Category: Cooling

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Hybrid Model: Combining Geothermal Heat Pumps (GSHPs) with Air Source Heat Pumps (ASHPs) for Maximum Efficiency and Cost Effectiveness

Although uncommon, systems composed of a hybrid, or mix of heat pump technologies are a better solution than any single type of heat pump, or heat pump with a supplemental fossil fuel combustion heat source. Well designed hybrid heat pump systems balance upfront costs with low operating costs, resulting in maximum system efficiency, cost effectiveness, and the potential for net zero emissions.

The market for heat pumps is experiencing strong growth. The growth is propelled by recent advances in technology that make heat pumps efficient over a wider range of input and output temperatures. Also, they also can be used for both heating and cooling; a desirable feature. There are several types of heat pumps, the two main ones being ground source heat pumps (GSHPs) and air source heat pumps (ASHPs). These heat pumps are usually deployed as a single type, or in combination with a fossil fuel heat source. Hybrid heat pump systems are those that use both ASHPs and GSHPs.

Heat pumps are “all electric”. All electric heat pump systems in new buildings will soon be the norm as efficiency, sustainability, and emissions reduction goals are prioritized. This is also true in retrofits of buildings with older heating systems like steam, oil-fired warm air furnaces, and similar gas fired equipment . As power from renewables continues to grow market share, and as fully electric systems have the potential to be dominant market leaders in efficiency, the greenhouse gas emissions footprint of these buildings will be greatly reduced. Appropriately designed heat pump driven heating and cooling systems have the efficiency potential to help achieve net zero emissions goals.

Heat Pump Principles

Heat pumps move heat; from a heat source to a heat sink. For heating applications, the principal energy source, be it sub-surface ground or ambient air, is on site, sustainable, and free. Heat pumps take the freely available thermal energy from the air (ASHPs) and from the ground (GSHPs), and boost it to a higher temperature with a compression/expansion cycle. The process is reversed in summer for cooling by taking heat from inside and expelling it to the air or the ground. Heat pumps are most efficient when the difference in temperature between the source (e.g. air or ground) and the output are close. In winter, as the source temp declines, the system loses efficiency. Likewise, higher output temperatures also lower efficiency.

Leveraging Heat Pump Strengths

Here in New England, the temperature in the ground 6 feet below the surface is a steady (approx.) 55°F year round. During the heating season, removing thermal energy from the ground reduces the ground temperature around the heat exchanger. It’s not unusual for the ground temperature around a geothermal borehole or horizontal loop to drop from 55°F to below 30°F. The ground temperature gets slowly replenished, from moving groundwater for instance, but it doesn’t get back up to its starting temperature until after the heating season is over.

With ground temperatures dropping by 20°F or more, system efficiency can easily drop by 30% or more. So if a stand-alone GSHP system is being designed for high efficiency, more boreholes are required to keep the system efficient. Boreholes are expensive to drill and fit up, and they can’t be located too close together. Also, sizing for 100% of the heat load with GSHPs doesn’t make good sense economically, as the heat load only approaches 100% for a matter of hours or days in the year. The answer is to include another heat source to supplement the GSHPs. As you will see, air source heat pumps make a lot of sense to be that supplemental source of energy.

Mixing Heat Pump Types to Make Hybrid Systems

As shown in the image below, most of the time that buildings need heat, the ambient air temperatures are in the 30s, 40s and 50s°F. In eastern Massachusetts, when the temperature is below 60°F, the air temperature is above 30°F for 77% of the time!

When air temperatures are in the 50s, efficiencies between GSHPs and ASHPs are roughly equivalent because the source temperatures are the same. When outdoor air temperatures are in the 40s, the GSHPs have a marginal efficiency advantage over the ASHPs. The difference in efficiency becomes more significant when temperatures drop to the 30s and below.

It’s worth examining the charts above. Most of the heating season, air temperatures are above 30°F. So if the key objective of running a heating system is optimized seasonal efficiency rather than moment-to-moment efficiency, there is good reason to continue to use ASHPs at these above 30F temps. By not using, or by using the GSHPs only sparingly at these relatively mild temperatures, in-ground temperature remains in the 50s so that the GSHPs can be used very efficiently when air temperatures are frigid.

Planning a Hybrid GSHP ASHP System

The key to implementing an efficient and cost effective heat pump installation is with thorough technical and financial planning up front. A good plan should encompass expected energy use and cost analysis, and include monitoring and performance benchmarking over time. Up front costs for GSHPs is much higher than for ASHPs. And as shown, ASHPs are just as efficient for parts of the year. So the plan needs to identify the right balance of costs and benefits.

A feasibility study and design analysis is the best way to approach this problem. The analysis should include a site evaluation, a building evaluation, and a parametric analysis of data related to u–pfront costs, hardware efficiency estimates, and operating costs. A full design plan should also include system control recommendations for balancing the operation of the hybrid system.

To truly optimize the system performance, tracking and benchmarking must be included. Every site is different, so GSHPs will not operate exactly the same at different sites. System performance data matched with weather data, time-of-day and time-of-season data will help to fine tune the system optimization.

Contact CIMI Energy for information about prioritizing energy investments, and planning for your hybrid heat pump applications. [CIMI Energy uses computer modeling and a range of data (including heat load calculations, building occupancy patterns, hardware costs, installation costs, energy costs, manufacturers efficiency data, etc.) to determine the best system plan.]

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Start Tracking Natural Gas Consumption in Real Time

It’s now possible to track natural gas consumption in real time, and here’s why you should. Knowing your consumption in real time makes it possible to associate consumption data with specific internal and external factors. These associations enable insights and actions into making improvements in key performance indicators (KPIs) like energy efficiency, conservation, and sustainability.

Looking at energy consumption in real time is not new.  Electrical power consumption has long been available in real time. That data is used by customers for behind-the-meter consumption analysis and benchmarking, by electrical utilities to determine demand rates, and for demand response.  In the case of real time natural gas consumption data, knowledge of the data by the customer has even broader and more powerful uses.

