Energy Savings Do Offset Upgrade Costs

There are many questions about the cost benefits of installing energy efficient improvements, like LED lighting, drought-tolerant landscaping, water reuse systems and more efficient HVAC systems. These upgrades can be costly, and owners have questions about whether the price tag of these improvements is offset by the utility and energy cost savings.

A new development, however, shows a big and immediate savings following installation. MG Properties Group’s Stonewood Gardens development in San Diego was certified energy efficient after installing $110,750 on property improvements. Following the improvements, the developer received an incentive check from San Diego Gas & Electric, offsetting the install costs by 93%. “We were not surprised to see the savings nearly cover the costs, in fact, we work hard to model our energy and water efficiency improvement projects to make it as low-risk of an investment as possible,” Bryce Colwell, project manager at Bright Power, a company that worked with MG Properties to reduce its footprint, tells GlobeSt.com.

Bright Power worked closely with the property owner to identify key areas to increase efficiency. Through the Fannie Mae Green program, the owner renovated the common area, installed in-unit lighting and made domestic hot water improvements. “Each owner and asset has specific payback criteria, so we are able to adjust our model to make sure projects pencil. This is a great example of how a knowledgeable partner can utilize their expertise in both efficiency improvements and incentives to make energy upgrades provide a strong ROI,” Kavita Bhatt, senior account manager at Bright Power, tells GlobeSt.com.

According to Bhatt and Colwell, it is not unusual to see cost savings justify most upgrades In general, owners can do easy upgrades as well, like installing LED lighting, which is the most common energy-efficient installation. “Upgrading to LED lights in common areas and apartments contributed to the largest reduction in electricity costs. LED lighting technology is extremely efficient and can have a big immediate impact on your electricity costs and consumption,” says Colwell. While the property is in San Diego, which Colwell says has great incentive programs, owners in Los Angeles, San Francisco and San Jose have also seen utility savings offset the majority of upgrade costs.

For owners looking to do more than upgrade lighting, the Fannie Mae and other green incentive programs are essential. “Incentive programs make installing energy and water efficiency improvements very low-risk for our clients,” says Colwell. “The incentives allowed our customer to go for a deeper energy retrofit while maintaining an excellent ROI and increasing the property value. Aside from the financial benefits, there is an aesthetic upgrade by updating the lighting on your property, both during the day and at night.”

There are clear benefits to increasing energy efficiency—but increasing NOI is among them. “Incentivizing property owners to implement more energy and water efficiency upgrades across their portfolios is a concrete demonstration of the impact they can have on NOI, resident comfort and consumption, as well as the utility’s infrastructure overall,” says Bhatt.