the first vote because of the inability to pass along the charges to rent-stabilized tenants. “However,” Dew recalls, “they were convinced that submetering was still the most cost-effective option.”
At Park Ten, a similar scenario occurred: several informational meetings, data presentations, and some other worries. “We had to get a vote to change the proprietary lease,” recalls Moran. “We had floor captains, and really went out and rang doorbells and got proxies.”
And then the delays began.
In 1982, Park Ten okayed submetering. But it was a full ten years before it would be implemented. Boards changed, as did priorities, funding was not sought out, and the submetering field was left fallow. “When the building first went co-op in 1980, there was a lot of enthusiasm,” explains Moran. “There was an enthusiastic guy on the board named Ted Lappas who did all the energy studies and began the whole submetering push. After the vote [approving submetering] the boards that came later were not as gung-ho as the first board. They had other priorities.”
In 1992, however, a new board was elected with Lappas as president and submetering once again came front and center. Lappas was concerned about rising energy costs and crusaded for submetering. “Ted’s a very energetic guy,” explains Moran. “He took this on.” At Lappas’s instigation, Hirschfeld was rehired and submetering proposals were redrafted and recirculated.
There were now new objections from some of the residents who were resistant to a change that might, theoretically, increase costs for excessive power-users. One of the shareholders became incensed at the plan and actually sued to stop the co-op from going forward. Even though it didn’t need approval again, the board sent out letters and staged meetings to explain to all the residents why the current system was unfair since the many were subsidizing the few. While that was going on, the lawsuit proceeded and was eventually thrown out. Then funding had to be worked out and bids gathered. It took 18 months to finally get the submeters in place.
Different issues delayed Clinton Hill’s submetering program. Funding was held up for a while, and then a winning bid came in for $3.4 million, $2.4 million of which was provided by the refinancing. The remainder came from capital funds and NYSERDA, which kicked in $404,000.
The complex is also taking part in another NYSERDA program, a “time use study.” Explains Dew: “NYSERDA wants to gauge usage of electricity during specified times of the day. They also want to see if residents can defer electric usage where possible, getting people to use their items that use a lot of electricity after peak hours. Instead of running the dishwasher at 6, 6:30, 7, you wait until 9, and the electric rate actually goes down. We will put that into place after we start submetering.”
The Clinton Hill board is currently undertaking a billing test to run for one month in which the residents get faux bills to show them how much they save/lose on submetering, and giving them an opportunity to alter their practices. It also allows the board to iron out any glitches.
If Park Ten’s experience is any indication, Dew’s co-op should soon be saving a great deal of money. According to Moran, in its first year of operation, the Park Ten submeters saved the co-op an estimated $40,000 in electricity costs. “It was a tremendous success,” she reports. “I hate to say it, but they behaved better when they knew they were to going to pay for it themselves.”
A decade later, the property is changing its meters to utilize advanced building technologies. “The advanced metering system will enable each apartment to be billed not only for the electricity it uses, but take into consideration when the electricity is used – the cost of electricity varies as a function of time of day and/or day of the week,” explains Hirschfeld. “Since energy has now become a commodity similar to pork bellies, the ability to buy and sell electricity based on time has become a reality.”
While submetering was being discussed and implemented, the boards of both buildings – at Hirschfeld’s suggestion – turned to cogeneration as another way to reduce electrical costs. Cogeneration allows for production of two forms of energy from a single fuel-powered device. In residential apartment buildings, it can significantly reduce a building’s energy expenses by generating a portion of the building’s electricity needs at a cheaper rate than can be purchased at the utility, and also by generating enough thermal heat for domestic hot water usage on a year-round basis. Cogeneration units are usually located in the building’s basement, near the mechanical and electrical systems. A typical device needed for a 200-unit apartment building will take up to roughly 10-feet by 12-feet of floor space, and stands 7-feet tall.
“Cogeneration technology provides greater conversion efficiencies than traditional electric generation methods as it harnesses heat that would otherwise be wasted,” explains Dave Ahrens, senior engagement manager at Navigant Consulting, a specialized independent consulting firm providing professional services to assist clients in identifying practical solutions. “Due to this efficiency, housing facilities may be able to reduce their energy charges. Additionally, due to the use of natural gas with the technology, the fuel source emits less than half the greenhouse gas per unit of energy produced than a typical electric generation power station.”
Because of equipment requirements, cogeneration only makes sense for buildings containing over 150 units, says Stephen Stone, president of DSM Engineering Associates, which has designed and installed several cogeneration units throughout the city, including Park Ten.
The first step in the process is to commission a feasibility study, which can cost anywhere from $4,000 to $50,000. NYSERDA will often pick up a portion of those costs. At Clinton Hill, for instance, the study cost $50,000, $37,500 of which was paid for by NYSERDA.
The cost/benefit analysis at Clinton Hill was very detailed, as Ahrens, who was hired to undertake the study, explains: “After analyzing years of electric and fuel consumption, monitoring apartment riser electric loads over several months, analyzing existing noise throughout the facility, developing electric and thermal load profiles for the complex, reviewing other pertinent energy usage data, reviewing appropriate electric and natural gas tariffs, reviewing utility electrical service interconnection requirements and completion of other analyses, we arrived at several cogeneration options for Clinton Hill Apartments. We presented these to the president and the board at several meetings. We then assisted Clinton Hill in submitting proposals to different funding agencies to obtain grants for the clean energy cogeneration equipment installation.”
According to Ahrens, several analyses were performed. To screen the economic viability of cogeneration projects, Navigant developed a software tool that performed detailed engineering and economic analyses using the building type, the building characteristics, the electrical and thermal load shapes, cogeneration control strategies, and heat recovery characteristics.
