The Cost Savings of Energy-Efficient HVAC Systems for Commercial Buildings

The Cost Savings of Energy-Efficient HVAC Systems for Commercial Buildings - Lee Company

When it comes to cost savings in commercial buildings, facility managers and business owners often focus on obvious avenues like reducing staff or cutting back on resources. One often overlooked opportunity for significant cost savings lies in energy efficiency — more specifically, energy-efficient heating, ventilation, and air conditioning (HVAC) systems.

Not only can these modern marvels help your business cut costs, but they can also pave the way for more sustainable business practices.

If you’re considering an upgrade to an energy-efficient HVAC system for your commercial property, here’s what you need to know.

Understanding Energy-Efficient HVAC Systems for Commercial Buildings

An energy-efficient HVAC system operates to provide optimal heating, cooling, and ventilation with the least amount of energy consumption. According to the U.S. Department of Energy, heating, cooling, and ventilation account for 44% of the energy used on-site in commercial buildings. So you can imagine what kind of savings you could rack up with an energy-efficient HVAC system…

But how is this efficiency measured?

Energy efficiency is measured by a rating system. The higher the rating, the more efficient your HVAC system will be.

Here’s a more in-depth look at these ratings and what they mean for your building:

SEER and EER Ratings

SEER (Seasonal Energy Efficiency Ratio) and EER (Energy Efficiency Ratio) are two critical ratings that measure the energy efficiency of HVAC systems. A high SEER or EER rating indicates greater energy efficiency.

The SEER rating calculates the cooling output of an HVAC system during continuous operation in a typical season, divided by the energy it consumes in Watt-Hours. This was updated and replaced by “SEER 2” in 2023, which defines the output during an entire year (instead of just a season). Although you’ll still see the standard SEER rating referenced on equipment manufactured prior to 2023.

EER, on the other hand, is the ratio of an HVAC system’s cooling capacity (in British Thermal Units per hour) to the power input (in watts) at a specific temperature.

So an HVAC system with higher SEER and EER ratings will use less energy to provide the same amount of cooling, translating to lower utility bills for commercial buildings and a more sustainable operation.

Residential and Small Business Standards

It’s worth noting that in 2023, residential federal requirements for HVAC systems increased by 1.0 SEER, bringing the new standards to 14 SEER in the northern states and 15 SEER in the southern states. Similar standards apply to commercial buildings and, as most business owners know, rules and regulations for businesses tend to be stricter than those for residential property owners.

As a small business owner, if you’re considering an electrically operated, air-cooled unitary air conditioner under 65,000 Btu/h, here are a few options for minimum SEER and EER ratings:

  • For a split system (single phase), the minimum efficiency should be 15 SEER and 12.5 EER.
  • If the split system operates in three-phase, it should have a minimum efficiency of 13 SEER.
  • If you opt for a single package system (single phase), the unit should have a minimum efficiency of 15 SEER and 12 EER.
  • With a single package system (three-phase), the minimum efficiency should be 14.0 SEER.

Again, these light commercial heating and cooling solutions would be a good fit for small businesses like single-location retail stores, cafés, or office spaces.

Big Commercial Buildings and Large Facilities Standards

If you’re managing larger facilities, particularly those housing industrial and machining equipment or those with high ventilation needs, the stakes are different. In these cases, you’re likely looking at a more efficient and powerful system.

We’re talking about HVAC systems with SEER ratings ranging from 18 up to the mid-20s.

The type of business you operate, the location of your facilities, and your specific heating and cooling needs play a significant role in determining the right SEER and EER ratings for your HVAC system.

But ultimately, a higher SEER or EER rating can contribute to more energy-efficient operations and, consequently, significant cost savings for your business.

Types of Energy-Efficient HVAC Systems for Commercial Buildings

Choosing the right energy-efficient HVAC system for your commercial building is crucial to maximizing cost savings and energy efficiency. Here are some popular options available on the market:

Variable Refrigerant Flow (VRF) Systems

VRF systems offer precise temperature control and operate only at the required capacity, reducing energy waste. This makes them an excellent option for large commercial buildings with different cooling or heating needs across various areas.

