In the October issue of HVACR Distribution Business, I wrote on the topic of the green initiative and how important it was for the Plan & Spec rep to stay on top of the subject. The article was very well-received, and several members and nonmembers contacted me looking for direction on the who, what, when and why of going green, and what it meant to the Plan & Spec rep. At that point, I knew I was in trouble. The article that I wrote was somewhat generic. Generic for one basic reason: I had only been involved on a few green projects and, to be honest, didn't really feel comfortable giving my limited experience as the drop-down-dead rules of how the Plan & Spec rep should attack the topic of green. By no means am I a green sensei (teacher).
The interest was too strong for me to run and hide. I needed to dig deeper into the topic of how Plan & Spec reps are truly benefiting from the green initiative and what the specifics are of the programs out in the market. I also knew that I, like the rest of us, was too busy to really clean my desk off and dive in — I needed to make the month! Then it hit me; why not get an expert and maybe kill two birds with one stone? Have an expert talk at the Annual Plan & Spec Seminar at AHR in New York City.
Our turnout was fantastic. We had 60-plus people attend, and our two guest speakers did a great job. The speakers come from different backgrounds. Jerry Hansen is president of Energy Savings Products, a manufacturer's representative firm for HVACR equipment in the Pacific Northwest, and Jim Dirkes is president of the Building Performance Team, a LEED® (Leadership in Energy and Environmental Design®) accredited consulting firm in Grand Rapids, MI. The two really presented the yin and the yang of the green initiative, including LEED, EPACT, tax credits, energy incentive programs, energy loan programs, city programs and utility programs.
The “Yin” from the Rep's Perspective
Jerry's presentation was very specific, informative and helpful in distinguishing between all the green programs out in the market today. He covered the fact that the U.S. Green Building Council is really the group responsible for the LEED standard. The goal of this standard in laymen's terms is to produce a “better” building. Very often, people feel that the standard and goal are energy-specific. However, it is not just limited to saving energy; it is a standard that includes topics such as site planning, indoor environmental quality, material use, water management, etc. In short, it is a true comprehensive approach to an environmentally friendly building.
Several federal, state and local programs have latched onto this standard and are reimbursing individuals that design and adhere to the LEED standard either partially or in its entirety depending on the program under discussion. Jerry spoke about some of the specifics of the Energy Policy Act and the fact that up to $1.80 per square foot in tax deductions are available for building owners who make improvements in energy efficiency relative to lighting, HVACR and the building envelope. On the state level, Oregon is offering rebates and/or loans on new equipment with sustainable increased energy efficiency. The local utility is offering similar programs. On the city level, Portland, OR, has an office of sustainable development that offers design assistance and may advertise you and your company if you have a green success story. As you can see, the programs, as well as the opportunities, are many, and you need to do your homework on the local level to see what is available to you and your customers.
The success stories of Energy Savings Products and green projects are many. Jerry gave several examples where the project went “right,” where all goes according to plan. One example was of a customer who had new lighting installed that saved 40 percent of electrical costs while improving lighting levels. Net cost of the fixtures was actually “free” after the incentives and tax credit. Another example showed how a building owner installed a new infrared heating system that reduced the heating bill by 35 percent. Cash incentives covered 30 percent of the equipment cost, tax credits paid for 35 percent of the entire project and payback was less than two years.
Jerry also covered the downside of going green and not doing your homework. He went over personal experiences that were rather eye-opening. He discussed several projects that Energy Saving Products lived through that made them more knowledgeable in the long run but were rather cumbersome, to say the least.
The one example that hit home for me was one project where “things went wrong.” Everything was falling into place; the customer purchased a bundle of energy-efficient infrared heating equipment based on receiving all the incentives that Jerry knew he could extend to the customer relying on his past experience. After installing the equipment, Jerry mailed in the Oregon Energy Trust completion forms, but because the project exceeded $50,000 in incentives (Oregon Trust Rules), the Energy Trust sent out an inspector to verify the measures met the Trust goals. The inspector discovered that someone had hooked up the project to a different gas meter than specified in the application, and the meter didn't qualify for the incentives. Then the proverbial you-know-what hits the fan. They disallowed the incentive. The finger-pointing started on why this meter didn't qualify for the incentives. The owner didn't know, the contractor didn't care; Jerry was unaware there was more than one meter on the site. Then attorneys start to get involved. The owner would not have proceeded with the green project without the incentives. The project was turning into a different shade of green — that sick-to-the-stomach green. Long story short, Jerry and Energy Savings Products were able to conduct last-minute negotiations and get the incentives for the owner.
