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Your Guide to Level 1, 2 & 3 Commercial Energy Audits: Differences Between Cost & Content

difference energy audit levels ashrae 1 2 3

What IS the difference is between a Level 1, 2 or 3 ASHRAE energy audit? Which one should I do? How much will it cost? As someone who helped write the book on energy audits and the standard that defines the scope of each, I’d like to help demystify these concepts.

In this post you’ll learn:

• Why there are different audit levels?
• What is the difference between a level 1, 2 and 3 audit?
• How to decide on an energy audit level
• What impacts the cost of an energy audit?
• How to hire a qualified energy auditor
• A bit about targeted audit approaches

Why are there different types of energy audits?

You can conduct an energy audit to varying degrees of depth, and the cost and hence value of that audit will vary too. The idea behind defining audit levels is that one can use them as shorthand for the audit scope. So, if you get bids from two vendors for Level 3 audits, they ought to be comparable. However, this level of detail took a while to define.

When you search for energy audits, you’ll see the name ASHRAE, which is a global organization supporting a sustainable built environment. ASHRAE defined energy audit levels in the first publication of Procedures for Commercial Energy Audits back in 2004. The problem was the original energy audit definitions for Levels 1, 2 and 3 were vague and didn’t go into much detail about scope.

I was the primary author of the second edition of ASHRAE’s publication in 2011, which clarified the level scopes somewhat. But there was still too much room for interpretation to really compare “apples to apples” when bidding audit work.

Then came ASHRAE’s Standard 211 (that I also chaired). It provides a more tightly defined scope and consistent reporting requirements for energy audits. Standard 211 is used by cities around the U.S., and agencies procuring services, to set the scope for energy audits.

What is the difference between audit levels 1, 2 and 3

If you want to get into the nitty gritty of scopes, be sure to check out Standard 211, which lays out the requirements clearly. Here I’ll summarize each level and their key differences. The following diagram provides a nice overview.

energy audit level 1 2 3 differences chart

Key differences between ASHRAE energy audit levels

Benchmarking (aka Preliminary Energy Analysis)

Although benchmarking (defined specifically as Preliminary Energy Use Analysis in Std 211) is not an official level, it is a key step in the audit process and will be found in all levels of energy audits. Benchmarking a building compares its energy use against comparable building stock to examine its operating performance. One of the key metrics for building benchmarking is energy use intensity (EUI), which expresses total building energy use per square foot per year (kBtu/sf/yr).

Level 1

The purpose of a Level 1 energy audit is to identify the rough potential for energy savings in a facility, and it includes benchmarking. A Level 1 audit also includes a list of recommended energy efficiency measures (EEMs), sometimes called energy conservation measures (ECMs), that outlines savings opportunities in the building.

Types of energy efficiency measures

The different types of EEMs are no-cost, low-cost or capital intensive. No-cost or low-cost measures are those that can be done within operating expense budgets (i.e. within the OpEx budget), without significant capital expense that requires more planning (CapEx budget).

  • No-cost measures are projects that have no significant associated cost (except internal labor) and are often operations and maintenance (O&M) changes. These measures reduce energy usage and costs with no capital investment, except for the time and effort of the on-site maintenance personnel.
  • Low-cost measures are projects with relatively small capital outlays. These measures significantly reduce energy consumption and costs while requiring relatively little capital investment.
  • Capital intensive measures are projects with higher capital costs. These measures significantly reduce energy consumption and costs, but also require significant capital investment. “CapEx” projects typically are budgeted a fiscal year in advance.

EEM cost, savings and priorities in a level 1 audit are described as qualitative only (as opposed to quantitative). This means that their exact costs and savings are not required, and are described qualitatively as high, medium, or low. A Level 1 used to be referred to as a “walk-through” audit but that label was dropped in the standard – it’s simply a “Level 1”.

Level 2

A Level 2 energy audit is what most people think of as an “energy audit.” Auditors spend more time on site to speak with facility staff, review drawings not previously provided and perform a detailed building survey.

The Level 2 report includes all of the information from the Level 1, plus a site-specific analysis of recommended EEMs, including expected implementation costs, expected savings, and economics (simple payback or simple ROI).

In addition, the Level 2 includes a summary of the building energy-using systems broken down by end use, its occupancy, historical billing data and observations.

The summary table of a Level 2 is what many owners focus on – the list of recommendations, savings, and economics of each, as shown in the example below.

Example EEM summary from a Level 2 energy audit (Right click and click Open in New Tab to see larger version)

Level 3

The Level 3 audit builds upon a Level 2, but expands on those recommendations to develop the recommendations into projects, and reduce risks associated with uncertainties.

For a Level 3, substantial projects are required to have vendor bids or cost estimates, and the analysis is expanded through measurement or modeling. The concept is to reduce investment risk by increasing precision around costs, savings and ensuring project feasibility.

A Level 3 audit is rarely requested directly by customers as a first step but is sometimes achieved as projects are developed following a Level 2. However, for some contractual vehicles such as performance contracts, a Level 3 may be required by the client as a means of increasing the due diligence around project viability and savings claims.

By the way, if you see references to audit levels I, II and III those folks are a bit asleep at the wheel. Roman numerals were replaced with numbers in the second edition of the Procedures for Commercial Energy Audits back in 2011.

The following table summarizes the process and results of the different energy audit levels.