Heat Pump Systems

Heat pump systems are a versatile choice, offering both heating and cooling solutions. They transfer heat rather than generate it, making them up to four times more efficient (which leads to major energy savings!).

Geothermal HVAC Systems

Geothermal HVAC systems use the stable temperature of the earth to heat and cool buildings, reducing the energy needed to reach comfortable indoor temperatures. While their installation can be costly, the long-term savings and lower environmental impact can be substantial.

Smart HVAC Systems

Modern HVAC systems are often integrated with smart technology, allowing owners or managers to:

  • Control the system remotely
  • Monitor energy usage in real-time
  • Set up personalized settings based on zoning or occupancy
  • Automate temperature control
  • Receive notifications for servicing and maintenance requirements

Building automation for energy efficiency is becoming a norm rather than an exception in commercial properties. Not only does it cut your expenses, but it adds value to your property as well.

The Financial Benefits of Energy-Efficient HVAC

Energy-efficient HVAC systems provide impressive cost savings through multiple avenues. To begin with, they utilize innovative technology that dramatically reduces energy consumption, directly translating into lower utility bills for commercial buildings.

How substantial are these cost savings?

According to a study by the U.S. Department of Energy, commercial buildings can save up to 40% on energy costs by upgrading to energy-efficient HVAC systems

But the financial benefits don’t stop there:

Longer Equipment Lifespan

As a commercial building owner or facility manager, the process of balancing immediate expenses and long-term savings is an intricate part of your role. When considering your HVAC systems, this often translates to deciding between continually patching up an aging, less efficient system or investing in a new, energy-efficient one.

While it might be tempting to extend the life of your existing system, know that the upfront costs associated with an energy-efficient HVAC system aren’t just an expense but an investment.

Energy-efficient HVAC systems are designed with the latest technological advancements and superior construction, significantly outliving their traditional counterparts. Their intelligent operating systems minimize wear and tear, leading to fewer breakdowns and less frequent replacements.

Increased Operational Efficiency and Decreased Maintenance Costs

As we mentioned above, energy-efficient systems operate with higher efficiency, which often means fewer breakdowns and maintenance requirements. This results in a noticeable reduction in maintenance costs over time, freeing up funds for other aspects of your business.

Consider, for example, Cookeville Regional Medical Center in Tennessee, which replaced its old HVAC system with an energy-efficient model. They saw a decrease in energy bills and maintenance costs, along with increased comfort for employees and patients. You can read the case study here.

Potential Tax Incentives, Rebates, and Financing Options

Governments and utility companies often offer incentives to businesses that invest in energy efficiency. These could be in the form of tax credits, rebates, or attractive financing options, further sweetening the financial proposition of energy-efficient HVAC installation for commercial buildings.

Thanks to the recent Inflation Reduction Act (IRA) of 2022, you may be able to claim a tax credit of up to $5 per square foot for energy-efficient improvements (such as HVAC upgrades). Learn more about credits and deductions for businesses here.

And, of course, there are plenty of ways to expense your HVAC costs, whether that’s the cost of installing a commercial HVAC unit or just the maintenance that comes with it.

***Lee Company is not providing tax advice. The content on this webpage has been prepared for informational purposes only. You should consult a tax professional if you have questions regarding federal tax credits.

Return on Investment (ROI) Analysis for Energy-Efficient HVAC Systems

Every business decision is ultimately a financial one. So when considering an upgrade to an energy-efficient HVAC system, it’s essential to understand the ROI. This involves calculating the initial investment, the annual energy cost savings, and the payback period (the time it takes for the cost savings to repay the initial investment).

Let’s consider two very different real-world scenarios – a mid-sized grocery store and a physician’s office – to illustrate the potential cost savings:

Scenario 1: Mid-sized Grocery Store

Suppose a mid-sized grocery store incurs an average annual electricity cost of $160,000. Based on data from the Environmental Protection Agency (EPA), implementing an energy-efficient HVAC system could reduce energy consumption by 20-30%.

  • At a 20% reduction, the store could save around $32,000 per year (20% of $160,000).
  • At a 30% reduction, the savings could jump to around $48,000 per year (30% of $160,000).

That’s a sizable reduction, representing between 6% to 9% of total annual costs!

