Pilot: Window Air Conditioner Replacement Initiative

Transcription

1 Pilot: Window Air Conditioner Replacement Initiative Item 3 September 17, 2008 City Building Committee To: City Building Committee Report: CBC: From: Chief Executive Officer CMP: Utility Cost Management Date: September 2, 2008 Page 1 of 10 PURPOSE: Provide an updated progress report on the pilot window air conditioner replacement initiative and the 2008 roll out plan. RECOMMENDATIONS: That the City Building Committee receive this report for information and forward the report to the Board of Directors for information. BACKGROUND: Tenant installed window air conditioners (AC units) in high rise buildings add to the cost of operating facilities and can be a liability in the manner they are installed. Toronto Community pays the cost of utilities in almost all high rise and most low rise buildings. There is limited incentive to tenants to install efficient equipment or to use this equipment in a manner that minimizes energy consumption. Because initial cost of an AC unit is often an issue for tenants, many units are purchased on the second-hand market or at the lowest cost possible. These units are most often high energy consumption models and do not operate at their intended energy efficiency. Poor installations of AC units create additional energy inefficiencies (winter and summer) as well as often pose safety concerns. In 2007 a consultant was engaged to conduct a comprehensive survey of the condition of the AC unit installation and the summary findings in the Report are illustrated in the Table below: Approximate number of buildings with window air conditioners Approximate number of window AC in use 16,000 Average age of window AC 5 to 10 years

2 Report: CBC: Page 2 of 10 Estimated total energy consumption Estimated total cost including air infiltration in winter Estimated gross cost savings if switching to ENERGY STAR window AC ( 100% conversion ) Estimated Greenhouse Gas Emissions savings (equivalent to growing 57,700 tree seedings for 10 years or taking 488 passenger cars off the road.) 13,600 MWh $1.6 M $767,000/year 2250 tonnes The consultant recommended measures and steps to arrive at a cost effective and sustainable solution that addresses the tenant comfort and health as well as environmental stewardship and Toronto Community Housing s liability. In the consultant report dated July 12, 2007, it was recommended that all existing inefficient window air conditioners be replaced with new Energy Star efficient window units that are properly installed and maintained by qualified contractor with an affordable and equitable monthly charge. This approach would result in energy savings and properly installed AC units that would function efficiently over time. In this proposal Toronto Community Housing funds the installation of the AC units using reduced building operating costs and available government incentives. The payback is estimated from 2 to 6 years depending on the level of rental fee to be set. In 2007 Toronto Community Housing purchased 3 Energy Star rated window AC units and installed them in units for a short period of time for energy monitoring study. Results in the 3 installations did indicate significant energy consumption reductions and improved AC unit performance. On this basis staff will expand the test and pilot the approach at a larger scale in two sites. DISCUSSION: On the basis of the testing noted above, staff will proceed with a pilot program to replace window AC units. Three key issues will be addressed by the pilot installations: Long term energy savings and program economics Cost and pricing for a large scale program Logistics and policy issues related to implementation of a large scale program Consultation process a) Staff Consultation

