Monthly Archives: July 2012

In this article, we discuss 11 different advantages of energy deregulation.

Find the “Right” Product

Purchasing energy through the utility is only offered as an indexed product. The utility either generates or purchases the supply and charges a fee and the price fluctuates with the market. For instance, natural gas demand is much higher in the winter in the Northeast and prices typically rise with demand. Purchasing energy from a competitive supplier allows the end-user to manage rate fluctuation exposure and choose a product that fits savings goals and risk tolerance.

Lower Energy Costs

Many professionals are able to lower overall energy costs for their facilities by finding the right product and purchasing competitive supply. In some cases, the savings are significant and can make a direct positive bottom-line impact for the customer. Typical supply side savings are in the 10-20% range (based on utility rates at the time end-user enters into a competitive supply contract).

Price Certainty

Fixed price products decrease rate volatility and hedge against future pricing increases. The supply rate charged by the utility is a variable rate and can fluctuate based on many factors that affect the supply cost. Customers electing a fixed price product will eliminate rate fluctuations during the contract term.

Flexibility

Deregulation has created products of all shapes and sizes depending on the unique needs for a particular facility. Unlike purchasing supply from the utility in a one size fits all product, competitive purchasing allows the end-user to create a forward thinking energy purchasing strategy.

Reliability

The reliability of your electricity does not change because you take advantage of deregulation. The infrastructure that transmits and distributes the energy is still handled and guaranteed by the regulated utility regardless of where you purchase the supply. You still contact the utility if the power goes out in a storm or if you have questions about your bill.

Products and Contract Terms

Prior to deregulation, utilities charged a monthly rate and the customer paid whatever the utility charges (usually determined by costs plus a fee). Deregulation has delivered a wide range of products and terms for the customer to choose from. The influx of new products also creates risk for the end-user because you could potentially choose a product that costs rather than saves money depending on unique energy needs. Many end-users enlist a broker to find the best product, term and pricing. Such options include:

Fixed Pricing

The rate is fixed for the duration of the contract. The options for fixed pricing include “all-in” or “energy only” contracts. Fixed pricing requires forward-looking intelligence to determine where the energy market is today and where it is expected to go throughout the term of the contract.

Index Pricing

An index pricing structure is essentially how the utility charges customers for supply. The pricing is an index price plus a supplier adder. Customers can typically purchase an index product through competitive markets at a rate lower than the rate charged by the utility.

Discount

A discount rate floats with the utility, but is discounted a certain percentage. Other pricing mechanisms that are advantageous to particular customers based on usage profile: “block and index”, “caps” and “collars”.

Terms

The contract term is a key component for any deregulated supply contract. Customers should carefully analyze forward-looking energy pricing estimates before locking into a long-term contract. All supplier quotes should provide pricing for multiple terms: 6 months, 12 months, 24 months, 36 months etc. Pricing for multiple term lengths will also provide insight into how the utilities view future energy pricing forecasts.

Options

An option contract gives customers the ability to lock into a fixed price per KWH contract to reflect current pricing at any time during a variable price contract.

This list of energy efficiency measures and projects is a great place to start in determining which activity will have the greatest impact on your building, with your tenants and on your operational cash flow:

