Stanford University - Second Nature

Stanford University - Second Nature

Green Revolving Funds in Action: Case Study Series Stanford University The Building Energy Retrofit Programs Emily Flynn Senior Research Fellow Sust...

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Green Revolving Funds in Action: Case Study Series

Stanford University The Building Energy Retrofit Programs

Emily Flynn Senior Research Fellow Sustainable Endowments Institute

C a s e St ud y : Stan f o r d Un ive rsit y

Summary Stanford University’s Energy Retrofit Program was created in 1993 to target resource reduction and conservation focused projects on campus. Fahmida Ahmed, Associate Director of the Department of Sustainability and Energy Management, says that Stanford has been investing in sustainability and energy-efficiency since the late 1970s, longer than many colleges and universities in the United States. In keeping with that tradition, Stanford University’s President John Hennessey highlights sustainability as a core value of the institution, and the campus operates two green revolving funds.

Location: Stanford, California Full-time student enrollment: 15,319 Combined gross square footage of all buildings on campus: 13,600,000 Endowment: $13.8 billion as of Aug. 31, 2010 Type: Private

This case study was supported by generous contributions from: David Rockefeller Fund, HOK, John Merck Fund, Kresge Foundation, Merck Family Fund, Roy A. Hunt Foundation, U.S. EPA Green Power Partnership and Wallace Global Fund.


C a s e St ud y : Stan f o r d Un ive rsit y

History Background of Sustainability on Campus

In order to continue to fund energy-efficiency projects on campus, Stanford administrators sought to develop an internal rebate structure similar to that of the local utility. They reasoned that the money the campus could save from reduced operating expenses would eliminate the need for energy rebates, and thus provide a costeffective way for the school to continue updating aging infrastructure. Out of these deliberations, the Energy Retrofit Program (ERP) was created in 1993, with the purpose of capturing the utility savings that came from the installation of more efficient technologies and reduced utility budgets.2

Stanford University’s Energy Retrofit Program was created in 1993 to target resource reduction and conservation focused projects on campus. Fahmida Ahmed, Associate Director of the Department of Sustainability and Energy Management, says that Stanford has been investing in sustainability and energy-efficiency since the late 1970s, longer than many colleges and universities in the United States. In keeping with that tradition, Stanford University’s President John Hennessey highlights sustainability as a core value of the institution, and the campus operates two green revolving funds.

The ERP received its seed funding from the Utilities Division due to the direct impact energy savings would have on the campus’ utility budgets. The fund was initiated with strong administrative backing from the Provost and the University President at the time.

Initiating the ERP Prior to 1985, Stanford University received energy rebates from local utilities that helped to finance energy-efficiency upgrades in campus buildings. However, when the university installed a natural-gas powered combined heat and power plant, it became the primary energy producer for its buildings and was ineligible to receive such rebates.1


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Operations Project Proposal, Approval, and Repayment Overview

implementation; this step also ensures that the objectives of the project have been achieved. 7. After the project has been completed, the ERP manager and a utilities analyst transfer funds from SEM to the individual project’s budget.

Potential projects are funded and carried out through the ERP, from proposal to completion, according to the following process: 1. A project manager submits a funding request for ERP approval, identifying the rough cost, energy savings, and payback. 2. The ERP manager reviews the request. 3. Upon review of the project, the ERP manager sends a letter of commitment to the project manager. 4. When commitment has been obtained, the competitive bidding process begins; this process is overseen by the project manager and Stanford’s Procurement Office.

Stanford ’s on-site cogeneration facility provides electricity, steam, and chilled water to campus buildings. Operating as its own utility, Stanford is also able to offer rebate programs comparable to local public utility companies, a factor which helped to support the creation of the ERP and the WBERP.

5. Once the bidding process is complete and the winning bid is awarded, the project undergoes the construction phase, overseen by the project manager.

Proposing Projects to the ERP Any group affiliated with a campus department or housing unit that receives utilities service through the department of Sustainability & Energy Management (SEM)—a group that includes energy coordinators, facilities engineers, building managers, consultants, and contrac-

6. At the end of construction, the project is inspected by the ERP manager to track individual project performance by comparing metered consumption before and after project


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tors—is eligible to submit a project proposal to the ERP for funding. In choosing among applications, the ERP seeks projects that have a simple payback period of five years or fewer, and also demonstrate a strong return on investment.3 The ERP also takes into consideration the location of projects, a consideration that ensures a fair distribution of funding evenly throughout the campus and across Stanford departments.