Using Real Time Natural Gas Consumption Data

Real time consumption tracking is useful for benchmarking and consumption analysis.  For example, matching up the rate of natural gas consumption in real time with indoor and outdoor temperatures, time of day, and other factors is useful for making comparisons with similar buildings.  Comparing the performance of “Retrofit A” vs. “Retrofit B” with real time data is a powerful way to maximize financial outcomes and system optimizations.

Building dynamics can be determined and used to reduce wasted energy.  If the data show that consumption causes indoor temperatures to overshoot their targets (e.g. on sunny mornings), a case can be made for installing a proactive energy control system.  A similar analysis can be used for cooling applications that use natural gas fired chillers.

For larger portfolios of buildings, benchmarking the KPIs of similar buildings, then applying an energy conservation technology to one of the buildings will quickly demonstrate how much energy can be saved with that conservation technology.  From there,  ROI calculations can be made to determine if that conservation measure should be applied to the other buildings.

Faster, More Accurate Insights

Having consumption data available in real time yields faster and more accurate insights.  The problem with the commonly used method of analyzing monthly billing data  is that there’s a lot of useful information that’s missing because it’s impossible to extract it from the data.  Billing data may include degree heating days and/or degree cooling days to match up with the consumption data, but that level of granularity has limited usefulness.  First of all, the data that adds up to degree days provides very little potential for drawing actionable insights.  The data doesn’t tell you what temperatures were and when (e.g. nights, weekends, etc) and what other factors were present, such as sunlight, wind, and occupancy level.  Whatever insights that can be derived from the billing data might take a whole heating season to compile, and even then the conclusions might still be missing the mark.

Real time data can be used to separate out or factor in variables.  In some cases it’s even possible to turn on and off energy saving features, adjust heating curves, or the like.  Doing so can help to quantify the level of impact from the new feature or setting. 

Real Time Energy Use Intensity (EUI)

For the purpose of illustration, here’s a simplified example of an hour by hour comparison of energy use intensity (EUI) on a scale of 1-10 over the course of 24 hours.  Lower average EUI with the same external factors yields lower energy costs and lower emissions.

The chart shows average hourly EUI dropping from 5.3 to 4.3 over two “identical” 24 periods.  Lowering EUI by approximately 10%, as in this example, is a substantial gain in efficiency.  In reality, data can be obtained in even shorter time increments for an even greater level of granularity.  As the data would be reported in therms (or similar),  it becomes easier to calculate costs and savings.

Natural Gas Consumption, Carbon Emissions and Carbon Tax

In addition to saving money through reduced consumption, building owners, managers, and REIT investors also gain knowledge and insight regarding the quantity of CO2 emissions that are eliminated by lowering gas consumption.  Lowering CO2 emissions has value, but the dollar value is difficult to quantify today.  However, wherever a price is put on carbon emissions, those calculations become straightforward and readily available.

Next Steps

Contact CIMI Energy to learn more about tracking your natural gas consumption in real time. 

CIMI Energy uses Energy Star Portfolio Manager and other tools to turn your real time data into action .

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Time to Make Energy Systems Proactive


Making energy systems proactive is a logical step forward in improving building energy efficiency

Proactive building energy systems can increase energy efficiency, improve comfort, lower energy costs, reduce peak energy loads, and increase property values.

What is a proactive building energy system? 

A proactive building energy system uses forward-looking input factors such as a building’s thermal momentum, near-term weather forecasts*, and demand costs to help determine system outputs.  Artificial intelligence (AI) software uses strings of data inputs and self-learning to calculate outputs and optimize system performance. 

A proactive energy system can be an add-on part of a very basic system, or it can can be integrated with a complex building management system (BMS) using open protocols or something else.

Contrast with today’s reactive energy systems

Nearly all building energy systems in North America today are reactive.  A typical example would be a temperature set-point being reached which triggers a relay that starts or stops one or more devices (e.g. pump, boiler, chiller).  There may be a variable component to the output, such as a distribution temperature selected from a heating curve. Commonly, a PID control determines the targeted output .  The production and distribution technologies themselves (e.g. condensing boilers, variable speed heat pumps, low-temp hydronic distribution, etc.) may be high efficiency in a stand-alone sense.  Nevertheless, they are limited by the narrow range of input data that are available to them.

Key differences between reactive and proactive system control

When external factors are changing quickly as is typical with nearly constant changes in weather factors (such as temperature), or when demand rates kick in, the reactive system loses its ability to optimize energy inputs.

Proactive energy systems on the other hand, use a range of data that includes forward-looking data that feed dynamic algorithms.  With proactive systems, there can also be some automated learning involved as improvements build on past improvements.  This is where AI can play an important role.  The AI is used to determine thermal inertia and thermal momentum, both of which are important for maintaining targets without over or under performance.  Reactive controls don’t have this ability.

Fortunately, there are more similarities than differences.  Proactive systems and reactive systems use the same building assets.  So from an upgrade perspective, it can be very easy to make the change.

Examples of proactivity in our lives

Although you may not have thought about it in this way, being proactive is a natural part of our everyday lives.  There are countless examples of being proactive that illustrate this point. 

Here are a just a few examples from one thing many of us do every day: drive a car.  Imagine you’re behind the wheel of your car and you’re driving down the road.  You see a sign that says “Stop Ahead”. This is an opportunity to be proactive.  You can take your foot off the accelerator and let the momentum of the car carry you forward to the stop line.  That’s proactive and saves a little bit of energy.  Now imagine you’re on a highway and you see a sign that says “Exit Right 1 Mile”.  If that’s your exit, you can look for a good opportunity to move over to the right lane.  That’s also being proactive.  A third example is when you drive with your high beams on at night, you’re gaining more “visual data”; you can be more proactive in dealing with upcoming road hazards. 

Of course, being proactive doesn’t necessarily have to lead to greater efficiency.  Proactive measures in energy are worth doing if they help achieve an objective like lower energy use, lower demand charges, or higher comfort. 

Thermal momentum quantified and used proactively

Being proactive helps increase efficiency in cases where momentum (including thermal momentum) and inertia are significant factors.  Thermal momentum is identified and used by AI for proactive control. 