Differences between ASHRAE Level 1, 2 and 3 Energy Audit Analysis, Building Investigation and EEMs

 Level 1Level 2Level 3
Building energy use analysisBenchmarkingBenchmarking Energy use broken out by end useSame as Level 2
Building investigationBrief, walk-throughComplete site inspection to perform detailed building surveySame as Level 2, plus energy use logging or a significant period
Energy efficiency measure (EEM) cost, savings and economicsQualitative Cost, savings & priorities described as: high, medium or low No economics.Quantitative Rough cost, savings and economics for all measures, except complex projectsQuantitative More accurate than a Level 2, with vendor quotes

How to choose an energy audit level

Each energy audit level provides unique value to building owners and can be used at different times depending on project needs. Your objectives with the building are the key to determining audit levels, and therefore costs. You need to ask yourself what are you trying to achieve?

  • Are you looking for investment opportunities in a building where you pay the utilities, and want to reduce operating costs?
  • What is your budget for improvements?
  • Are you looking for no-cost or low-cost ways to save money?

As an auditor, I’ll look very differently at a building if I know that the owner is only looking for projects with a simple payback of two years or less. There’s no need to waste my time estimating boiler replacement costs in that scenario. But if the owner is a university, that will own and occupy the building for the foreseeable future, their planning needs, and the appropriate level of effort for planning future investments, is much different.

What impacts the cost of energy audit?

The cost of your audit will primarily depend on the level, size and facility type, and perhaps the experience of your auditor (more on that shortly). You should choose your energy audit level based on your intended outcome, because the right level will deliver a good balance between cost and value. A good auditor will discuss your needs to provide a cost and audit that allows you to make smart, cost-effective decisions that meet your efficiency goals.

Should you ask for cost per square foot?

I believe that asking for audit costs based on floor area is asking the wrong question. For that type of pricing, the assumption is that the bigger the building, the greater the level of effort, but the premise is flawed. The level of effort to audit a 200,000 sf hospital versus a 200,000 sf warehouse is hugely different. The hospital has a chiller plant, VAV air handlers, strict indoor air quality requirements, health and safety risks, multiple space types, etc. The warehouse may have two light fixture types and 20 identical package unit air conditioners. So a $/sq ft approach just doesn’t make sense.

If you must bid a “normalized” approach, I recommend asking for costs based on EUI or energy cost intensity (ECI); such as BTU/sf, kWh/sf or $/sf of energy usage or spend. EUI and ECI are at least in proportion to the base case energy use and aligns more closely with the level of effort needed, and with the value of the investigation. Using the example above, the hospital may use four times the energy use of the warehouse, so the value is more in line.

How to get the most value for your money

Going cheap on an energy audit is a poor investment. Don’t make the mistake of going with a low-cost bidder, unless your only goal is to meet your city’s mandatory requirements and you have no intention of using the results.

Fixed energy audit costs

There is a threshold level of effort required to complete any audit – simply to get to the site, benchmark the energy use of the building, and report out the basic systems and options. For larger buildings, that has little impact on cost, but there are fixed costs on the small end of the spectrum.

You’ll get what you pay for, and sometimes even less

In my opinion, there’s an unwritten rule pertaining to energy audits where you get what you pay for, except below a threshold you get nothing. Or worse you actually get an audit that, if you follow the recommendations, you negatively impact the value of your building, so you end up throwing good money at bad stuff.

The Kelsey Curve (thanks Barry Abramson!) aka The Difference Between Cost and Value of an Energy Audit

What does this curve say?

If you pay too little for an audit you get no value, or even negative value!

Effective energy auditing requires a broad knowledge of building systems and expertise. Only experienced auditors can effectively identify:

  • what energy projects are viable,
  • what opportunities are most cost-effective, and
  • what will maintain the safety and comfort of building occupants?

Do you really want to trust the health and safety of occupants, and value of your building to the low-cost leader?

Hiring a qualified energy auditor

Qualifications for energy auditors are the same for each level. Many assume that lower paid staff can perform lower-level audits, but that’s not true. A Level 1 actually requires the highest level of knowledge and experience because the recommendations are made based solely on that experience instead of analysis. A Level 1 done by entry level staff is a very shaky foundation to build your energy plan upon. You can learn more about how to hire a qualified energy auditor in this post.

Targeted audit approaches

While the audit levels are a handy reference, they might not meet your exact needs and sometimes a targeted audit approach is more appropriate. ASHRAE Audits as they are defined are a “whole building” effort but sometimes you have more focused questions like that chiller’s getting old;

  • what’s the payback on replacing it?
    • When is the best time to do that?
    • What kind of performance requirements should I ask for?

Those kinds of questions can be done to varying level of precision too, so that the level of effort is in line with the potential costs and energy savings. Anyone qualified to perform energy audits would be happy to answer those questions too.

Moving forward

Energy audits are an amazing tool for facility managers and building owners. They can provide the roadmap to reducing operating expensing by lowering utility bills, identifying actions that extend the life of your equipment, decreasing maintenance costs, maximizing ROI, and avoiding regulatory fines. Energy audits have been at the core of kW Engineering’s services since 1998 so we have a lot of expertise to guide you towards the level of investigation that meets your needs and objectives. If you have any questions, contact us any time and one of our friendly and knowledgeable energy efficiency engineers will be in touch soon.

Additional resources

For more information on getting started with an energy audit you can read more in these posts:

Is retro-commissioning a better choice than an audit? Sometimes you need to do the best with what you have, and the cost of performing retrofits might not be in the budget right now.

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