In-House Support The ERP Guidelines note that the fund is designed to “blend the abilities of many different groups within Facilities.”5 Nearly all staff members who support the ERP are employed by Stanford; seeking staff internally streamlines the effectiveness and speed of how the ERP operates. A dedicated ERP Manager oversees the complete fund process, from approving project proposals, to working with applicants to reach energy savings targets, to reviewing invoices during the construction process to ensure that the project remains on budget. Upon completion of construction, the ERP manager conducts a walk-through with the project applicant to ensure that the intent of the project was achieved. The ERP manager is assisted by the Sustainability & Energy Management team, which provides technical guidance for projects and conducts research on new strategies and technologies for future installation.6

The ERP operates with two proposal deadlines per academic year: one on October 15th and one on January 15th. Having two separate implementation periods increases flexibility for project managers when scheduling new project work, as they are not beholden to one time of the year to introduce new projects. Having two implementation periods also maximizes the advantageous periods of winter and summer breaks, when such construction will cause less interruption for student and academic life. Having the deadlines occur over two fiscal years—Stanford’s fiscal year ends August 31st— decreases the number of projects that can be billed in one year. Two distinct application periods also shortens the length of time in which the university can begin to accrue energy savings from those projects proposed during the first implementation period.4

Project construction also utilizes the internal Stanford staff. Upon the approval of a proposal, university craft shops bid on the opportunity to implement them.7 This competitive bidding process helps keep project costs low and ensures that contracting opportunities remain within the university.

Over the course of its life, the ERP has a strong track record of supporting new projects. “As long as a project demonstrates its benefit to the campus and meets our payback criteria, it will be funded,” said Gerry Hamilton, Associate Director of Facilities Energy Management. “There are only a few all the way through [the funding process.]”



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as the largest consumers of energy the Stanford campus. Table 1. demonstrates the weighted percentages that the ERP takes into consideration when they are allocating funds for potential projects. The weighted percentages reflect the proportion of total campus electrical consumption that these departments individually consume.

Source of Funding

“We expect energy savings to persist for many years after the project is completed,” said Senior Energy Engineer Scott Gould. “We are diligent to ensure that the savings will last for the life of a project.”

Table 1.8 Project Funding Limits Group

% of total electrIcal consumption

Unlike many revolving funds, the ERP is annually replenished through funding from Stanford’s central administrative budget. Though the ERP’s fund isn’t directly paid back through cost-savings, as is seen traditionally in green revolving funds, its structure is similar to that of a traditional revolving fund because the amount of funding that is allocated by Stanford is adjusted every fiscal year and dependent upon the energy savings accumulated by the ERP’s past projects. In this way, the ERP is able to be sustainable for years to come.

Academic Zones








Like many public utility incentive programs, SEM charges a small consumption-based fee based on electrical, steam, and chilled water utility recharge rates calculated from the previous year’s energy savings to all of its utility rate payers. These utility rate payers— which include the various schools, departments, and business units operating at Stanford— provide additional money to fund future ERP projects.

The ERP divides projects from the applicant pool into four areas of campus specialization: Academic Zones, the School of Medicine (SOM), Residential and Dining Enterprises (R&DE), and Department of Athletics, Physical Education and Recreation (DAPER). These four categories were devised based on these departments’ status


C a s e St ud y : Stan f o r d Un ive rsit y

Performance The Energy Retrofit Program (ERP)

Green Lights Program Since the creation of ERP, 124 of its projects have focused on lighting upgrades and retrofits.11 One of the fund’s most successful projects came about by participating in the Environmental Protection Agency’s (EPA) Green Lights Program. Stanford signed onto the Green Lights Program in 1995 and committed to retrofit 90 percent of the fluorescent lighting on campus within a 5 year time period.12 As a collaboration between the university and the EPA, Green Lights sought to install more energyefficient T8 lamps to replace the existing T12 lights and electronic ballasts. These lighting upgrades were installed in academic, residential, and administrative buildings on campus. The projects that took place in academic zones were funded through rebates given by SEM.13

Year created: 1993 Size: $619,000 annually Source of capital: Department of Sustainability & Energy Management Average payback period: 3.07 years Administrator: Program Manager (Facilities), Sustainability and Energy Management Largest project financed: $50,000 Average return on investment: average payback 3.3 years

Collectively, the ERP has produced a total annual savings of 13,782,798 kWh. Since the fund’s creation, it has grown to $1.42 million and tallied cost savings of approximately $3.02 million.9 The fund has completed 360 projects since its creation, with an average simple payback period of 3.07 years.10

The Green Lights Program completed its objective in1998, one year ahead of schedule.14 The program had an annual cost savings of $764,740 and produced energy savings of 9,114,932 kWh/year.15


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Table 2. The Whole Building Energy Retrofit Program (WBERP)

Larger Projects Outside of the ERP’s Financial Capacity The ERP was initially created to handle smallto-medium sized projects at the university. However, the limited scope neglected larger projects offering potential for significantly higher returns, but requiring a much more capital investment. “We started running into the issue of what if we had a very large building and wanted to do a whole-building retrofit? How would we handle that?” said Hamilton.16

Year created: 2004 Size: $30 million in total debt commitment Source of capital: Stanford University Average payback period: 4.4 years Administrator: Vice President of Land, Buildings, & Real Estate

To address these funding needs, the university developed a second program to target large scale energy-efficiency and resource reduction projects on campus: the Whole Building Energy Retrofit Program (WBERP). The WBERP focuses on projects that are a “whole magnitude larger and require significantly more oversight,” said Hamilton.