As momentum is the product of mass and velocity, higher mass leads to higher momentum. As an example of this concept, heavy trucks benefit more from that “Stop Ahead” sign than does a car, and the car benefits more than a bicycle. A pedestrian may not benefit at all. So the greater the mass, the greater the momentum, and this is true in buildings as well.  Proactive AI control can account for momentum and inertia, and use it to improve overall efficiency.

A multifamily building is full of walls, floors, ceilings, carpeting, furniture, and plumbing.  Therefore it is relatively dense. An empty airplane hangar, a big space filled with nothing but air, is not dense.  As a result, changes in thermal energy can occur much more quickly in the hangar (assuming the building size, energy systems, and building envelopes are equivalent).  Because the multifamily building is denser, it takes longer to heat up, and is slower to cool down. All that mass inside the building is a heat sink.  That mass is absorbing and radiating back out thermal energy constantly.  If a heating system reacts to a set point being reached, and stops pumping heat into the building, that building mass will continue to radiate heat back into the living space.  If the outdoor temperature rises or sunlight streams in, the interior of the building can become overheated. 

Consistent building temperatures with proactive control

Another thing we can say about the multifamily building is that steady temperature is important to the people that live there.  Zeroing in on a set point temperature is a challenge that is easier with AI and proactive control.  Multifamily building owners know that the alternative to consistent indoor temperatures is either complaints, open windows in winter, or both.  It also can lead to higher energy costs, increased tenant turnover, and lower rents.

Lowering demand peaks in district energy with proactive control

In cases where there is an energy demand rate**, it’s possible for a proactive energy system to optimize operation to pre-load heating or cooling, and to hold back from the high demand peaks that drive demand charges.  As noted earlier, this is a valuable tool where building mass can be used to advantage.  This is most common for buildings connected to district energy networks, but is evident in other energy scenarios as well. 

Other applications for proactive energy control

Besides thermal energy, as described above, there are other forms of energy consumption that can, and sometimes do benefit from proactive control. 

  • Natural gas consumption
  • Electrical power (demand response)
  • District energy (heating or cooling)
  • Chilled water /sensible cooling

 
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*useful weather data may include the timing of upcoming temperature, sunlight, wind, and precipitation.

**energy demand rate – charged by some district energy utilities and electric utilities.  Demand charges may be tiered, and can vary by time of day and time of year.  In some cases demand rates change daily, with a day or less of advance notice.  Demand charges help utilities pay for the higher marginal cost of supplemental energy sources, or the cost of infrastructure needed to meet peak demand.

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Proving the Financial Soundness of Investments in Energy Use Reduction

Reducing energy use in buildings often requires an investment of capital, making an obligation of some sort, or both. As with any investment, there needs to be an acceptable financial return.

Returns are usually quantified in dollars saved. When looked at strictly from a dollars point of view, the investment can be looked at like other investments. The investment might even be compared to alternatives such as repaving a parking lot, expanding a workout area, or hiring more staff. Except it should be easier to quantify the return on the investment in energy reduction. Energy consumption can be easily measured. Things like parking lot improvements and staff may be desirable, but the returns are largely guesswork.

Payback Period

One of the easiest ways to quantify energy reduction return expectations is by estimating a simple payback period. Divide the expected annual savings by the initial cost.  If an expected simple payback period is really long, like 15 or 20 years, that investment can be quickly eliminated from contention without spending any more time on it.  There are probably  alternatives out there that will get a much faster payback.

Limitations to payback period as an investment metric include not quantifying changes in maintenance costs, which are not part of the initial investment. Also not accounted, but very significant are the returns that accrue after the payback period ends.  The time value of money is not accounted for.

Discounted Cash Flow Analysis (DCF)

Discounted cash flow accounts for the time value of money, and is therefore a metric that can be used if the quick-and-easy payback period metric passes muster.  DCF provides a closer look at the attractiveness of the investment opportunity.

DCF requires using a discount rate.  Different discount rates  make large impacts on the results of the analysis.  Therefore, it’s important to use one that is realistic, and even more important, to be consistent in using the same discount rate for all DCF analyses. 

Net Present Value (NPV)

Net Present Value also accounts for the time value of money, as  DCF is used to determine NPV.    Calculating the NPV results in either a positive number or a negative number.  A positive result usually indicates that an investment is worth doing.

Where NPV is less clear is when two different investment alternatives end up with positive NPVs.  The larger NPV is usually the best.  However, if more initial capital is required to reach that higher NPV, and that capital requirement comes at the expense of other things, such as necessary maintenance, then the answer is not so clear cut.

Internal Rate of Return (IRR)

The internal rate of return is another useful metric.  It shows the discount rate where the NPV of cash flows = zero (assuming NPV is positive).   The IRR is useful for determining if an investment is worthwhile.   If the IRR is higher than the cost of capital, and there is confidence in the assumptions made to determine the IRR, then the investment is probably worthwhile.

Valuation Effects

Another consideration for energy cost reduction is how the reduction in costs effects valuation.  A change to energy assets that creates a lasting and meaningful energy cost reduction most definitely will increase the value of the property or business.  Of course, to be true, the scale of energy use reduction must have a material affect on the cost structure. 

More details about the subject of how energy costs cuts affect valuation is available in this blog post.

Other Financial Considerations

In the world of energy efficiency, there are often additional factors to consider.  Some of these factors include:

  • No money down loans
  • Low interest loans
  • Energy services agreements (ESAs)
  • Tax credits
  • Tax deductions
  • Accelerated depreciation
  • Grants
  • Discounted fuel
  • Discounted power
  • Tradeable credits, and more.

CIMI Energy Can Help

CIMI Energy can perform these financial analyses and write up reports that help you to prioritize where to focus.  

Beyond the financial aspects of these investments, there are  environmental and sustainability considerations. CIMI Energy can help with this also.  If so desired, these considerations can be considered within the reports. 

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Evolving Past Outdoor Reset to Achieve Higher Efficiency


Outdoor reset technology, which uses a single outdoor temperature sensor to determine boiler temperatures, is being eclipsed by innovative control technologies that utilize multiple factors plus artificial intelligence (AI) to increase efficiency. 

