December 2019
The promise of future savings can be hard for condo corporations dealing with present concerns. Yet failing to undertake efforts to mitigate known increases in condo fees creates unnecessary expenses for everyone.
It is widely acknowledged that energy efficiency upgrades save money. The struggle for corporations is in deciding which upgrades make the most sense and how much to pay for future savings.
A three-step process can eliminate the guesswork.
Step One – Identify Potential Dollar Savings
Add up the annual cost for utility expenses; electricity, gas and water. Typically, these account for 30 percent to 60 percent of all annual expenses. For a high-rise condo building the total can exceed $800,000.
Step Two – Identify Recommended Energy Efficiency Upgrades and Cost
This requires an energy audit to determine which upgrades make the most sense for your building. Actual savings tend to be in the 15 to 30 percent range. Annual cost savings in the hundreds of thousands of dollars are not unusual.
Step Three – Do the Math
For a building with annual utility expenses of $800,000, a 10 percent saving amounts to $80,000 per year. Over three years this amounts to $240,000. If the total cost of upgrades provides a three-year payback this means the cost of upgrades does not exceed $240,000. The corporation requires three years to repay the investment in energy efficiency upgrades. In the fourth year the corporation saves more than $80,000 per year after considering annual cost increases. Savings can be used to reduce condo fees or invest in the community.
In practice, payback periods of up to six years are both reasonable and common.
Aggressive efforts to improve energy efficiency remain the single most effective way to make better use of condo fees. Communities that have embraced improved energy usage have benefited from both improved lifestyle and financial savings.