“This tool performs an hour-by-hour annual simulation of the building’s cogeneration system,” he explains. “The results include life-cycle costs, payback analysis, and calculation of the expected rate of return. We also perform sensitivity analysis on the cost of fuel, the appropriate electric tariffs and other issues.”
The board was impressed. “It looked like a win-win situation,” recalls Dew. “The technology would be installed in the basement and it produces electricity much cheaper than we can buy it from Con Ed.” Dew adds: “For cogeneration, the feasibility study completed in 2001 demonstrates a savings of 25 percent in operating costs. For fiscal year 2001, electricity costs amounted to approximately $1.2 million. With cogeneration, we projected savings of $306,000 in the first year alone. Without the NYSERDA grant, simple payback time is estimated at 4.16 years. With the NYSERDA grants, payback will be much sooner. And cogeneration savings increase as electric rates escalate.”
Park Ten’s program involves the installation of a newly developed microturbine cogeneration unit. Additionally, the co-op is installing a backup generator, which will provide sufficient electricity to power some of the essential building systems, such as hallway lighting and elevators. The board decided on both partly because of the cost-savings in generating its own electricity but also because of lingering memories of the citywide power failure of 1977. The decision seemed prescient on August 14, 2003.
“We considered the fact that we’re a big building, 32 stories high,” says Moran, who sat on the committee that considered cogeneration. “It always worried us a little about what would happen if there was another blackout. Walking down 18 flights was not amusing for me then. It was very frightening. We had always talked about a backup generator.”
“Over the years, we were looking at the cost of electricity,” adds John Waldes, the co-op’s current president. “We had our eye on a cogeneration system for a while now. When electricity became more expensive and with NYSERDA sharing the costs, we thought it was a good time to put it in.”
The cogeneration unit will provide thermal energy to heat the building’s domestic hot water, as well as electricity to reduce the amount that the building must purchase from Con Edison. DSM Engineering Associates is currently engineering this cogeneration project with NYSERDA incentive funding.
At Clinton Hill, the design phase is currently underway. NYSERDA provided $758,000 in funding for the estimated $3 million installation cost. The co-op will install cogeneration equipment in six of its twelve buildings and hopes to have it operational in 18 months. It is currently seeking funding to add cogeneration units to the other six buildings. The units will ultimately provide 90 percent of the electricity during daytime, and from 35 to 40 percent at night. Con Ed will provide the remainder.
Dew says that the cogeneration system would have been a boon during the recent citywide blackout. “We were out close to 24 hours. We are high-storied buildings and we don’t get any water except from our pumps. So, two or three hours after the blackout started, we had no water. Cogeneration would have helped. We’ll still be on the grid, but there’s a component that will allow our cogeneration units to feed our public light and power, so that we could have in effect switched to cogeneration to have supplied power to one elevator per building, and to the water pumps, and we would have had public lights at least in our stairwells and common areas.”
STEPS TO TAKE
Finally, if you’re considering submetering and/or cogeneration, what steps should you take? The first thing to do is to see if the systems make sense for you. Submetering works for most properties, but because of equipment requirements, cogeneration is only feasible for a building containing over 150 units.
You should then talk to a professional. (Hirschfeld has two informative web sites on the subject: http://www.submeteronline.com and http://www.cogenerationonline.com). You can also get suggestions about engineers who specialize in this area from NYSERDA (http://www.nyserda.org), your managing agent, or organizations like the Council of New York Cooperatives & Condominiums (http://www.cnyc.org) or the Federation of New York Housing Cooperatives & Condominiums (http://www.fnyhc.org).
For cogeneration, an engineer will prepare a feasibility study, which can cost anywhere from $4,000 to $50,000. NYSERDA will often pick up a portion of those costs. Have the expert walk you through the proposal so you can understand the costs and the payback of each system and be clear about what you want to achieve.
“Presentations to the board of directors were lengthy and extensive,” Dew notes, “and much of the information is technical in nature, but you have to hear it anyway. We asked for everything to be explained in layman’s terms. Everyone understood the benefits of upgrading (no more brownouts, no more fuses, you could use your microwave oven without having to remember to turn off your air conditioner).”
Figure out how you are going to fund the project. The funding necessary for the upgrade at Clinton Hill was secured through refinancing of the underlying mortgage. “So, technically,” Dew says, “we have a lengthy payback period. However, the benefits of knowing that we have more reliable electric service are priceless.”
When planning the installation of either system, you should discuss access logistics at length. At Clinton Hill’s submetering project, for example, each apartment required four access days, not in succession. The first, to install the new outlets. The second, to install the risers. The third, to paint the disturbed areas. And the fourth, to make the final connections to the meters. Residents were given three weeks’ advance notice of each appointment and were asked to rely on relatives or friends or neighbors if they could not be home on the appointed days. “Most of the contractor work was completed by 12 noon or 1 PM if there were no access issues,” says Dew.
Communicate with your owners. Since your shareholders usually have to approve the switchover to submetering, setting up an education campaign is crucial. At both Clinton Hill and Park Ten, that education process was lengthy “We leaned over backwards to make them understand,” says Moran. “But we still had endless complaints of all kinds.”
In the end, make it clear to the residents what appealed to the board about the systems. “Two important factors in cogeneration make it very interesting for us,” observes Dew. “In cogeneration, you get a throw-off of heat that we can use to produce hot water, which means in the summer we no longer need to use the boilers to produce hot water. That will also decrease the need for us to burn No. 6 oil in the summer so we will be cleaning the air by reducing noxious emissions. We feel we are helping the environment.”
Not to mention keeping the home fires burning, blackout or no.