As an efficiency solution, outdoor reset is a step above older technologies that didn’t use any external factors for setting the boiler temperature. However, with the most cutting edge technologies of today, there are many additional factors that can be taken into account, and which improve efficiency even more.

Outdoor Reset Technology

Outdoor reset is a technology that correlates boiler settings with the outdoor temperature in one spot outside the building.  The purpose of this match-up is to increase efficiency by lowering systemic losses of energy that naturally occur from the production and distribution of thermal energy.

Here’s how outdoor reset works.  Heating curves are shown in the image below.  One of the curves is chosen manually by an installer or commissioning agent.  The colder the outside temperature, the hotter the water that’s produced (or the longer the system runs, in the case of steam systems).   The heating curve slope is chosen manually (top image) and the level of the slope is also chosen (2nd image). 

Choosing an Outdoor Reset Curve

Often there are more than a dozen curves to choose from.  There is inherently some uncertainty in choosing a curve.  One could argue that choosing a curve is part art and part science.  The main objective is to find a curve that will work for the building, and that leaves some room for error.  Finding that a curve is not steep enough, for example, is only going to be discovered when it’s really cold out.  This is not a good result.  Yet by choosing a curve that’s steeper than necessary, some system efficiency is sacrificed.

Once the system is set up, the chosen curve is usually not changed more than once or twice, if at all, so there’s not much in the way of “fine-tuning”.   Curve adjustments are only made after the fact, based on tenant complaints.  If the curve is too steep, tenants will not complain, yet efficiency is sacrificed.

[Note that steam systems use outdoor reset, but don’t work exactly like this.  Read about steam systems here:  A Modern Innovation for Improving the Efficiency of Steam Heating Systems]

Upgrading from Outdoor Reset to Leanheat AI

Among the factors that can be used to improve system efficiency is a group of building-specific factors such as how a building reacts to sun (e.g. amount of sunshine, time of day and time-of-year), wind (speed and direction), and “thermal inertia”, how a building responds to the heating system.  Other important factors that are accounted for are individual unit temperatures, particularly those units farthest from the heat source.  What’s needed to account for all these factors is energy intelligence software using algorithms that learn and adapt.

Leanheat AI actually takes into account all these extra factors using local weather forecasts, plus in-unit temperatures and humidity levels that  are gathered by strategically placed sensors through cellular IoT technology. Without human intervention, a dynamic heating curve unique to the building is created.  Boiler temperatures are controlled better, so there’s none of the typical large buffer that’s always been a necessary part of outdoor reset-controlled systems. As a result, the heating system runs more efficiently.  In Finland, where Leanheat was first introduced, efficiency improvements of 10-20% have been realized. 

An added benefit has been lower technical maintenance costs, such as from identifying and correcting housing units where climate control is problematic.

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Outdoor Reset: A Soon-to-be Historical Relic


Outdoor reset technology, which bases operational temperatures on the outdoor temperature, is going to be eclipsed by innovative control technologies that can utilize more factors.  As an efficiency solution, outdoor reset is a step above older technologies that use no external factors for achieving a measure of system efficiency, but there are plenty of external factors that, if taken into account, would improve efficiency even more. Information about energy intelligence software that accounts for these factors follows below, but first a review of outdoor reset.

Outdoor reset is a technology that matches up heating and cooling temperatures with corresponding outdoor temperatures.  The purpose of this match-up is to increase efficiency by lowering systemic losses of energy that naturally occur from the production and distribution of thermal energy.

Here’s how outdoor reset works.  Heating curves are shown in the image below.  One of the curves is chosen manually by an installer or commissioning agent.  The colder the outside temperature, the hotter the water that’s produced (or the longer the system runs, in the case of steam systems).   The heating curve slope is chosen manually (top image) and the level of the slope is also chosen (2nd image). 

Choosing an Outdoor Reset Curve

Often there are more than a dozen curves to choose from.  There is inherently some uncertainty in choosing a curve.  One could argue that choosing a curve is part art and part science.  The main objective is to find a curve that will work for the building, and that leaves some room for error.  Finding that a curve is not steep enough, for example, is only going to be discovered when it’s really cold out.  This is not a good result.  Yet by choosing a steeper than necessary curve, some system efficiency is sacrificed.

Once the system is set up, the chosen curve is usually not changed more than once or twice, if at all, so there’s not much in the way of “fine-tuning”.  There’s just too much uncertainty for any one person or team to deal with.

Upgrading from Outdoor Reset to Leanheat AI

Among the factors that can be used to improve system efficiency is a group of building-specific factors such as how a building reacts to sun (e.g. amount of sunshine, time of day and time-of-year), wind (speed and direction), and thermal inertia.  Other important factors that are accounted for are individual unit temperatures, particularly those units farthest from the heat source. What’s needed to account for all these factors is energy intelligence software using algorithms that learn and adapt.

Leanheat AI actually takes into account all these extra factors and creates, without human intervention, a heating curve unique to the building. As a result, the heating system runs more efficiently.  In Finland, where Leanheat was first introduced, efficiency improvements of 10-20% have been realized. 

An added benefit has been lower technical maintenance costs, such as from identifying and correcting housing units where climate control is problematic.

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The Effect of Energy Cost Cuts on Property Values


Cutting energy costs has many benefits, not the least of which is increasing property values.  The example below shows the effects on property values for a $10,000 cut in energy costs.  If you consider that many properties can have their costs cut by some multiple of that figure, it’s clear that building (or business) valuations can be increased a great deal.

Investment Payback Considerations

For anyone considering the possibility of selling their property or business, the valuation should be factored into the payback equation.  That is, even if a sale were contemplated for as little as one year out, an investment in energy cost cutting technology can make good sense even though the investment exceeds the returns on energy savings in that first year.  That’s because the investment is not just lowering annual expenses, it’s also increasing the valuation by some multiple of that expense reduction. In other words, the investment results in a positive net present value.

Property Taxes

Another benefit of cutting energy costs is that the benefits over costs go directly to the bottom line.  There should be little to no effect on property taxes because the added property valuation from the cost cuts would not be seen until the building or business is sold.  In the meantime, energy cost savings accrue for the entire time that the asset upgrade is in place.

