Category: Partners

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Energy Storage Systems

Energy storage systems (ESS) present an opportunity for lowering energy costs, particularly for large energy consumers like industrial plants, hospitals, and large multifamily complexes. This is especially relevant in Massachusetts and New York, where incentives make the financial benefits compelling.

What is the value of storing energy?

ESS provide value in several ways.  For one, these systems can be configured to help utilities  reduce the energy transmitted during peak weather events, such as exceedingly hot or cold days.  The batteries are loaded in anticipation of the peak event, and subsequently disbursed of energy during the peak event.  By disbursing the energy in this way, the ESS acts like a small scale power plant.   This lowers power transmission spikes and the very high costs often associated with them.

Grid stability and resiliency are additional benefits.  If part of the grid goes down, for example, during a weather event like Superstorm Sandy, the energy in the batteries can be used to provide power in a local area, if they’re integrated within a microgrid.

A fourth point of value is in the context of renewable energy, particularly solar and wind energy.  Both energy sources are growing quickly, particularly in Massachusetts and New York State.  Solar and wind capture energy, but not always when it’s needed most.  So the ESS stores excess (or cheaper) energy when it’s produced, and then disburses it when its value is optimized.

ESS Optimization

As noted, customer-sited energy storage systems provide benefits to power producers and power distributors.  These benefits are monetizable for the owner of the ESS.  In a typical scenario, the utility pays the owner of the ESS for power drawn from the ESS to the grid. 

In a second common scenario, the energy is used on-site to flatten out demand and reduce utility demand charges.  Our partner, Enel X provides value in both scenarios.  The company’s software optimizes the revenue for the owner of the ESS, buying power when it is cheaper, storing it in the ESS, and either using it when utility demand charges kick in, or selling it back to the grid.

Development and Ownership of the ESS

Obtaining an ESS is not akin to buying an appliance or new motor… there’s much more scale and complexity with the storage system.  As you might expect, the capital requirements are significant.   Fortunately, they do not have to be born by the property owner.

For most ESS installations, the engineering, planning, installation, ownership, maintenance and operation of the ESS can all be farmed out, typically to one single entity.  That entity is proficient in doing (or managing) all of those things.  For most organizations considering an ESS, this is the type of arrangement that’s most suitable.  Exceptions might be large Fortune 500 type companies that have the scale to develop and maintain the specialized knowledge and expertise that’s needed to optimize the ESS.

The ESS developer/maintainer/owner attempts to maximize revenue from the equipment.  The owner of the property on which the ESS sits gets paid a percentage of the revenue derived from the ESS.  Because the payment is a percentage, it keeps the interests of all the parties, ESS owner and property owner, aligned.  

For the property owner upon which the ESS sits, there’s no capital required.   The ESS generates revenue with no downsides.

Resources

A good extra resource on this subject, with content that goes beyond battery storage can be see on this page published by the Federal government’s Energy Information Administration. 

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Peak Demand Flattening for Natural Gas Utilities

Using Demand Flattening to Alleviate Capacity Constraints

Shifting natural gas demand away from demand peaks has several benefits for utilities.  The most obvious benefit is that it helps alleviate  natural gas constraints that can arise on very cold and very hot days.

Capacity constraints occur when demand is highest. They also can occur in local areas where older gas lines require a lower limit for safe pressure levels. (Higher pressure in older distribution lines may also contribute to higher rates of methane leaks.)

Flattening demand also can help reduce or eliminate low pressure at distal points in the distribution network.

Visualizing Peak Demand and Demand Flattening

The following chart shows an example of what demand looks like over the course of one winter day for a large multifamily property.  Over the course of this 24 hours, the building consumes 1020 therms of gas.  In this example, the peak consumption is in the morning, from about 6:00am to 10:00am.  A second, smaller peak occurs in the late afternoon and early evening. 

The example shows the exact same consumption over the 24 hour period.  The only difference between the two is that the red line is flatter, spreading out the demand, and maxing out at 50 therms/hour, a 17% reduction from the 60 therm/hour peak. 

Incentivizing Demand Flattening

Ideally, the best and most cost effective way to manage capacity constraints is to incentivize natural gas consumers to willingly shift their demand away from peak hours.  This can be true during all times of the year.

This is already a common practice with power utilities, and to some extent with district energy utilities.  In both cases, the utility is charging more for consumption during peak periods, in the form of a demand rate.  What consumers of electrical power do to reduce their demand costs is either lower demand during peak summertime hours by raising thermostat settings, or they shift consumption to off-peak times of the day (e.g. making ice at night for cooling during the day).

As noted, power and district energy utilities use demand charges.  This is the “stick” approach.  Utilities could also offer a “carrot” in the form of either a monetary benefit, or some other kind of reward.  There are many rewards, both tangible and intangible, that can be considered.

Using Leanheat AI Technology for Peak Demand Reduction

Leanheat technology success to date has been reducing peak demand in district heating networks.  The technology applies equally well for natural gas distribution networks.  The only difference is the source of energy:  hot water, steam, or natural gas. 

The technology works best is dense buildings with a constant, but not necessarily consistent demand for thermal energy like apartment buildings, nursing homes, and retirement communities.   The consumer (or tenant) receives more consistent and comfortable indoor temperatures.