Largest project financed: $7.4 million (Beckman Center for Molecular and Genetic Medicine) Average return on investment: 23%

Developed out of the ERP While many early energy retrofits were undertaken by Stanford’s ERP, the university developed the WBERP to implement large-scale, multi-million dollar energy retrofits beyond the scope of the existing ERP’s available funds. The WBERP was started in 2004 by the university’s Vice President of Land, Buildings, and Real Estate.

“If you’re getting started in a lab building, the opportunities are limited to large or quite large projects, or no projects. [These projects] require a huge financial commitment, beyond the scope of the ERP,” said Hamilton.17 The next section will explore the WBERP and the larger-scale projects that it supports.

The program was created to address two major points: 1) to investigate and create opportunities to implement energy-efficient technologies in all existing energy-use systems, instead of focusing on specific end-use opportunities like lighting or motor retrofits; and 2) to create a team composed of Stanford University staff—


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including the SEM and in-house construction managers—along with external contractors and consultants, who could develop largescale energy savings projects on campus.18

How the WBERP Operates Stanford University buildings are individually metered, which Senior Energy Engineer Scott Gould credited for facilitating the identification of the top 25 energy-consuming buildings on campus. Next, the university identified the 25 most energy-consuming buildings as being eligible to apply for funding from the WBERP. The WBERP program manager then prioritized the buildings within that list to identify the projects with the shortest payback. Other factors, such as the age of the building and construction impact to occupants, were also taken into consideration.20

The idea for the fund originated after Stanford Utilities (now SEM) conducted a 12-Building Energy Study, which looked at the campus’s largest electrical consumers by building. The study found that the 12 buildings use 33 percent of campus’ energy. The study also found that by addressing efficiency projects, the campus could save over $4 million dollars annually in avoided energy costs, with a projected an estimated simple payback period of four years or less.19

While these considerations are important in deciding the order that projects receive funding, there are other factors at play on the Stanford campus. One such factor is the important influence a Project Manager can exert to lobby for moving a specific project higher on the list of priorities.21

Initiating the WBERP In 2004 Stanford University’s Provost allocated $15 million to create the WBERP. “Since initial WBERP projects demonstrated good payback, the University decided to reinvest energy cost savings into additional projects.” said Joseph Stagner, Executive Director of the Department of SEM. The program was allocated another $15 million in 2010. Stanford estimates that the total program expenditures will approach $30 million once the last retrofits are completed. As seen in the ERP, the energy savings from funded projects translate into cost savings from lowered utility bills, which revolve back to replenish the WBERP.

“There is an opportunity for the building managers to influence [their rank]. Their participation and support is critical for project success. We want buildings to take initiative, to say ‘Hey, put ours on queue,” said Hamilton.22 As of February 2011, half of the 25 selected buildings had already undergone construction, with the remaining buildings awaiting future funding.


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Phase II, the Program Manager requests that the WBERP project budget cover the costs of implementation. Only when Phase I and II are successfully completed and funding is secured can construction begin. “This process ensures that costs are controlled and that only practical measures are implemented,” said Hamilton.23

The Purpose and Performance of the WBERP Stanford’s WBERP differs from the ERP primarily in the way projects are scoped: while ERP projects are based on the benefit of installing a piece of equipment or end-use of a project, WBERP projects are identified through a detailed building level engineering analysis. This analysis is conducted to explore multiple energy-saving measures with the purpose to keep energy savings projections and total project costs as accurate as possible.

The WBERP Team The WBERP has many different groups that aid in the development of a project. A project team, consisting of a program manager, facilities manager, engineering consultant and contractor as needed, assists in implementation. The initial projects undertaken by the WBERP focused on HVAC system retrofits in the campus lab buildings Stauffer 1 and Stauffer 2, which contain the Chemical Engineering and Chemistry labs, the Gilbert Biology building, and the Beckman Center for Molecular and Genetic Medicine. Due to the magnitude of the projects undertaken by the WBERP, extensive oversight is provided throughout the implementation process. “There is direct involvement with the whole building and the project manager, which is supported by energy engineers. It brings in a lot of resources, both at the building management level as well as tapping into facilities support staff,” said Gould.