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Identifying Opportunities for Energy Savings

Energy is used in many ways, from heating to cooling to power and motion.  Opportunities to lower energy use are available in all of these areas.  The challenge is to identify the best areas for reducing energy consumption by balancing opportunities with their costs.  It’s possible to find a positive net present value (NPV) for many different upgrades.

Energy Audits

For many building owners and managers, an energy audit is a worthwhile first step.  Often there are some glaring opportunities that easily apparent.  Old technologies that use lots of energy are an example.  Energy audits can provide a list of items where deficiencies exist, which can be prioritized and addressed by order of value.

Technical Fixes

The low-hanging fruit for energy reduction efforts is through the application of technical fixes.  In new-builds as well as in retrofit situations, older technologies are being supplanted by new.   Many leading industrial companies such as 3M, GM, and Volvo Group have made great efforts to reduce their use of energy in their processes.  For example, Volvo Group announced in May 2018 that they have successfully reduced their energy consumption by 25% at their US facilities!  As a company in an energy-intensive business, Volvo Group’s savings is impressive, and impactful.  Reducing costs, lowering environmental impacts, and increasing competitiveness and investor returns are all resulting benefits.

Technical fixes are also available for other large energy users such as multifamily buildings, hospitals, and hotels.  Larger organizations may have in-house expertise, or work with management companies that dedicate staff to energy reduction efforts.  Smaller and medium size organizations in these business areas also stand to benefit from significant cost savings, and a corresponding increase in profitability.

Operational Fixes

As noted in the article at the Volvo link (above), that company is going beyond technical fixes:  “As we shift from technical changes — which tend to have a large one-time impact — to operational and behavioral changes that are more people-driven” the company’s objectives are to continue to reduce energy consumption. 

Companies like Volvo Group are showing great leadership in their commitment to, and success in  reducing energy consumption.  The behavioral and operational changes are a frontier that is ahead for everyone, though for the time being, for most, it is the technical changes which will bear the quickest payback.

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Cutting Energy Costs to Avoid Reverse Compounding

Energy use remains a low-hanging fruit for cutting costs. For many buildings, energy cost cuts of 10-50% are easily achievable. Energy costs are the single largest expense for some buildings, meaning that cutting energy costs can have an outsized impact on a building owner’s cost structure.

By not cutting energy costs where they can, and as soon as they can, building owners incur a reverse compounding (or negative compounding) of that opportunity. The chart below shows the effect of savings lost as if it were an expense. In this example we look at $10,000 in initial energy costs, 5 levels of savings, and the opportunity costs for not taking those savings compounded at 5%.

Reverse (Negative) Compounding

Multifamily building owners, managers, and tenants all benefit when energy costs are reduced. And cost cuts are both desirable and necessary. Competition in the multifamily sector is increasing. The total number of multifamily housing units increased by 587,000 units last year (2017), the most since 1971. That increased supply ripples across the housing markets, and puts pressure on every owner and manager, whether they be condo owners, multifamily REITs, municipal housing authorities, or direct investors.

The opportunity to cut costs is greatest for those paying the energy bills. Many building owners have already made changes to lighting, and perhaps upgraded to more efficient boilers and chillers. Others have entered into contracts that shave costs from their energy suppliers. There remain many others who don’t have the capital to invest in necessary upgrades. Fortunately, for all of these groups, the biggest opportunities for cost cuts remain. These opportunities are made possible through the application of innovative technologies.

Opportunities for significant cost savings are present whether a building has central heating and cooling, pays variable time-of-day energy rates, includes heating in rent, and more. When the scale of the savings opportunity is large, as it usually is, a solution can usually be found that’s suitable for almost any building.
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Advancing Beyond Outdoor Reset by Using a Building’s “Unique Energy Fingerprint”


It’s now possible to lower energy costs by applying bundled technologies that find and use each building’s “Unique Energy Fingerprint” (UEF). Our partner Leanheat has created energy intelligence software that bundles artificial intelligence (AI) with the Internet of Things (IoT) to determine each building’s UEF. The technologies integrate seamlessly with existing building assets. Building energy use is reduced through improvements in system efficiency.

Before this technology became available, this level of efficiency improvement was not achievable in a cost-effective way using current assets. Improvements that have been made have been limited by the available technology. The potential for improved control technology has expanded greatly. Leanheat has been able to focus on realizing that potential for the purpose of lowering building energy use and costs.

There are two major differences between using a building’s UEF and today’s common control optimizer, outdoor reset (OR). First is that the UEF is based on more variables (as opposed to just one or two with OR), giving a more precise picture of the heating and cooling load at any given time. Second, the technology that determines the UEF is able to anticipate loads, and thus to proactively optimize settings so that energy use is reduced.

Proactive beats reactive.

Outdoor reset is reactive. It operates on a curve tied to the outdoor temperature. Outdoor reset depends on finding a heating curve that matches up with the output with the load. Because outdoor reset is reactive, there’s an inherent uncertainty with the load matching. To compensate, outdoor reset curves must provide some extra buffer, and that extra buffer creates inefficiency.

On the other hand, Leanheat proactively anticipates the heating and cooling needs of the building. It does this in two ways. First, it factors in more data related to weather and climate. Factors include:

1. Present and anticipated outdoor temperatures
2. Present and anticipated solar irradiation (sunshine) on the building
3. Sun angle (latitude, time-of-day, and time-of year)
4. Wind direction and speed (“building wind chill”)

Other factors are indirectly (and automatically) factored in based on how the building responds:

1. Capacity of the heating and cooling system assets
2. Building mass & orientation
3. Insulation, windows, etc.
4. Air infiltration

Together, these are the variables that make a building’s UEF. Because it uses more variables, it’s able to get a more complete picture of the building’s energy load.

The second way that the Leanheat technology is proactive is that it monitors how building data correlates with naturally occurring changes in weather. As a result, the technology finds the UEF and its algorithms keep the building systems matched appropriately to current and incoming weather. The result is a typical cost savings of 10-15%.