Building envelope improvement
- Weather/infiltration sealing
- Increased insulation
- High performance window replacement
- Low emissivity reflective window film (to reduce unwanted solar gain in the summer and increase the R-value of windows in the winter)
Lighting
- “Delamping,” i.e. permanently turning off/disconnecting unneeded light fixtures
- “Relamping,” i.e. replacing inefficient light fixtures or lamps with high efficiency fixtures/lamps
  - Convert T-12 fixtures/lamps to T-8 or T-5
  - Relamp 32 watt T-8 lamps with 28 watt T-8
  - Eliminate incandescent bulbs
  - Convert all exit lighting to LEDs or switch to photoluminescent signs that require no electricity
  - Beware of retrofitting with indirect lighting – while classy looking it may require more fixtures and more wattage
- Increase reliance on task lighting in order to decrease general illumination without adversely affecting productivity
- Improve lighting controls
  - Occupancy sensors
  - Timers (stand alone or energy management system or EMS-interfaced)
  - Daylight harvesting sensors and controls including simple photocells
- Convert outdoor lighting to high pressure sodium
- Eliminate/reduce outdoor decorative lighting
- Consider LEDs for general indoor and outdoor illumination (the technology is almost there)
- Consider outdoor solar powered-LED light fixtures (this technology is also almost there)
- Require white or off-white wall paints for maximum light reflectivity so adequate lighting levels can be achieved with minimum lighting wattage
- When renovating spaces, design new lighting for less than 1.0 watts per square foot
Boilers
- Replace old boilers with new high efficiency boilers
- Do not oversize replacement boilers
- Retrofit boilers with variable flame burners
- Consider multiple high efficiency modular boilers to improve efficiency by better matching hot water heating loads
- Consider replacing boilers with cogenerators (which also produce electricity)
- Control boiler output water temperature with outside air temp reset so boiler does not need to heat water hotter than necessary
- Retrofit boilers with flue gas/stack heat recovery
Chillers
- Replace old chillers with new high efficiency chillers whose efficiency curve best matches your load profile
- Do not oversize replacement chillers
- Operate at peak efficiency (by adjusting water flow, load, condenser/evaporator water temps, etc.)
- Replace old cooling towers with new high efficiency towers
Air conditioning
- Replace older AC equipment with maximum efficiency models
- Discontinue use of inefficient window units
- Reduce AC operating hours
- Turn off reheats and stop controlling humidity levels during the cooling season
- Clean cooling coils on a regular basis
- Maximize use of “free cooling” with economizer cycle
- Use open windows and passive cooling when mechanical air conditioning is not needed
- Close windows when air conditioning is in operation
- In dry climates consider evaporative cooling
- In humid areas consider desiccant cooling
Temperature control
- Reduce temperature settings in winter
- Increase temperature settings in summer
- Maximize night, weekend and holiday temperature setbacks
- Install tamper proof or remote thermostats
- Control space temp remotely by EMS
- If occupant controlled thermostats are required, then limit range of adjustment to ensure campus temperature policy compliance
Motors, fans and pumps
- Adjust operating schedule to minimize run hours (review and update periodically)
- Replace old motors, pumps, and air handling units with high efficiency
- Control motors serving fans and pumps with variable speed drives (VSDs)
- Operate VSDs at maximum acceptable turn-down; vary by time of day and occupancy; also vary by season
- Convert constant volume fan system to variable air volume
- Reduce outside air volume during morning warm-up cycle and where/whenever possible through damper settings and demand control ventilation
- Reduce needless pumping by eliminating three-way by-pass valves
Laboratory Ventilation and Fume Hoods
- Switch to a “green chemistry” teaching program that doesn’t require fume hoods
- Turn off 100% outside air ventilating systems whenever possible, e.g. in teaching labs whenever classes are not in session; shut down or slow down related supply fans
- Decommission/remove unneeded fume hoods and reduce fan system outside air volume
- Eliminate unneeded fume hoods by using ventilated storage cabinets instead of hoods for chemical storage
- Retrofit constant volume fume hood ventilation systems to variable air volume
- Retrofit conventional fume hoods with low-flow hoods and reduce outside air volumes
- Retrofit these systems with heat recovery
Heat recovery
- Run around loops
- Heat wheels
- Heat pipes
- Desiccant wheels
- Air-to-air heat exchangers
- Install heat recovery
Energy Management Systems (EMS)
- Switch to direct digital control (DDC) systems
- Purchase EMS systems which are easy to program (so programming capabilities will be fully utilized by facilities staff)
- Utilize and optimize use of EMS energy conservation programs, e.g.
  - Optimal start/stop
  - Night setback
  - Demand shedding
  - Remote programmed lighting control
Fuel Switching
- Consider converting electric space and water heating to natural gas
Energy Intelligence & feedback systems
- Accessible display units that show energy use and savings can have dramatic results in energy use behaviors

First, you need to verify that your state is deregulated for the energy source you wish to purchase in a competitive market. Next you must determine whether you have the capability and expertise in-house to find the right supplier and products for your organization. Purchasing energy supply through a competitive supplier is risky if the purchaser in uninformed or unfamiliar with how energy markets work. Brokers and aggregators negotiate power purchase agreements on a daily basis and have a good real time feel for the market and where it’s heading. Oftentimes a broker and or aggregator can procure energy at much lower rates than an end-user could get on its own. Make sure to follow our energy deregulation checklist before determining the best way to purchase energy.

