Sustainability tends to conjure up images of green buildings contributing to a healthier global environment, and that is certainly one aspect of it. But we all know that money talks, and building owners and managers are going to justifiably expect to see a solid returns on their investments (ROIs) in sustainable building measures. Contractors who understand the importance of maximizing ROI will be positioned to better sell sustainability technologies, such as combined heat and power (CHP), thermal energy storage, and dedicated outdoor air systems (DOAS).

Benjamin Locke, CEO of Tecogen, said there are a number of factors that make CHP systems attractive to building owners, including power resiliency for times when the electrical grid goes down, high system efficiency, and a reduced greenhouse gas footprint. However, the most fundamental drivers for CHP are economics and ROI.

Locke explained that the situation most favorable to CHP is when there is a high spark spread in an area, meaning that electric rates are medium to high and gas rates are low.

New York City, California, and much of the Eastern seaboard have a high spark spread, making the ROI for CHP an attractive three to five years. In Chicago and much of the Midwest, gas rates are low, but so are electric rates, meaning the ROI can take longer.

“That’s not to say people don’t install CHP in those areas, it’s just that they may be looking at an ROI of eight years instead of five,” Locke noted.

The basic ROI calculation for CHP is fairly simple. Locke explained the savings numbers are the reduction in electricity purchased from the grid plus the savings provided by the recovered heat. The costs include the cost of maintaining the unit and the cost of the gas to run the unit. Subtracting the costs from the savings provides an annual savings number from CHP — dividing the installation costs of the unit by the savings determines the ROI.

“That’s a very basic and generic calculation,” Locke noted. “More sophisticated models drill down deeper and take into consideration time of day rates, demand charges on the electric bills, and the specific CHP unit’s efficiency and run time. Other benefits, such as the increase in property value that a CHP system provides, are more difficult to calculate and are usually determined individually by the building owner.”

Buildings that are good candidates for a short ROI investment in CHP include those with large numbers of beds, such as hotels, long-term care facilities, and prisons. 

“Beds usually imply the need for hot water for showers and laundry,” Locke said. “Everybody uses electricity — the key to finding a good CHP site is identifying a place that has a large hot water load.”

Locke added that the future looks bright for sustainable technologies, such as CHP.

“As everyone knows, the utility model is changing away from the centralized utility to a decentralized structure of delivering power to buildings, and CHP is a part of that,” he said. “In addition, the severe weather events we’ve been experiencing have everyone concerned about losing power for an extended period of time. The grid going down typically doesn’t interrupt the flow of natural gas, so CHP can enable people to maintain their power indefinitely, and many building owners are deciding to install CHP systems now rather than wait for an event later.”


A thermal energy storage system can effectively shift all or a portion of a building’s cooling needs to off-peak hours. These systems, applied in conjunction with alternative energy, can store excess energy whenever it is available, such as at night or during daytime hours in the shoulder seasons, then discharge it in the morning and evening when electrical demands are higher. This helps smooth out the energy demand profile, allowing more alternative energy sources to be available on the grid.

According to Al Fullerton, systems leader, Trane, there is no typical ROI time frame for an investment in a thermal energy storage project. Many factors contribute to ROI, such as the building size and application, the building’s geographical region, and the utility rates and rebate programs that are available in each state. Some utilities offer a special rate or incentive for thermal energy storage or peak-load reduction, driving businesses and schools looking to reduce their energy costs to adopt thermal energy storage.

Fullerton said HVAC contractors can ensure an owner gets maximum ROI from an investment in a thermal energy storage system by incorporating the latest control technology.

“Next-generation integrated controls, such as Trane® Tracer AdaptiView™ chiller controls, can improve the overall performance of thermal energy storage systems,” he said. “Proven control strategies, such as integrated temperature and flow logic, respond to a wide variety of conditions and maintain reliable, efficient operation. In addition, with the use of control technology, peak energy usage can be monitored remotely or on-site, and alerts can be set to notify building managers of peak energy thresholds and chiller downtime. With data storage capabilities, data can be analyzed to optimize future system efficiency. Contractors can be comfortable that thermal energy storage is a mature technology and can be applied with minimal risk to the contractor.”

Fullerton added that the ability to store energy thermally provides significant energy savings and operational flexibility while simultaneously increasing the usefulness of alternative energy.

“By shifting energy use to times when renewable energy is available, thermal storage systems contribute significantly to the emerging vision of energy in the future,” Fullerton said. “In addition, today’s ice storage systems are more cost-optimized and flexible than ever, offering high efficiency, low water use, and lower environmental impact.” 

He concluded that air-cooled chillers with ice storage offer additional financial and maintenance benefits as well.

“Many system designers recommend excess capacity or oversized chillers, which leads to higher initial and maintenance costs,” Fullerton said. “By moving some of the system redundancy into thermal storage rather than excess or oversized chillers, systems using air-cooled chillers with ice storage have increased emergency cooling capacity with competitive or lower first cost and lower maintenance, energy, and water costs. Building owners with thermal storage typically enjoy up to 30 percent operating cost savings.”


Ed Ferrier, senior manager, engineering, LG Air Conditioning Technologies, said a number of factors contribute to a larger return on investment with a separate dedicated outside air system.

Ferrier explained that with conventional rooftop systems, outside air is combined with return air, resulting in the system bringing in conditioned outside air even when it isn’t needed, creating substantial inefficiencies.

In contrast, a separate rooftop DOAS with modulating capacity control allows building owners to benefit from only conditioning outside air as needed.

Conventional rooftop systems also require the use of ductwork, whereas with a DOAS, building owners can maximize savings by choosing a more efficient HVAC system, such as a variable refrigerant flow (VRF) system. When a DOAS is paired with a VRF system with heat recovery, building owners can benefit further from offering personalized comfort through simultaneous heating and cooling in addition to capitalizing on the efficiencies of heat recovery.

Ferrier added that in cases where comfort is an important factor to the profitability of a building, such as a hotel, building owners can benefit from the fact that a DOAS with VRF is a more effective system to reduce humidity levels, ensuring occupant comfort.

In addition, when the DOAS and VRF system are on a common platform, such as LG’s MultiSITE platform, both systems can be controlled. This augments return on investment for building owners by simplifying the integration of the systems, reducing the cost of controls installation, and allowing facility managers to simultaneously optimize both systems for enhanced performance.

“Building owners care greatly about the profitability of their building, which means they want a good return on their investment,” Ferrier said. “When it comes to a DOAS with LG’s VRF solution, the contractor can offer their customers two highly efficient systems with superior tenant comfort rather than a single, more inefficient system. Based on an energy analysis we’ve conducted, we have seen an average of 26 percent savings through the use of the LG DOAS compared to ASHRAE 90.1 baseline system.”

The full LG energy analysis is available at

Publication date: 11/13/2017

Want more HVAC industry news and information? Join The NEWS on Facebook, Twitter, and LinkedIn today!