Proactive heating and cooling control is especially important in buildings that react slowly to changes in weather and climate factors. Of course, any building with traditional controls can react slowly to a cold front with wind and rain or snow. Or when the cloud cover breaks up and suddenly the building is in full sunshine. Proactive technology controls the water temperature (or steam) with greater precision (and “less cushion”) than is possible with a reactive-based system like outdoor reset.

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Buildings and IoT (Internet of Things)

The evolution of building energy is moving toward more connectedness and control.  The objectives of this purposeful evolution are lowering costs and carbon emissions, while maintaining or enhancing comfort, safety, and reliability.  One innovation that will be key to achieving these objectives is IoT, or Internet of Things.

IoT in the context of buildings refers to a next generation of building controls and components that are connected to each other, and to external controls and monitoring. A key feature of IoT is the ability to automate outputs.  Automation using IoT helps optimize the efficiency of building systems such as heating, cooling, air exchange, lighting, snow-melt, water use, and more.

How IoT Automates

IoT systems and components operate in enhanced feedback loops.  Sensors gather data about heat, light, pressure, mechanical stress, noise, vibration, you name it.  That data is transferred through wires or wirelessly to a controller.  Before IoT, that control often comes from a straightforward PID-type control which attempts to maintain the output (such as indoor temperature) at a target value.

With IoT platforms, the control is more sophisticated, incorporating multiple inputs, outputs, and algorithms.   The computing power and control is cloud-based.  Algorithms make it possible to combine more inputs, and add more output flexibility than is the case with hard-wired frameworks using PID control.  As a result, one can say that the system is “orchestrated” through the cloud.

Examples of IoT in Buildings

IoT can monitor and control features that we don’t think much about, but that can have a material effect on energy costs and CO2 emissions.  For example, for buildings with large glass facades or south-facing windows, the control of window shade positions can make a big difference in energy use.  Window shade positions, and louver angles can be tied to variables such as indoor temperature, room occupancy, time-of-day, day-of-week, time-of-year, and even current and incoming weather.  By automating the control of light and solar heat gain, and radiative heat loss through glass, the building is more comfortable while using much less energy.

Another example of using IoT in a building is controlling the demand for power with a microcontroller. Let’s say that a large building has its utility power disrupted, and it switches over to back-up power, such as a traditional on-site generator or fuel cells.   The amount of power produced may not be as high as is normally consumed through the grid.   With an  IoT platform, a microcontroller can reduce power to motors, pumps, irrigation systems, ventilation systems, etc. that are equipped with ECMs (Electronically Commutated Motors) and VFDs (Variable Frequency Drives), and cut off the power to non-critical (and less efficient) on/off components.

By reducing demand for power, the building reduces energy use, making available back-up fuel supplies last longer. Reducing demand also saves money on equipment costs, by reducing the size of the equipment that’s needed for back-up.

Other Benefts of IoT Platforms

IoT is useful in reducing maintenance and repair costs, as motors and pumps, for instance, can be monitored for on-time, heat and vibration.  When a motor approaches its maximum “pitch count”, or begins to operate outside of its normal parameters, that motor can be fixed right away, swapped out right away, or added to a maintenance schedule so that it doesn’t create an unexpected shut-down at an inopportune time.

Furthermore, older equipment that continues to run within normal parameters can be kept in service, rather than doing the “safe” thing and taking it out of service early in order to avoid those unscheduled, and costly shut-downs.

Extra:  Integrating IoT with BIM (Building Information Modeling)

BIM is the 3-D modeling of a building process using specialized software.  This software makes the building process easier, by streamlining the information stream  (e.g. system design, engineering changes, etc.) that’s created and used for building a building.

BIM software programs (or SaaS) give more flexibility to the process of building a building because information can be kept up-to-date in real time, and can quickly provide cost scenarios for different options. These programs can also help to reduce costs and implementation errors.

As an increasing part of large building structures and systems, IoT platforms and infrastructure need to be integrated with these software programs.  As IoT continues to evolve, BIM needs to adapt and account for these changes.  This is a challenge that will be made easier as dialog and partnerships evolve along with the underlying technology.

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Resources: A further resource for IoT-related subjects is IoT Hub

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Pros and Cons of Energy Services Agreements (ESAs)

Energy Services Agreements (ESAs) are an innovation in how energy is managed and paid for. ESAs provide funding for energy-related capital improvements. They also provide other benefits as described in the list that follows. As might be expected, there are limitations that organizations need to weigh when considering entering into an ESA.

Pros of ESAs

1. No capital costs for retrofit borne by building owners
2. Net cash flow positive for building owners (usually)
3. Planning and execution of capital upgrade costs handled by ESA contractor
4. Maintenance of capital equipment managed, and costs borne by contractor
5. Organization management can stay focused on organization’s mission
6. ESAs often enable needed improvements to take place more quickly
7. Larger financial benefits can accrue when an ESA enables capital upgrades to be made near-term rather than waiting for capital to become available
8.  ESA payments can be treated as an expense
9. Gas is cheaper in some locations when used in CHP

Cons of ESAs

1. Upgrades to existing energy and water assets can cause temporary disruptions that need to be planned for
2. Contracting organization must have trust in ability of contractor to plan, execute and manage properly

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Energy Services Agreements (ESAs)

ABOUT ENERGY SERVICES AGREEMENTS (ESAs)
Energy Services Agreements essentially outsource your energy in a way that saves you money. Outsourcing has proven to be effective in many areas where core experience and focus are an advantage. Think about payroll services, food services, custodian services, headhunting services, etc. These are areas where outsourcing has taken hold long ago.

The production and consumption of energy has been going through big changes in recent years, leading to a great opportunity for organizations to cut energy costs significantly. To seize the opportunity, however, it takes specialized knowledge, an experienced team of engineers, and new capital equipment.

Ordinarily something like this would take a management team’s time and focus away from their core mission. It would ordinarily require a significant amount of capital to get it off the ground. Capital that could perhaps be preserved, or put to better use on something core to the mission of the organization.

So if an ESA can 1. save you money, 2. doesn’t distract your management team, and 3. requires no upfront capital, then you have a winning formula. That’s why we partner with RENEW Energy Partners, a pioneer in specialized Energy Service Agreements (ESAs) that require no upfront capital.