Scenario 2: Physician’s Office

Now, let’s consider a physician’s office with an average energy bill of $2,000 per month or $24,000 per year.

  • With a 20% reduction in energy consumption, they could save around $4,800 annually (20% of $24,000).
  • A 30% reduction would translate to annual savings of about $7,200 (30% of $24,000).

For both scenarios, these savings are significant and contribute directly to the bottom line.

Obviously, every business will be different — a stadium, retail store, restaurant, and so on, would each have different energy needs and potential savings.

However, these examples illustrate the tangible financial benefits that can come from investing in an energy-efficient HVAC system. It also shows how the upfront investment can be offset in just a matter of a few years (i.e. the payback period).

Factors to Consider for Cost Savings

Several factors contribute to maximizing the cost savings that come with energy-efficient HVAC systems. For instance, a properly sized system, expertly installed by a qualified contractor like Lee Company, can significantly enhance performance and efficiency.

Regular Maintenance and Servicing

Proactive maintenance ensures your system continues to operate at its highest efficiency. HVAC professionals can identify potential issues before they become costly repairs, extending the system’s lifespan and maintaining the expected cost savings.

Building Occupancy Patterns and Zoning Strategies

By understanding and adjusting for building occupancy patterns, zoning strategies can be implemented for more efficient resource use. For example, heating or cooling can be reduced in areas that are not in use, resulting in further energy and cost savings.

Duct Sealing and Insulation

The U.S. Department of Energy reports that 25-40% of the energy used for heating and cooling by a furnace, heat pump, or air conditioner is lost through the ductwork. That’s a ton of unnecessary waste!

Ducts should be inspected for leaks as part of an efficient HVAC system and sealed or insulated when necessary. This helps to reduce energy consumption and keep heated and conditioned air from escaping.

Additional Benefits of Energy-Efficient HVAC Systems

Apart from cost savings and energy efficiency, energy-efficient HVAC systems bring other advantages to the table:

Improved Indoor Air Quality and Occupant Comfort

Energy-efficient systems are often better at regulating temperature and humidity levels, improving indoor air quality, and making the building more comfortable for its occupants. This can boost productivity and reduce health-related issues for your employees (and what owner doesn’t want fewer sick days for their employees?). For customers, you’ll create a more enjoyable experience that encourages them to return.

During the Covid-19 Pandemic, energy-efficient HVAC systems became a necessity for many organizations to keep their facilities safe. Read our case study here on a Nashville hospital that employed negative pressure strategies with a new high-efficiency HVAC system to reduce the spread of the virus.

Increased Property Value and Marketability

With the growing focus on sustainability, energy-efficient buildings are highly sought after. An energy-efficient HVAC system can increase your property value and its marketability to potential buyers or renters.

Reduction of Environmental Impact

Reducing your energy consumption is a great way to make your business more environmentally friendly. This is particularly advantageous for companies interested in increasing their sustainability efforts.

In fact, 57% of businesses have already begun implementing energy-efficient and eco-friendly machinery, technologies, and equipment. And with 88% of consumers reporting that they are more likely to remain loyal to businesses that support environmental causes, energy-efficient HVAC systems can open up opportunities for positive PR and customer retention.

Choosing a Commercial HVAC Contractor

Choosing the right partner to guide your transition to energy efficiency is crucial. You need a qualified expert who understands your business and can provide tailored solutions, just like Lee Company.

Here’s why Lee Company is a smart choice for your commercial HVAC needs:

  • Vast Technical Knowledge: Our team brings decades of commercial HVAC expertise to your facility, ensuring you receive top-tier service.
  • Predictive Analytics & Preventive Maintenance: Using the latest technology, we provide actionable insights that promote cost-saving preventive maintenance.
  • Around-the-Clock Support: Our professional technicians are available 24/7, ready to handle your commercial HVAC needs at any time so business can stay open as it should.
  • Facility Management Expertise: We support your team with comprehensive facility management and maintenance, so you can focus on what you do best.

Are you ready to experience the cost savings and comfort of an energy-efficient commercial HVAC system? Contact Lee Company today and discover the perfect energy-efficient solution for your commercial property.

Interested in an energy-efficient HVAC system for your commercial property?

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