Current and Future Economic Analyses for ASHRAE Standard 90.1

1
Current and Future Economic Analyses for ASHRAE
Standard 90.1
Cost Effectiveness Criteria for Commercial
Property Development
Nashville June, 2004
2
Envelope AnalysisRefinement Options

• Scalar
• Re-evaluate Values of the Scalar Ratio Variables
• Expand the Variables Included in the Scalar Ratio
• ECM Analysis
• Account for HVAC Downsizing with Envelope
  Upgrades
• Use Regional Fuel Costs
• Use Local First Costs
• Other
• Expand Number of Various Building Types
• Expand the Prescriptive Envelope Options Through
  a Mapping Technique
• Software Version of Standard Instead of a Printed
  Document

3
Re-evaluate Values of theScalar Ratio Variables

• Interest
• Discount
• Fuel Escalation
• Tax Rate

4
Interest Rate

• There Are No First Costs
• Total Monthly Payments
• Capital Cost vs Operating Costs
• 6 to 9

5
Interest Rate

• Federal Treasury Prime Interest Rate
• 20 year average 8.20
• 15 year average 7.72
• 10 year average 7.43
• 5 year average 6.60
• FHA Mortgage Rate
• 20 year average 10.36
• 15 year average 8.96
• 10 year average 8.32
• 5 year average 8.07
• Personal Development Experience
• 3.25 to 8.5

6
Discount Rate

• Future Benefits Are Worth less than Present
  Benefits
• Delayed Gratification
• Alternative Investment Opportunities
• Interest Rate less Inflation Rate
• 2 to 8

7
Discount Rate

• Federal Treasury Discount Rate
• 20 year average 5.35
• 15 year average 4.68
• 10 year average 4.18
• 5 year average 4.00
• LBNL Analysis of Commercial Unitary Air Cond
  Heat Pump, Life-Cycle Cost
• Discount rates from 3.0 to 7.3
• Portland, OR Energy Office Analysis of Building
  Performance
• Discount rates from 3.0 to 5.8

8
Fuel Escalation Rate

• Most Sensitive Variable
• Compound Effect
• Gas (Nom Escalation) 3.5 - 5
• Electricity (Nom Escalation) 1.5 - 3

9
Tax Rate

• Marginal Rate
• Combination of Federal and State Taxes
• Gross Profits vs Net Profits
• 20.1 Combined Rate

10
Tax Rate
100 Biggest Ohio Corps Avg Tax 0.03
11
Expand Variables Included in the Scalar Ratio

• Resale Value
• Depreciation
• Appreciation

12
Resale Value

• Valuation - Capitalization Rate (Cap Rate) (10
  Average)
• Net Operating Income (NOI)
• NOI / Cap Rate Building Value

13
Depreciation

• 35 year Straight-Line
• 28,571 / 1,000,000

14
Appreciation

• Normal Increase in Investment Value
• Compound Increase Caused by Reduction of NOI
• 4 Appreciation for 30 Years 225 Increase in
  Value

15
Scalar Ratio
16
Market Failures

• Split Incentives
• Investor Expectations

17
Future Options

• Software Version of Standard Instead of a
  Printed Document
• Performance Requirement Rather Than Prescriptive
  Requirements