from James Dunne – The CREative Department
I recently performed a valuation on a multi-building office complex in Brooklyn that will be installing a new cogeneration energy system to replace the complex‚Äôs current boilers, while supplementing its electricity usage. This is the second such property in Brooklyn I‚Äôve appraised in the last year that has installed or will install a co-gen system to power its buildings.
Cogeneration is system that creates heat and generates electricity through the burning of natural gas along with the recirculation of excess heat in a system. Typically, the use of microturbines or reciprocating engines generates the electricity through the combustion of natural gas, plus the system can also drive the chillers for a large HVAC unit.
Initial capital costs for a cogen system can be significant. In the complex I recently looked at, capital costs would be roughly $2.8 million for removal of the old boilers and replacement of old equipment with the new system; however, with cost savings of roughly $500,000 per year, or between a 53% to 58% savings in energy costs, the payback would occur in about 5.5 years. With a life expectancy of over 20 years, substantial savings would occur over the long run.
What was more interesting was that a bank was willing to fund this capital cost, with no up front capital outlay from the building owners. Even with the financing payments, there was still a significant net savings. The cost was further brought down by a NYSERDA (New York State Energy Research and Development Authority) grant to cover a portion of the capital costs.
With increases in taxes, labor costs, materials, and energy costs in recent years, building owners in NYC should explore cogeneration. It will benefit the environment, and the bottom line.
Additional note: NYU upgraded to a new gas-fired cogen system at it’s main campus last year.¬† There’s a lot of good info on the system and cogeneration here.