The conclusion driven home was that Energy Savings Products does differentiate itself from the competition by offering green building design. These projects are much more complex, but the work pays off in higher margins; and in order to ensure that those margins don't slip away, the “devil is in the details.” You need to be tuned into not only the programs available in your market but also to the specifics of the job to make sure that the expected high margins turn into reality.
The “Yang” from the Consultant's Perspective
Jim Dirkes and his company, the Building Performance Team, deal with the specifics of LEED, EPACT and other issues every day, and when we first discussed this seminar, he was interested in taking his presentation in a different direction. He was concerned and wanted to make sure that some of the details associated with the green building initiative were covered because he agrees with Jerry that the “devil is in the details.” However, once I assured him that Jerry had that covered, Jim asked me if I was familiar with the intangibles associated with green. Intangibles? Intangibles?! Any time I get into a conversation with anyone about LEED, EPACT, utility rebates, all they want to talk about is numbers. In fact, numbers are all anyone seems to want to talk about anymore. Period. Intangibles interested me, but at that point, I had to get off the phone to make sure my sales numbers for the month were OK. I told Jim it was his presentation and to take it where he felt it needed to go.
Jim did start out touching on specifics of a green building and how it basically is a building that has a lower net impact on the environment (including energy and resource usage), and the most popular measurement tool is the LEED building standard. He discussed some of the detail associated with the different levels of LEED (basic, silver, gold, platinum) and how the point system tabulates your level based on everything from recycling, waterless urinals, waterless landscaping, to providing bike racks and showers (to encourage low-energy commutes), use of natural-fiber carpet and environmentally friendly cleaners, to high-performance HVACR and lighting.
Once he completed his “engineering obligations” on the fit, form and function, Jim turned to the intangibles. Yes, a degreed engineer covering intangibles. He covered parts of going green that not everyone thinks about. He discussed the fact that a properly designed green building really does reduce energy, but this also means the customer experiences reduced operating cost, which just happens to reduce greenhouse gas emissions and may result in kudos for the PR department. Something to talk to the media about and get “free” media exposure. This may also result in that customer being able to recruit high-quality workers more easily.
He also mentioned the team aspect of being involved in a green project and how the designer, the Plan & Spec rep, the equipment manufacturer and the end-user all contribute in a small way to a more responsible use of resources and are very aware that they are working toward a common goal. They are “bonded” more than if they just would just buy/sell “cheap.” Therefore, it is more likely they will do business together again. How about the fact that more efficient HVACR often results in a more pleasant, healthier workplace, which results in happier, more productive, more creative and more innovative employees? Better problem-solving, more innovative products, less absenteeism, more efficient people. Is there any owner, boss or manager who isn't interested in these “intangibles”?
Jim and Jerry had three common themes in their presentation.
Green is here to stay. Major corporations such as The Home Depot and Wal-Mart are making major commitments in terms of money and time to implement LEED.
Opportunity abounds for the well-informed, well-educated Plan & Spec rep. Global-scale property managers, like CB Richard Ellis, have discovered that green buildings have higher occupancy rates, higher lease rates (+15% — 40%) and higher sale prices (+40% — 50%). Green buildings typically have dramatically lower operating costs (-20% — 40%), and only one percent of the building universe can be called green!
The upside to a Plan & Spec rep's business is almost endless. There's greater customer and brand loyalty due to the fact that the rep helps customers look at the big picture and long-term instead of “cheapest,” where you are just a commodity. Jerry said he actually has greater job satisfaction in selling higher-performance products and he enjoys telling the success stories.
The one statement relative to numbers and going green that I am always interested in discussing is “greater margin for the higher-end products.” I think we are all very interested in becoming a sensei of higher margin. Going green can take you there.
Kevin Mahoney is the chair of HARDI's Plan & Spec Committee. He is also vice president of North American Sales and Corporate Marketing with Buffalo, NY-based Roberts-Gordon. Contact him at 716/852-4400 or [email protected].