First Pay-for-Performance Efficiency Retrofit Delivers Savings

SAN FRANCISCO—Gridium’s energy efficiency retrofit project constructed at 550 Montgomery St. on behalf of Downtown Properties is the first to leverage PG&E’s commercial whole building program. This performance-based program financially rewards customers for every unit of energy saved.

As constructed, this project is expected to improve building operations, exceed project costs with energy savings in five years and reduce annual energy costs by $0.26 per square foot or 15% of total energy costs.

“Our new program measures efficiency savings with innovative normalized metered energy consumption methods, leveraging the advanced technology used by SmartMeters. This first project shows that measuring energy at the meter is the next crucial step towards unlocking deeper energy efficiency. We can now incentivize project-based savings we see at the meter, while helping ensure the savings persist and that everyone’s economic objectives are met,” said Aaron August, vice president of business development and customer engagement for PG&E.

The normalized metered energy consumption approach measures changes in energy use at the whole building level. This means an energy upgrade project can be comprehensive and have lower transaction costs for building owners. 550 Montgomery’s retrofit includes LED lighting, high-efficiency electric motors and boiler controls. And because the savings are being measured over time, incentive payments can be made over time as energy efficiency is delivered to the electric grid in real time.

Furthermore, the normalized metered energy consumption measurement approach also enables tailored building baseline energy use calculations. Accounting for non-routine events is now possible, such as the drop in energy used by 550 Montgomery St. due to COVID-related shifts in occupancy.

“Adding value is foundational in our approach to building ownership and leveraging two innovative PG&E programs to boost our sustainability is an exciting way to accomplish these goals,” said S. DeMarco Carter, vice president of property management at Downtown Properties. “In addition to the economic benefits of this retrofit, we hope to motivate our tenants to further consider their energy efficiency practices and sustainability efforts. Partnering with Gridium on the project really simplified the entire process.”

Gridium’s turnkey project development offering starts with its energy analytics software and a free touchless initial assessment.

“We handle the investment grade audit, coordinating with PG&E and meeting the various programs’ requirements, and monitoring for persistent performance over time,” said Aaron Panzer, managing director of Gridium Alpha. “It’s exciting to break new ground and advance the standard for a normalized metered energy consumption-powered energy project in these operating conditions alongside the teams at Downtown Properties and PG&E.”

The project included upgrading the remaining 50% of interior lighting to high-efficiency LED lights, offering higher-quality light at about 40% of the energy. A makeup air unit on the roof was retrofitted with two new high-efficiency motors and controls, allowing for reduced fan speeds that precisely match ventilation demands throughout the day and across the work week. Additionally, a hydronic heat boiler controller was installed to enable outdoor air resets and sequencing control strategies that produce energy savings.

“There are two PG&E programs we are employing at this building. The first program, PG&E’s On-Bill Financing program, incentivizes building owners to retrofit for energy savings by allowing tenant utility bills to cover the cost of the retrofits on the basis of the energy savings they create. The second program, the new commercial whole building program, is being used at this building for the first time.  It effectively turns the building into a virtual power plant of energy efficiency,” Tom Arnold, CEO at Gridium, tells GlobeSt.com. “Gridium is expert in combining these programs to create the best result.   It’s a win-win for the owners and the tenants and it’s a huge win for the environment. The new program treats office buildings like virtual power plants by paying them for the efficiency resources they deliver to the Grid over time, as it boosts results from sustainability projects like this one at 550 Montgomery.”

The upgrades fully funded by PG&E’s On-Bill Financing program bypassed the building’s capital budget to achieve efficiency goals and deliver an improved environment for tenants. PG&E’s funding for the project was critical, because it was otherwise unbudgeted at the building. PG&E finances the energy upgrades to match the energy savings, then places loan repayment services charges on the monthly utility bill. The loan is sized this way to provide bill neutrality while enabling proportionate cost recovery. Tenants benefit from a better built environment without increasing total utility costs.

“Our goal is to create signature spaces for tenants where they can do their best work,” said Dennis Collins, property manager at Downtown Properties. “Gridium’s turnkey project delivery means they handle the upgrades while we stay focused during this uniquely challenging period for everyone. And with PG&E’s On-Bill Financing Program, this historic building can modernize its systems without impacting our capital budget.”

Commercial buildings’ role in climate change continues to be a key factor in design and construction. Estimates indicate US commercial buildings account for 40% of carbon emissions.