3 Report: CBC: Page 3 of 10 As a follow up to the consultant report in late 2007, the Energy Management Unit worked on the concept and recommendations to come up with an Initiative that addresses both the comfort and health of tenants and the energy and operating cost reduction as set out in the objectives of the Community Management Plan. The proposed initiative was discussed and fully endorsed by the Green Team that consists of representatives from the site and management staff and tenant representatives. Then the initiative and the consultant report were circulated and discussed at the Operation Committee in May, 2008 which included a full discussion of operational implications, logistics of the roll out plan and potential issue with surcharging the tenants for the use of window air conditioner. After weighing the advantages and challenges of a program to replace window AC units, staff proceeded with a pilot program to test the feasibility of a larger scale initiative. b) Tenant Consultation and Communication Toronto Community Housing staff and tenant representatives, as part of the green plan implementation, assessed the tenant interest in a pilot program for the window AC replacement. Staff also considered which buildings may be the most appropriate in terms of tenant readiness and size for a pilot installation. A pilot involving 2-4 buildings with a total number of potential units of 400 would provide a sound basis on which to test this approach. A pilot program to switch window AC units would fit into the Summer Challenge for the whole portfolio. Last year Toronto Community Housing achieved a $95,000 rebate as a result of achieving 10% reduction during the month of July and August whereas the previous year ( 2006 ) a rebate of $35,000 was attained. In 2008, with the launch of the window AC replacement pilot and CFL change out, it is expected that a higher saving and resulting rebate will be achieved. In preparation of the Pilot, AC Poster and Questions and Answers Fact Sheet are made and translated into several commonly spoken languages, e.g. Korean, Chinese, Italian, Russian and Spanish for reaching out to our residents. Community animators and local champions are being recruited to enhance and promote the green message as well as providing personal support in answering their questions and concerns regarding the initiative. The two senior buildings selected for the Initiative are Arleta Manor and Joseph Brown Manor. Both buildings have over 50% penetration with existing window AC in various shapes and age. The presence of committed tenant representatives and supportive Operation Unit Managers are one of the critical success factors for selecting these buildings in the pilot.

4 Report: CBC: Page 4 of 10 Two separate tenant meetings were conducted at Arleta Manor with good tenant turn out active participation in discussions. The tenants were engaged and enthusiastic about the initiative especially on the recognition of their health needs, ongoing and rising operating cost and environmental stewardship in line with the Green Plan. There were constructive exchanges on Rental Fee and related issues such as how long the AC rental fee will be collected and can they eventually own the AC unit after certain years. Some tenants also suggested lowering the rental fee to a more affordable level such as below $10 per month. However, it is worth noting that none of the tenants object to the idea of an AC rental fee. The latest tenant meeting at Joseph Brown Manor was held in August 28 and there were over 30 tenants attended. Common concerns included disposal of old AC units, scale of rental fee, use of portable AC, when the unit is paid off will the rental fee decrease, comment on the collection of refundable deposit. At the end of the meeting, there were 15 tenants immediately signed up for replacing their old AC and 1 for a new AC. Noticeable different feedback at Joseph Brown from Arleta is the general acceptance of the proposed rental fee from $12 to $15 as a means to cover the capital and maintenance cost of the new air conditioner. Based on the feedback from the above tenant meetings, the following interim conclusions can be drawn: 1. Tenants understand and support the energy savings and environmental goals of a window AC replacement program 2. Tenants, in general, accept a reasonable and equitable monthly rental fee for the replacement of their old inefficient air conditioners and covers energy and maintenance cost; 3. There is a perceived difference in level of affordability among subsidised, rent geared to income and the market rental tenants with regards to the set AC rental fee; 4. Most tenants do not welcome the idea of refundable deposit for the new AC unit especially for seniors where they may not have anybody to claim the deposit when they are gone; 5. Tenants are interested in additional incentives to generate savings and in sharing in these with Toronto Community Housing; As a result of the initial tenant consultation, we have decided to drop the refundable deposit requirement. The tenant consultation will continue and feedback collected will further inform and enhance the design and roll out of the Initiative in Energy Savings and Economic Model for the Initiative