Past WBERP projects, like the 28,000 gsf Stauffer Chemistry building, incorporated higher eff iciency chilled water, steam, and electrical systems as well as lighting upgrades.

Due to the intricacy of this process, successful assessment of WBERP projects requires that potential projects go through a multi-phase review. Phase I requires Project Managers to produce a qualitative list of energy measures, while Phase II requires the production of an investment grade analysis that is primarily data-driven. Upon completion of Phase I and

A Closer Look: The Stauffer Chemistry Buildings The Stauffer Chemistry buildings, the first project to be completed by the WBERP, finished construction in June of 2007. The project resulted


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“The Stauffer Chemistry Building Retrofits saw decreases in carbon emissions, electricity use, steam use, and chilled water use due to installing energy-efficient technology in 2007.”

in a 35 percent drop in electricity use, a 43 percent decrease in steam use, and a 62 percent decrease in chilled water use for the building. HVAC retrofits decreased energy costs by 46 percent within the first year, and the buildings’ carbon dioxide emissions were reduced by 762 metric tons per year.24 The total cost of the project was $621,945 for Stauffer 1, which included an $180,000 rebate, and $985,033 for Stauffer 2, which included an $113,000 rebate. WBERP projects have had varied costs, ranging from $300,000 in George Forsythe Hall, a data center facility, to $7.4 million in the Beckman Center for Genetic and Molecular Biology. For the buildings identified as the 12 highest energy consumers, all retrofits are scheduled to be completed by 2013. The result will be an estimated annual savings of $4.2 million and a projected reduction of these buildings’ energy consumption by 28 percent.25 Gerry Hamilton stressed that schools with their own funds should not be discouraged by the longer timeline that large-scale energy projects require. “Because these projects are bigger, they just take more time. It’s more about getting a project team [and] construction team together, and doing implementation. Even though greater financial resources are required, the rewards are there to justify the project staff required to do the implementation.”


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Two Different Programs to Target Large- and SmallScale Sustainability With two programs active on the Stanford University campus, all magnitudes of project can be considered for funding. “ERP and WBERP are effective and complementary methods of tackling both small and large scale projects simultaneously,” noted Fahmida Ahmed. Stanford’s Joseph Stagner credits the success of these two programs to the insight of the university’s senior administrators. “Stanford’s major capital Whole Building Energy Retrofit Program and minor capital Energy Retrofit Program are strategic initiatives launched by senior campus leadership over the past decade to identify and pursue energy efficiency opportunities at the university,” said Stagner. “This proactive, systematic approach assures that no stone will be left unturned and that potential projects from across the entire university will be identified carefully, prioritized adeptly, and pursued vigorously.”


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Ahmed, Fahmida; Gould, Scott; Hamilton, Gerry.


Stanford University - Sustainability and Energy

Phone Interview with Emily Flynn. February 23rd,

Management Energy Retrofit Program. http://lbre.

April 7th, 2011.

2011. 2

Stanford University - Sustainability and Energy

Management, Stanford University.

10 Ahmed, Fahmida. Email to Emily Flynn. “Stanford

Accessed March 23rd, 2011.

ERP & WBRP Case Study.” May 2nd, 2011.

11 Ibid. 5. 3 Energy Retrofit Program Guidelines. September 2003.

12 Stanford News Service – News Release: Stanford joins


EPA’s “Green Lights” partnership. http://news.stanford.

Accessed March 15th, 2011.

edu/pr/95/950424Arc5268.html. Accessed April 7th,

2011. 4 Ibid. 3. 13 Ibid. 5. 5 Energy Retrofit Program Guidelines. September 2003.


Accessed April 5th, 2011.

14 Ibid. 2. 15 Ahmed, Fahmida. Email to Emily Flynn.

“Questions for Case Study.” May 5th, 2011.

6 Ibid. 5. 16 Ibid. 1. 7 Ibid. 5. 17 Ibid. 23. 8

Ibid. 3.


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Endnotes 18 Ahmed, Fahmida. Email to Emily Flynn.

“Stanford’s Revolving Green Fund - Inclusion in

New Study.” February 23rd, 2011.

19 Stanford Univeristy - Energy Retrofit Program.

program. Accessed May 3rd, 2011.

20 Ibid. 1. 21 Ahmed, Fahmida. Email to Emily Flynn. “Stanford

ERP & WBRP Case Study.” May 2nd, 2011.

22 Ibid. 1. 23 Ahmed, Fahmida. Email to Emily Flynn. “Stanford’s

Revolving Green Fund – Inclusion in New Study.”

February 23rd, 2011.

24 Energy Initiatives – Sustainable Stanford.

Accessed April 5th, 2011.

25 Ibid 24.