Energy Aggregators

Aggregation is the grouping of utility customers to purchase as a group. Pooling purchasing power could result in more favorable pricing compared to the individual members purchasing based solely on their unique usage. Developing the right energy purchasing strategy is a complex challenge for busy facilities managers or business owners wearing many different “hats” within an organization. A reputable and qualified energy aggregator or broker acting as an independent energy advisor can help guide the person responsible for energy costs. Outsourcing procurement often results in significantly higher savings for the end user while mitigating downside risk. Choosing the right partner is crucial to maximizing the advantages created through deregulated energy markets.

Advantages:

You can reduce internal administrative expenses and maintain focus on your core business. The energy market is complicated and it may make sense for you and your business to outsource procurement services to a company specializes in energy procurement to save you money and time.
You can share fees with other entities in an aggregation group. This is an advantage for any entity because you can likely spread the aggregation/broker fees out with the other entities in the aggregation group. Lower fees combined with more purchasing power will result in further cost reductions.
Suppliers are more interested and pay more attention (more competition) with a larger purchasing block. Economies of scale come into play for aggregators. The more KWH combined in an aggregation pool lowers the fixed cost/KWH and results in lower rates for the users involved in the aggregation group.
-Lower rates result from combining dissimilar user profiles. Some businesses use more energy in the winter months and others in the summer. Irregular usage may result in higher rates from competitive markets because the suppliers can’t forecast usage throughout the year. Joining an aggregation comprised of end-users with dissimilar usage profiles may result in lower rates.

Factors to consider before joining an aggregation:

Size of load – The amount of energy your building or business consumers during a period of time (Kwh or Btu).
Load profile – Your profile refers to how or when you use energy. Some businesses use approximately the same amount each month. Other businesses, for instance seasonal businesses, use more energy in some months and significantly less during other months. The inconsistent usage may increase pricing available to a particular customer.
Risk tolerance – Different products present different levels of risk. You should evaluate the appropriate level of risk for your firm before determining the best product.
Contract length flexibility – You should verify that the contract length for the aggregation group fits your particular risk profile and needs.

Here is a map of energy deregulation in the U.S. as of 2012:

Click on map for full sized image.

Business owners and property managers are under constant business pressure to improve tenant services, make their buildings more “Energy Efficient” and accomplish all of this while reducing operating expenses year-over-year. For these reasons (and others), they are always looking for ways to save energy.

These “opposing” objectives bring to light the business challenges faced by business owners each and every day. They are too busy to focus on energy efficiency with so many other things interrupting their daily activities. When the Utility bills arrive, they just pay them and move on, as they are keenly aware of the impact on operating costs.

Business owners have a general understanding of how much the utilities cost each month but they are not necessarily aware of how those costs convert into consumption of kilowatts, kilowatt hours, Therms, gallons or cubic feet.

For example, this baseline tracking brings to light why the electricity usage might be high on a weekend when:

The factory is closed but the heat and air conditioning are BOTH running with no-one in the building!
An air compressor is running when no machines are operating.
The lights are on in the building at midnight when there is no second shift.
Every desktop computer monitor is left on when the entire staff goes home for the evening.
Common area lighting remains on all weekend. A potential for additional savings exists with the installation of motion sensors and conversion to compact florescent lighting.

The path to reducing energy expenses is best served by using energy management software as a service to establish a baseline energy consumption profile. This easily tracks and monitors the costs of energy and the volume of kwHours and natural gas therms consumed by buildings, and begins to analyze why certain things are happening.

For business owners and property managers to begin saving money on their energy bills, they should consider these and other methods to pay less for energy as well as use less energy.