LeadingAge Magazine · March/April 2014 • Volume 04 • Number 02

Smart Energy Savings in Senior Living

March 12, 2014 | by John Mitchell

Energy costs are a constant concern to any provider that houses people. New technologies, combined with a variety of public and private financing mechanisms, are making it easier to get energy costs under control.

If Jeff Davis knew then what he knows now about energy sustainability, he would be the first to tell you that he would not have had to lay off so many people in 2009. At the height of the financial crisis with a move-in drop of 30%, Davis, chief financial officer for Presbyterian Senior Living (PSL), headquartered in Dillsburg, PA, had a difficult decision to make without any good options. To maintain the organization’s commitment to ministry, charity care and its credit rating in the face of a $3 million drop in revenue would require a layoff of 130 people out of a work force of 2,850.

“If we had started the green programs we have initiated in the past few years much sooner, I believe the cost savings would have helped us to get through a period of lower revenue without letting people go,” Davis says.

PSL operates more than 3,000 living units and programs, such as adult day care services, in 29 locations in four Mid-Atlantic states. It serves more than 6,000 seniors. Some 75% of the organization’s costs are in employee benefits and salary.

“Nothing is getting easier in carrying out our mission,” Davis says. He recalls that after the layoffs he was channel surfing at home one day and came across a documentary on the world’s future energy crisis. He learned that energy consumption in the US is three to ten times higher than in other countries.

“I learn a lot from my failures,” Davis says. “And when I heard this I realized it was an opportunity.” He quickly received approval from CEO Steve Proctor to start a green committee. The group included himself, the corporate director of plant operations and construction, an energy consultant and a building systems engineer. The result of the committee’s work is emerging—and impressive. In late 2013 PSL worked with utility company ABM and its Washington Gas Energy Systems subsidiary to build one of the largest solar array panel sites in the Baltimore metropolitan area. Sol Systems provided the financing. The array is built on nine acres granted through an easement by PSL at its Glen Meadows Retirement Community northeast of Baltimore, which due to zoning could not be developed. The solar array consists of 4,150 solar panels and is expected to generate up to 1.5 million kilowatt hours a year. The utility maintains ownership of the array. PSL and the utility have negotiated a 20-year agreement at current rates to use all of the generated electricity. The savings over that period are expected to amount to a minimum of $700,000, with 75% of the electricity targeted to service nearly 200 living units serving 350 residents in the 87,000 square foot main manor house (one of its largest).

As Maryland has green energy mandates in place, the project most certainly helps reach statewide alternative energy targets that are commonly supported through tax credits and depreciation.

Since the PSL committee started its work three years ago it has netted annual savings on several projects, including the Glen Meadows solar array, of nearly a million dollars on $5 million invested, much of it coming from sources—stimulus money, low interest energy loans, cash flow—other than PSL’s own capital budget. And while the team does think big, there are sizeable savings in thinking small.

“Most studies show an additional 10 to 20% of energy savings is behavioral,” Davis noted. To squeeze out these efficiencies, Davis says the team is relying on a wide range of strategies, including: energy tracking software installed at its sites; increasing involvement from residents, as is currently the case at several of its sites; and widely embracing retrofit solutions. Among these are: low flow showerheads and toilets (which Davis says have become much more aesthetically effective in recent years); replacement of old PTAC (Packaged Terminal Air Conditioning) room heating and cooling units, similar to those found in hotel rooms, with new efficient design units; and high-energy window replacement. He cites a current project in partnership with Pittsburgh-based Presbyterian SeniorCare to convert a former convent in which all of these low-tech strategies will be deployed. The joint partnership will renovate the building into 42 affordable apartments that will continue to be served by a day care center operated by the nuns.

Energy retrofitting is such a good investment, Davis says, that he has recommended to his CEO and board that PSL set aside 20% of its annual $13 million capital budget and part of its $80 million endowment just for this purpose.

“We’re picking up the easy dollars from deploying sustainable energy in new construction,” says Davis. “Now we need to go after the more difficult and expensive retrofitting.”

Across the country at Mercy Housing, Lauren Maddock, director of asset management for the organization’s California properties, reports similar benefits from embracing sustainable energy.

“We speak and act like owners. Sustainability is the right thing to do,” stressed Maddock. “We’ve begun pulling the trigger on retrofitting because utilities are offering significant rebates to make the projects financially feasible.” According to Maddock, on eight projects with costs of nearly $2 million in 2013 and in progress for 2014, Mercy’s out-of-pocket costs after rebates will be approximately $835,000. She says that so far the electricity cost savings on three of the photo voltaic cell projects installed in early 2013 have been between 75-90% with a decrease in of 25% in gas utilities. Mercy owns or is in arrangements with approximately 17,592 units in 275 properties in 21 states, with nearly half in California.

Maddock also spends a lot of time thinking about roof space. Mercy has more than a dozen sites where solar voltaic panels have been installed. This includes 11 new construction projects and three retrofits on existing buildings. The solar thermal units have reduced the loads provided by traditional boiler-fired power plants that in some cases were more than 50 years old. Maddock noted that the solar units need very little maintenance, just a quick hosing off every six months or so. Energy monitoring software also makes information sharing about the building’s energy use possible. This helps educate residents, which is key in getting people to develop better energy use habits. She says that solar panel conversion is so quick and easy that unless the residents of the building happen to see the crane lifting the panels into place, they would not notice anything different in their heating and hot water service.

For Mercy, reduction in energy costs, especially in California where costs are among the highest in the country, is used to support programs.