Advantages of an ESA
Operating Expenditures Saved Through Lower Energy Costs
ESAs save money. Typical ESAs involve replacing old, inefficient energy-consuming assets with new, more efficient assets. Examples include boilers, cooling units, lighting, building controls, etc. Experience has shown that reductions in energy use of between 30% and 50% can be achieved.

Savings Start Sooner
By moving forward with your energy upgrade through an ESA today, you start to gain the benefits of lower energy costs right away. Contrast this with an alternative scenario where you move forward with an energy upgrade independently, but 2 or 3 years further in the future. This alternative means that you miss out on 2 or 3 years of energy savings.

Lower Environmental Impact
By achieving large reductions in energy consumption, the environmental impact of operations is proportionally reduced as well. Carbon emissions in particular are reduced, thereby lowering the carbon footprint of your operations.

Increased Valuation
With an ESA, energy costs are lower, which leads to operating expenditures being lower. Therefore the profitability of the organization is typically increased. Profitability is obviously one key metric that organizations look at, as is valuation, which is also typically higher as well. A building with new HVAC, lighting and controls is valued more highly.

No Added Debt, Preservation of Capital
If an ESA bundles in all the capital, then there’s no upfront capital that’s necessary. Therefore, there’s no debt added to the balance sheet. Capital gets preserved, or deployed in other ways.

Outsourced Maintenance, Repairs & Insurance
By entering into an ESA, an organization essentially outsources all the fixed costs (i.e. equipment capital costs, maintenance, and insurance) related to the energy production. Additionally, during the length of the ESA, the ESA provider covers any equipment repairs, if any.

Less Risk of Breakdown or Failure
An organization that operates old and inefficient capital equipment bears a substantially higher risk of failure. Not everything that can go wrong is evident through inspections, or avoided through routine maintenance. The higher risk of failure leads to a higher risk of incurring repair costs, as well as going without energy for a period of time while the repair is being made.

Full Scope of Improvements Outsourced
By having an experienced team plan and manage the improvements, and optimize those improvements to maximize savings, the heavy lifting needed to make these big improvements is not placed on management.

Leveraging Team of Experts
The ESA comes backed with an experienced team of experts who have completed these types of projects in the past. The team includes financial investors, industry experts, and channel partners such as product manufacturers, engineers, and general contractors.

ESA Payments Can Be Expensed
ESA payments can be treated as a capital expense or as an operating expense.

Disadvantages of an ESA
No Depreciation
The only potential downside to entering into an ESA is that the “buyer” organization doesn’t get to depreciate the cost of the equipment. Of course, in most cases the equipment that’s being replaced is already fully depreciated, so there’s no depreciation impact in the financial statements of the organization.

Of course, if the buyer of the ESA invests in capital or labor instead of spending on the energy assets, that disadvantage is greatly mitigated, or even eliminated.

How an ESA is Priced and Paid For
With a RENEW Energy Partners ESA, no upfront payments are required. Energy audits (including a review of historical energy consumption), planning, and construction costs are all bundled into the ESA. Payments under the ESA are only a portion of the savings, so the organization making those payments is net cash flow positive from the start. The organization continues to pay its utility bills directly to the utility, which become lower, of course, after the investment in high-efficiency equipment is completed.

At the end of the term, the building owner can buy the project at fair market value or renew the ESA.

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Energy Services Agreements and Their Alternatives

CIMI Energy’s funding partner is a premier provider of Energy Services Agreements (ESAs). ESAs provide organizations with off-balance sheet funding for energy retrofits. For the term of the agreement, the provider of the ESA maintains ownership of the equipment, and provides maintenance. Energy costs are paid by the customer, with the ESA provider receiving compensation through a portion of  the energy large energy savings.

Owner execution risk is low, and there are NO upfront costs.  The net result for the customer organization is a reliable and cost-saving energy system  that requires no cash and no debt.  It’s an off-balance sheet solution with short and long-term benefits. For more details on ESAs, visit CIMI Energy’s ESA page.

Alternatives to ESAs

Self Funding

Energy retrofits can be achieved in a number of other ways.  The most common way is self-funding, either with cash on hand, or with a combination of cash and borrowing.  However, because the capital costs for large energy retrofits can be very high, this requires tying up a lot of capital.  Furthermore, by planning and investing capital for purposes outside the core mission of the organization, management can get distracted, and takes on execution risks.
Nevertheless, if an organization has a lot of free capital, and no higher yielding alternative uses, this can still be a good approach.  But if the organization can use that capital for other purposes, either right away or off in the future, then it’s prudent not to spend it on an energy retrofit.

Operating Lease

There’s less upfront capital required with an operating lease, and  less execution risk than self funding.  An operating lease is essentially renting, and payments are expensed.  This method of funding is not suitable for many types of integrated hard assets such as heating and cooling equipment, and other large equipment that’s an integral part of a building system.

Capital Lease

A capital lease is attractive for having low upfront cash requirements.  The downside to capital leasing is that the responsibility for project management and ongoing maintenance falls upon the lessee.  These are small issues when the products are straightforward, as is the case with trucks, furniture, and computers.  For complex projects like large energy retrofits, this is a management responsibility that can require added manpower.

Performance Contract / Energy Services Company (ESCO)

Performance contracts, also known as Energy Savings Performance Contracts (ESPCs) or Energy Management Services (EMS) have achieved some popularity in recent years.  They provide a way to fund capital improvements for energy management, maintenance, and energy generation.  They typically bundle together investments with short and long-term paybacks, with a resulting medium-term payback for the bundle.

The ESCO is the entity that proposes the ESPC (or EMS), and that carries the responsibility for engineering & design, equipment purchasing, construction management, maintenance, training, measurement and verification (M&V), etc.

Upfront capital costs are high.  On the other hand, there is a performance guarantee for up to 20 years as part of the contract.  Savings are shared between the organization and the ESCO.

Power Purchase Agreements (PPAs)

Similar to ESAs (see at top), Power Purchase Agreements (PPAs) require no capital, and have low execution risk.  While ESAs are for efficiency, PPAs are for power, typically produced on site.  A typical example is an installation of a large power producing asset, such as a district heating plant, where power produced is billed, as is the heat (byproduct).