5 Report: CBC: Page 5 of 10 Existing window AC units are for the most part older units that have very poor energy consumption characteristics. Replacing these units with Energy Star rated equipment produces a significant reduction in energy use. This combined with a proper installation that improves the effectiveness of the cooling (and reduced winter heating loads) results in significant operating savings. From the electricity demand and consumption viewpoint, properly installed Energy Star AC units will yield an average saving of 0.1 kw demand saving during peak summer month and a corresponding 250 kwh consumption reduction per year or 29% energy reduction from the old AC. This translates to an energy cost savings of $25 per year for each unit in use. However, the net savings which takes into account of heat loss in winter through infiltration and added maintenance cost of the new AC unit is $15 per year per unit. Annual Operation and Maintenance Cost Analysis per AC Unit Cost Category Old AC New AC Net Savings Energy Cost $85.00 $60.00 $25.00 Heat Loss $15.00 $ 0 $15.00 Maintenance Cost $ 0 $25.00 ( $25.00) Total $ $85.00 $15.00 Through strategic procurement, the Energy Star window AC unit, 10,000 BTU, EER 10.8 is at $260 per unit compared to $330 sold locally in most of retail shops. The 8,000 BTU is $210 per unit. In addition, Toronto Community Housing is eligible to receive about $ 65 per unit from the City of Toronto Electricity Reduction Program and other associated incentives for installing energy efficient replacement equipment. The average life time energy cost of an ENERGY STAR window AC unit is around $520 (assuming useable life span of 8 years). The supply and installation of the Energy Star AC unit is about $360. Annual repair maintenance and energy cost is estimated at $85. An economic model can be constructed to illustrate that sufficient cash flow in 6-8 years is achievable by collecting a rental fee or surcharge of $10 to $12 a month as part of the rent. Detailed analysis of various fee scenarios is shown in the attached Saving Calculations AC Spreadsheet. Cost of AC units in pilot program

6 Report: CBC: Page 6 of 10 The City of Toronto Electricity Reduction incentive, coupled with other eligible incentives will generate grants of $ 65 per unit. It is proposed that the balance of the cost be off set by the Toronto Community housing energy savings as a monthly contribution from tenants participating in the program. It is estimated that the monthly charge for tenants would be $12 for tenants who have existing AC installed and $18 for tenants who want to have a new window AC installed by Toronto Community Housing. The price differential is a result of there being no off-setting energy savings or financial incentives to off set capital costs from new installations as there are in the case of replacement units. On tenancy turn-over new rental (of existing units) will be at the higher cost should the tenant choose to retain the window AC unit. Notwithstanding that the estimated annual maintenance fee is on the low side, a term service contract for 3-5 years will help to keep the maintenance cost at a reasonable low range. In some building situation, the installation cost would be higher when minor electrical re-wiring is required. Overall, staff feel the program will not result in any net cost to Toronto Community Housing, nor will there be any significant long term surplus generated by the program. Pilot program Monthly Rental Fee Size of AC Replacement AC New AC 8000 BTU $10.00 per month $18.00 per month 10,000 BTU $12.00 per month $20.00 per month Fee collection is proposed to start in 2009 for units installed in 2008 with immediate fee collection for units installed after March 1, Pilot program implementation The Pilot Program initially is targeted for 2 buildings where tenants currently have an old window AC units in operation. Based on tenant take-up the program will be expanded in 2009 up to an installed level of 700 window AC units. It is proposed that the pilot be voluntary and on a first-come-first serve basis. Toronto Community Housing will provide the new unit under a rental contract. All the new units and the replacement units will be under Toronto Community Housing maintenance program for the entire life span of the units. Once the window AC units are fully subscribed the pilot program will be capped until an assessment of results is made. Based on a program evaluation of the pilot in 2009, a recommendation will be made on program expansion in Pilot program implementation will proceed as follows:

7 Report: CBC: Page 7 of 10 Program information distributed to tenants in selected buildings in September 1008 Rental agreements signed starting October Staff unit inspections, energy metering installations, etc. October November 2008 Installations November 2008 ongoing to 2009 Rental charges start in March 2009 for installed units The means of the proposed monthly rental fee collection would be through the regular rent collection practice as with monthly parking and other additional services. Selected tenant units will be monitored before and after the replacement to gain energy consumption data for verification of savings and consumption profiles for future demand response incentive and potential savings sharing with tenants once the threshold consumption can be identified. Insulated window AC jacket will be provided to cover and seal up existing AC units to minimize cold air infiltration through the unit casing in winter months. The latter measure has been proven to save % energy cost in winter months through a Windsor Essex Community Housing AC Pilot Program in Ongoing energy performance monitoring and tenant communication will be undertaken for further improvement of the Initiative for future development into a full scale Program for continuous roll out to the rest of the buildings in our portfolio. Policy issues Staff are reviewing current lease provisions to ensure that in the future all window AC installations are prohibited without the express consent of Toronto Community Housing. This is currently the case for in-suite laundry equipment and satellite dishes (although poorly enforced). These prohibitions are within a landlords rights. Lease changes cannot be easily made retroactively for current tenants, so it is likely these will be I effect for all new tenancies. This means that for a period of time there will be, in the buildings where the pilot window AC replacement program is in effect, some tenants who can still install equipment of their own choice. Over time, should the program deemed to be successful, there will be a need to address this as a tenancy policy issue. CONCLUSION:

