• Sat
  • Aug 2, 2014
  • Updated: 11:46am
PropertyHong Kong & China
CONCRETE ANALYSIS

Fulfilling a legally mandated energy audit can be a profitable exercise

Owners of commercial buildings built since 1987 could profit by meeting the efficiency ordinance's rapidly approaching deadline

PUBLISHED : Wednesday, 22 May, 2013, 12:00am
UPDATED : Wednesday, 22 May, 2013, 4:14am

Owners of all commercial buildings in Hong Kong built since 1987 will be well aware that they are legally required to conduct an energy audit under the new Buildings Energy Efficiency Ordinance (Chapter 610).

But not all such owners recognise that the window for doing so is now more than two-thirds closed. Each day that goes by means more owners have to use the remaining time to avoid being fined.

Building owners dealing with time constraints also face a great risk of a loss that is far more significant than a fine.

The Buildings Energy Efficiency Ordinance (BEEO) took effect on September 21 last year. That means all commercial buildings - and the commercial portions of composite buildings, usually retail podiums with residential properties above - with Occupancy Permits issued since 1988, have until September 20 this year to complete the audit.

They also have to display the resulting Energy Audit Form "prominently at the building main entrance" (as the Ordinance says).

About 3,000 buildings are subject to this deadline. The Electrical and Mechanical Services Department (EMSD) website showed that just 78 buildings were issued with their Energy Audit Form (EE5) with eight of the 12 months gone. The owners of the remaining 2,900 buildings now have only four months left to get the job done.

They should also be mindful that energy audits take months to complete. Good ones certainly do. The EMSD defines "up to six months" as reasonable. So the remaining 120 days is looking even more challenging.

Time aside, there is another finite resource in the availability of Registered Energy Assessors (REAs) to sign off on the completed audits. But many REAs have never completed an energy audit before, let alone one as technically specific as this.

Coming to grips with the cut and thrust of a real-world energy audit will take additional time. Experienced support teams will also be in short supply.

Simply getting the audits done on time will be a challenge. But the far greater and more meaningful challenge is to see that these 2,900 BEEO energy audits yield all the value they should.

Make no mistake. Although the energy audit is an old-fashioned and fundamentally flawed method for advancing building energy efficiency, it can still constitute a key link in the chain of actions that will improve building owners' profits, enhance Hong Kong's competitiveness, and enable the city to waste less energy and emit less carbon. That is the prime reason for the ordinance's existence.

Of course, some building owners will choose to meet this legal requirement by spending the least possible amount of money and effort.

However, there will be those who see this as a head start to do much more than comply with the law. Their goal will be to use this audit to maximise profits and gain a competitive edge.

To achieve this, they not only need to overcome the lack of time and expertise, they also need to understand the many definitions of the term "energy audit" and the potential profit opportunities that they can uncover.

Building owners may think that the EMSD's highly detailed Energy Audit Code (EAC) would assure them of an excellent outcome. This is not the case.

On the contrary, the EMSD says the EAC sets "the minimum checking requirements". In other words, meeting the EAC is the least that will be permitted if the audit in question is to have met the letter of the law.

By no means should it be interpreted as anything more, let alone as best practice.

The value realised from a BEEO energy audit can range from "net loss" - any positive outcomes never even offset the investment of money, management time and attention - to delivering new profits tenfold those of the costs.

There are many actions which building owners can take to improve the odds of an excellent outcome.

One is to define what they intend the audit to achieve. With the EAC defining the minimum requirements, all that remains is to imagine all the possible results that the audit could contribute to, and then to come up with the scope of works that would lead to the realisation of those results.

Another action is to prepare the request for proposal (RFP) document. The quality of RFPs commonly seen in Hong Kong ranges from deplorable to brilliant, and it is not only the bidders who suffer from the former.

Flawed RFPs hobble or even kill an energy audit's chance of success. Crafting a perfect RFP, on the other hand, pays enormous dividends.

A third and highly effective action is to stay intimately involved throughout the audit process: follow the progress closely or, better, to actually have a suitably responsible executive be part of the audit team.

The EAC guidelines do a particularly good job of arguing for this action.

Yet a fourth success-promoting action is to challenge the draft audit report. Top-tier property owners do this without exception. They know to bring in colleagues from another business unit or outsiders to quiz the audit team, not about their data but about their choice of recommendations.

As many of our 2,900 BEEO energy audits will be first-time experiences for the management teams involved, this level of sophistication might not occur to them.

To be sure, even the very act of advising in the RFP that a professional peer review of the final work product will occur will set the audit team on a better course. The exercise itself will add yet another layer of improvement.

Which building owners are to be most envied as the clock ticks towards the deadline? Perhaps it is those whose building was completed between 1977 and 1987. Their BEEO energy audit is not due until September 21, 2014. They will have the benefit of learning from the inevitable pressure that post-1987 building owners are about to face.

 

Robert Allender is a director of Hong Kong-based energy management advisory company Energy Resources Management.

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