“Every dollar we save on energy gives us more to support our vision,” Maddock stressed. This no small goal as the Mercy Vision strives, in part to “… to create a more humane world where poverty is alleviated … and people can develop their full potential.”

Sustainability is not just for large, multi-state organizations. Arbor Acres United Methodist Retirement Community in Winston-Salem, NC, is a $25 million new state-of-the-art assisted living retirement community. The community is heated and cooled by geothermal. In a newspaper article written when it opened in early 2012, CEO David Piner said:

“We’ve worked really for the better part of five years in trying to bring this about. We’ve needed it for 25 years.” The community is home to 66 residents in assisted living accommodations and 12 residents in a memory care wing. Construction included drilling 132 wells 400 feet deep, 120 wells for the assisted living building and 12 wells for the memory care addition. “When we started the building, I did not understand that the constant 55-degree temperature of the earth 400 feet down could be used as a utility. I just find this fascinating,” Piner says.

The cost to include geothermal in the new construction was about $2 extra per square foot, or $236,000 more, compared to the cost of a conventional four-pipe system traditionally used in the south for such projects, according to Les Cranfill, director of building & landscape arts. Piner says there were those who questioned if the additional cost was justified in a mostly temperate region of the country. But on the day Piner and Cranfill spoke with pride about the project, Winston-Salem was in the grip of a weeks-long single- to low double-digit temperature cold snap.

“The temperature is amazingly consistent from front door to back door,” Piner noted. “It’s a lovely quality temperature and it’s a very quiet system.”

Cranfill says the 118,000-square-foot building does not experience the cold and hot zones common to a similar space serviced by conventional systems. There is another aspect that Cranfill really likes about geothermal: There are no ugly condensers, chillers and boilers to take up space. Chillers are especially vexing, as they often hang off the end of a building like a growth and can be unsightly and expensive to cover up.

“Boilers and chillers are noisy and have mechanical problems at a very predictable rate. The average life span on a chiller is 15-20 years and they are expensive and inconvenient to replace,” Cranfill says. The geothermal system, on the other hand, is powered by pumps and fans that are relatively easy to replace.

Piner says that the project engineers projected the additional cost of geothermal will be recouped in about seven years.

“Energy costs are only going in one direction and we’ve baked into our planning a significant hedge against those future costs,” Piner stated. “It is also reducing our carbon footprint, which is important to a growing number of the residents we serve.” He added that it is important in designing such a project that the geothermal system is housed in an “efficient envelope,” a building that is properly insulated with high-energy efficient windows and doors. Piner echoed a familiar sense of motivation voiced by the other leaders interviewed in making the decision to make geothermal an important part of the new building’s design.

“We operate on a narrow margin, so operational savings are crucial to keep our rates competitive for the residents we serve,” Piner says.

Piner, Maddock and Davis all had the same advice for other senior and affordable income housing leaders considering the move toward sustainability: get expert help and know the options and ramifications for financing these projects.

“Be very careful; choose your team wisely,” says Davis with PSL. “I get calls and emails every day from so-called experts who do not really have any experience in sustainability design and engineering. You do not want someone learning at your expense,” he cautioned. Davis attributes much of the success of PSL in achieving its sustainability financing to the Enterprise Community Loan Fund. Enterprise Community Partners has worked for more than 30 years to achieve its goal of an affordable home in a vibrant community for everyone by focusing on financing public-private partnerships. Since 1982, Enterprise has raised and invested nearly $14 billion towards this goal. According to Paul Cummings, senior vice president for Enterprise, there is a rapidly growing opportunity for sustainability financing.

“Low income, quality affordable housing projects serve a population that can’t pay a lot,” Cummings says. “So it takes an owner with a long-term mindset who appreciates that sustainability is a really good opportunity to manage fixed costs.” He notes that retrofit project loans are more difficult to arrange, but vital in improving the energy efficiency and water conservation of large housing portfolios. According to Cummings, current funding sources range from the Department of Housing and Urban Development to the Bank of America’s Energy Efficiency Finance Program.

Eric Nyman, sales & marketing manager for Sun, Light and Power (SLP), which works extensively with Mercy Housing, is enthusiastic—almost giddy—when he talks about the potential of energy sustainability. SLP has been in business designing and installing solar electric and solar thermal for almost 40 years. According to Nyman, SLP has completed over 200 projects with three dozen not-for-profit housing agencies.

“The beauty is you take a variable expense and control and reduce it through predictability,” he says. Nyman noted that tax credits are a vital financing device to offset the cost of installing sustainability projects, especially solar panel projects.

“If there is no tax advantage, then we look for other incentives, such as utility rebates or low interest loans to make these projects viable. But we don’t want to create financing costs that outrun the utility costs,” Nyman says. He says that a state-by-state list of current financial incentives is maintained by the Department of Energy at DSIRE™ (Database of State Incentives for Renewables and Efficiency).

Nyman says that much of SLP’s time is spent working with housing organizations to assess their properties to identify the best candidates for retrofitting, as well as optimizing new construction design. He says roof footprint size is one of the critical factors in determining feasibility for solar power.

Everyone interviewed agrees that retrofitting and new building design is the future. If rising energy costs don’t mandate it, states will legislate this change. According to the Institute of Energy Research, 30 states have renewable electricity or energy mandates while another six states have target goals of 20 to 25% renewable energy by 2025. But Les Cranfill at Methodist’s Asbury Place has looked into the weathered face of his contractor and reports the future is obvious.

“The guy who dug our wells has seen his business switch from 100% of the wells he drills … used for water supply, to in the last 10 years, 65% of wells he now drills are intended for geothermal.”