8 Report: CBC: Page 8 of 10 The pilot window AC replacement program demonstrates a continuous effort of Toronto Community Housing taking the lead in reducing energy consumption and related GHG emissions. The use of Toronto Community Housing purchasing power will result in overall energy savings while increasing the comfort of tenants who participate in the program. The feedback and experience gained in this round of the pilot stage of the initiative will inform the staff to further understand the true economics and tenant engagement dynamics with a view to establishing an equitable and well-balanced window AC Program for full implementation in the coming years. FINANCIAL IMPLICATIONS: For the Pilot Program, a small quantity of less than 700 ENERGY STAR window AC of two sizes ( 8000 BTU and 10,000 BTU ) were purchased from the allocated capital budget. Through the proposed rental fee collection, annual savings and rebates from the City / OPA Electricity Reduction Program, the capital outlay will be paid off in 6-8 years. LEGAL IMPLICATIONS: The proposed plan for the window AC replacement initiative involves voluntary removal of existing AC units, agreement to purchase a new energy efficient unit (installation and removal services provided) and payment of a monthly user fee. This is permitted under the Residential Tenancies Act ( RTA ): TCHC and a tenant can agree to add a service or facility, and we can increase the rent accordingly (123(1), RTA). (a) Purchase Cost and Surcharge For the charges to be collected through the regular rent collection regime, the fees must be considered rent as defined under the RTA. The monthly user fee for an air conditioner is a prescribed service, facility or privilege and can be included in and collected as rent (O.Reg. 516/06, s16). However, if the tenant purchases the AC unit from TCHC, that amount is not considered rent and could not be collected through the Landlord and Tenant Board; it would be collected by other means. For that reason, TCHC would maintain ownership of the AC unit in the same way it does for stoves or other appliances that are provided to tenants. TCHC would not sell the unit to the tenant, but the monthly user fee would be determined in a way that it is sufficient to recover the purchase cost and account for installation, maintenance service and

9 Report: CBC: Page 9 of 10 energy savings. This fee structure would allow for collection of the entire amount through the regular rent collection regime. (b) Removal of Tenant-Installed AC Units It is understood that the current program is intended to be implemented on a voluntary basis, and no existing units will be removed unless the tenant has signed up for the AC service and surcharge. In the event that some tenants do not participate in the voluntary program and there is still a concern about how the unit is installed or about the energy efficiency of the unit, TCHC may choose to require removal of the unit in certain circumstances. This will be in cases where tenants did not receive prior written approval for the installation and/or in cases where the unit is not properly installed, causes a safety hazard, or otherwise interferes with our ability to maintain or preserve our property. To make the Initiative and the subsequent Replacement Program successful, enforcement of current AC policy under the rental lease, similar to not permitting tenants to install private washer and dryer in their apartment, is essential and equitable to all tenants who signed up for the old AC replacement and pay for the added service. With regard to new tenant moving into a unit where ENERGY STAR window AC was installed under previous rental lease, the new tenant will have to pay for the AC rental fee under the Replacement AC fee structure. If the new tenant does not want the AC, the window AC will not be removed and instead it will be locked in the circuit breaker panel from use. COMMUNICATION IMPLICATIONS: At this Pilot stage, only buildings selected will receive communication in the form of educational poster posted in prominent locations during the roll out period and questions and answers fact sheet translated into commonly used languages and circulated to the tenants in the buildings and at tenant meetings.