Property Assessed Clean Energy (PACE)

PACE loans are loans which are paid for through property taxes.  They are specific for what they can be used for, with energy reduction or efficiency upgrades being accepted investments.  As they are geography-specific, they are only available in some communities.

CIMI Energy partners have the experience and expertise to manage PACE-supported projects, and others.  Together we can find the right balance of risk, capital, project management, and ongoing equipment management to meet your goals.

Summary

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Building Energy: Evaluate, Plan, and Act


An evaluation of energy use, energy assets and systems is a worthwhile undertaking for any large user of energy. Whatever the end use of the energy in question, a thorough evaluation provides a foundation or baseline for any planning and action that takes place after. Although the focus of this post is on building energy, the takeaway is equally valid for energy used to support industrial processes.

The goal of an energy evaluation is have enough information to create a strategy that upon implementation leads to lower costs and equal or better reliability. To find the best course of action for reducing energy costs and increasing reliability, an organization should make that evaluation comprehensive. To be comprehensive, think broad and deep. It should cover all aspects of power and heat consumption, including historical and anticipated consumption data, energy pricing, equipment condition, maintenance requirements, reliability, location, and so on.

How to Begin

Choose an Evaluation Plan

It may not be clear at first, but a decision will need to be made about whether the plan will include outside help. An internal team may be sufficient for when the broad set of energy assets are still in good operating condition, and if energy costs are satisfactory and a relatively small part of the budget. On the other hand, when energy costs are significant, and/or assets are unreliable, and causing extra maintenance or risk of failure, it’s probably worthwhile to bring in an external team. The external team adds some costs, but also brings expertise, and leaves the home team with the time to focus on their jobs.

In any case, an evaluation will start by evaluating energy assets as deployed at present.  Look at the condition of those assets and factor in the amount of maintenance that’s required to keep them in working order. Connect those energy assets in the evaluation with energy consumption and pricing data.

Also consider your building’s energy needs at present, and anticipate what they will be in the future.  Consider the expected remaining life expectancy of the equipment.  Prioritize which needs are most urgent, and which ones are not.

Power Review

Have a professional evaluate your power consumption and the price you’re paying for it.  Are there demand charges?  At what point do they kick in? Are there other energy providers worth looking at?

Cooling & Refrigeration

How does cooling factor in?  Is cooling something that’s used year round, or just at certain times of year?  If cooling is a significant expense, a cooling demand estimate should be calculated.  Chart it over time.  Does cooling cause a spike in demand?  Is that spike in demand causing expensive demand charges?

How does refrigeration factor in, if at all? If it does, an evaluation of refrigeration assets is probably worthwhile.

Heat Review

Review the demand and uses of heat.  Space heating is typically seasonal.  A heat loss calculation can be made to estimate demand for space heat over time.

Process heating is usually more consistent over time rather than tied to the heating season.  Still, process heating demand may ebb and flow based on time of day, or with some periods peaking, and others where it’s non-existent.  The more you know, the more useful the evaluation will be.

When you have all this information and data together, you can then make a judgement on the best course of action.

Nonlinear Effects of Efficiency Upgrades on Energy Use and Cost Savings

Care must be taken to factor in the nonlinear effects of asset upgrades. That is, when selecting efficiency upgrades, the energy reduction will count for more than the amount of efficiency increase. The cost savings will be greater. The following chart illustrates this using the examples of two sets of pumps; Pump #1 and Pump #2.

The example shows the nonlinear effects of an efficiency upgrade. Two choices are available in this example: an efficiency upgrade for two types of pumps, and the effects of an efficiency upgrade on each. With a much bigger drop in energy use connected with the efficiency upgrade of Pump #1, the example shows that cost savings are 3 times higher. This can seem to be surprising because the efficiency of the upgraded Pump #1 is still lower than the efficiency of Pump #2, even before an upgrade. To summarize this example, the graphic shows that the best upgrade, when faced with an either/or choice, is the one that decreases energy use the most, even though the increase in efficiency is much smaller.

A good example of this effect is the large but short-lived cash4clunkers program described below.

Taking Action on Findings

Your completed energy use evaluation should include a set of next step recommendations.  The recommendations should be weighted with regard to level of urgency, amount of expected costs savings, and expected increase in energy security, if any.  Those recommendations should be actionable in some way.  The recommendation could be direct, such as recommending an investment in CHP.  Or the recommendation may be to look more deeply into the calculus of an issue before significant capital is deployed or obligations are entered into.

Decisions will have to be made on how best to actuate changes.  An internal team may be sufficient to manage the process if the fixes are simple.  Alternatively, hiring an outside team will bring expertise to the process, and allow internal resources to be deployed in other ways.

Keeping Evaluations Up-to-date

If you’re a very large energy user, the energy evaluation should be templated and updated yearly.  For moderate consumers of energy, the original evaluation should be updated with new data every few years at least.

Paying for Energy Upgrades

Investments can be made in a standard way; out of free capital, a lease, or with loans.  As a further option, the equipment and installation can be obtained through an energy service agreement (ESA).  With an ESA, there is no capital or lease required. You purchase power and heat from the 3rd party investor but you don’t own the assets at the start.  Once the equipment is fully depreciated, you take full ownership.

Contact CIMI Energy for more information.

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The Federal government’s “Cash for Clunkers” program from 1999 was a prominent example of this effect. The program was one where “clunkers”, low-efficiency cars and trucks were permanently scrapped and replaced by cars with significantly higher efficiency. Although the primary purpose of the program was billed as a stimulant for the economy, the government also recognized that a relatively small pool of older automobiles was providing CO2 emissions far beyond their numbers. A lot of money was already being spent on increasing automobile efficiency, but those marginal gains were outweighed by the smaller numbers of old gas guzzlers people were driving around. An incentive was set up pay people to scrap their “clunkers” and buy a new automobile with higher gas mileage. The program was controversial as it was mainly judged on the cost vs benefit of the economic effects, where the economic returns from higher new car sales were judged to be less than the $3 billion spent on the program. Nevertheless, the program undoubtedly had an outsized effect on reducing auto emissions nationwide.