10 Report: CBC: Page 10 of 10 Derek Ballantyne Chief Executive Officer Attachment: 1: Window AC Energy savings analysis 2 Window AC Replacement Study, 2007 Staff Contact: Gordon Chu CFO Gordon.chu@torontohousing.ca Ian Fichtenbaum Director, Asset Planning & Investment ian.fichtenbaum@torontohousing.ca Philip Jeung Manager, Energy Management Philip.jeung@torontohousing.ca

11 Existing AC Analysis Inputs A/C cost $260 10,000 BTU Monthly Surcharges Installation $100 Scenario 1 $0.00 One-time rebate (Clean air + OPA) $65 Scenario 2 $5.00 Annual O&M $/yr $85 Scenario 3 $10.00 Annual Savings $/yr $15 Scenario 4 $12.00 Discount Rate 6.50% Economic life of new AC 8 years Analysis Methodology Cash flow Out Cash Flow In Net Cash Flow period 0 A/C cost + installation One-time rebate (Clean air + OPA) In minus Out period 1-8 Annual O&M Annual Savings + Surcharge In minus Out Results NPV of Net Cash Flow Surcharge $ per month A/C Cost = $ scenario 1 $0.00 ($721) $0 $0 scenario 2 $5.00 ($356) $0 $0 scenario 3 $10.00 $9 $0 $0 scenario 4 $12.00 $156 $0 $0 breakeven surcharge simple payback scenario 1 $0.00 N/A N/A N/A scenario 2 $5.00 N/A N/A N/A scenario 3 $ N/A N/A scenario 4 $ N/A N/A CashFlows A/C Cost = $260 Scenario 1 Scenario 2 Scenario 3 Scenario 4 period Cash flow Out Cash Flow In Net Cash Flow Cash flow Out Cash Flow In Net Cash Flow Cash flow Out Cash Flow In Net Cash Flow Cash flow Out Cash Flow In Net Cash Flow 0 $360 $65 ($295) $360 $65 ($295) $360 $65 ($295) $360 $65 ($295) 1 $85 $15 ($70) $85 $75 ($10) $85 $135 $50 $85 $159 $74 2 $85 $15 ($70) $85 $75 ($10) $85 $135 $50 $85 $159 $74 3 $85 $15 ($70) $85 $75 ($10) $85 $135 $50 $85 $159 $74 4 $85 $15 ($70) $85 $75 ($10) $85 $135 $50 $85 $159 $74 5 $85 $15 ($70) $85 $75 ($10) $85 $135 $50 $85 $159 $74

12 6 $85 $15 ($70) $85 $75 ($10) $85 $135 $50 $85 $159 $74 7 $85 $15 ($70) $85 $75 ($10) $85 $135 $50 $85 $159 $74 8 $85 $15 ($70) $85 $75 ($10) $85 $135 $50 $85 $159 $74 0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 NPV ($721) NPV ($356) NPV $9 NPV $156 Payback Payback Payback 6 Payback 4

13 New AC Analysis Inputs A/C cost $260 10,000 BTU Installation $100 One-time rebate (Clean air + OPA) $0 Note: There is no rebate for New AC s Net Cost $360 Annual O&M $/yr $85 Surcharge ($/yr) $240 $20 per month Net Annual Cash Flow $155 Simple Payback (years) 0 Discount Rate 6.50% NPV ( 8 year) $584 Cashflows A/C Cost = $260; installation = $100 period Cash flow Out Cash Flow In Net Cash Flow 0 $360 $0 ($360) 1 $85 $240 $155 2 $85 $240 $155 3 $85 $240 $155 4 $85 $240 $155 5 $85 $240 $155 6 $85 $240 $155 7 $85 $240 $155 8 $85 $240 $155 Simple Payback 2 Net Present Value $584

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