Leanheat uses artificial intelligence (AI), combined with lots of data; each building’s “energy fingerprint”, and near-term weather forecast data.  Virtually any kind of incentive can be embedded in the software as long as the incentive can be digitized for the underlying algorithms.

Alternative Methods of Peak Demand Reduction

Lowering peak demand can be accomplished in several ways:

  1.  In some cases it’s possible for a customer to shift to an alternative (supplemental) form  of energy.  This isn’t common.
  2. It can be possible to lower peak demand through conservation during peak periods. 

An example of raising or lowering the thermostat settings by several degrees for a limited period of time has been field tested in Southern California.  One downside of this approach is that it requires thousands of typically single family homes to sign on in order to make an impact.  Another downside is that it only reduces peak demand for a few select days, as opposed to every single day with the Leanheat approach.

Conclusion

It makes sense for natural gas utilities to reduce the intra-day volatility of natural gas delivery.  It reduces peak upstream gas pressure requirements on a daily basis, and provides more consistent pressures at the ends. 

Leanheat is the logical technology choice for achieving meaningful reductions  peak natural gas demand.

 

 

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Optimizing the Energy Economy of District Energy

Optimizing district energy use from the building-side (i.e. point-of-use) has many benefits, including lower costs and higher building value.

District energy is the go-to  energy source for many buildings in urban areas.  For a new building, connecting with a district energy network can mean lower up front costs, as investing in boilers or furnaces, air conditioning units, chimneys, and large boiler rooms are rendered unnecessary.

District energy-connected buildings benefit from no energy equipment maintenance.  The district energy provider of course maintains a large plant, and those maintenance costs that it incurs benefit from it’s economies of scale. Those costs are passed on to the customer in the price of energy.

District Energy Rate Structures

District energy providers can charge for the energy they provide in a variety of ways. First, they can charge differently depending on the type of customer, such as multifamily, industrial, or office building. 

Second, there may be different rate structures depending on past energy use.  Users of energy can be shifted by the provider from one rate group or another based on past consumption levels.  Third, and adding some complexity, each one of those rate groups can consist of multiple tiers of energy use, where the first “x” amount of energy use is charged at one level, the next batch of energy used above that would have another rate, the third quantity of energy above that another rate, and so on. 

A fourth component of district energy costs is time-of-use rate.  Some district energy providers charge higher rates, for example, between 8am and noon on weekdays, at certain times of year. These rates are usually posted and published well in advance, and they usually don’t change except for seasonally.

A fifth component is the demand rate.  District heating companies can charge for each unit of energy, such as the peak amount of steam, or BTUs passing through the meter in a short period of time, like 15 minutes, over the course of a billing period.  Providers can define their demand rates differently, so the details matter.

Day-Ahead Rates

Another rate type that is not so common in North America at this time is the day-ahead rate.  It’s possible for district energy providers to anticipate demand ahead of time.  With this knowledge, they can post a rate or rates for the following day.  For example, if the energy provider expects heavy demand from 8am to 10am the following day, they can notify customers of a higher rate during that time slot.  Customers with appropriate technology can then respond by shifting more of their energy consumption to before and after that time slot if the difference in energy costs is significant.

Technology Solutions

Technology that uses artificial intelligence (AI) has been developed that makes it possible to reduce all of these charges, by using the district energy more smartly.  A successful example of this is our Finnish technology partner Leanheat. 

Leanheat’s technology has been successfully deployed in district heating-connected buildings that collectively house tens of thousands of apartment units.  Those apartment units have their heating and cooling costs bundled into the rent by the building owners.  The Leanheat technology saves the building owners from 10-20% over previous energy consumption, without any sacrifice in comfort. 

Contact CIMI Energy for information about the Leanheat district energy optimizing solution.

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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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Improving Steam System Efficiency


Yesterday’s state-of-the-art steam heating systems will benefit from an upgrade to the innovative heating technology developed by Leanheat. This technology lowers energy use and costs. It does this by getting steam heating systems to run more efficiently.

Unlike hydronic systems which can easily regulate supply temperatures, steam systems always boil water to make steam. Making steam from hot water requires what’s known as a phase change (liquid to gas). Boiling water through this phase change requires a lot of extra energy*, so to wasting the energy, it’s important to limit the amount of steam produced to as close to what’s necessary to maintain comfort as possible. Steam systems are very sensitive to systemic heat loss because there’s a high temperature difference between the steam and the much lower temperatures around the system. Latent heat loss is costly, and drags down system efficiency to a much greater degree than is the case in the aforementioned hydronic systems, for example. For larger steam systems, there’s also an energy consuming vacuum pump that runs to distribute the steam. So the overall energy footprint of these systems is high.

Steam systems as they were initially constructed contained only passive energy saving technology. They relied on pipe insulation and good boiler design. But because getting even a little bit of heat through the building requires expending a lot of energy, any cycling on and off, plus overshoot effects lead to very inefficient operation.

Today’s steam systems typically operate with the first generation of active efficiency improvements. Outdoor temperature, together with a heating curve are used to limit the amount of time the boiler produces steam. For example, milder days require less heat, so by using the outdoor temperature as a factor to limit the time that steam is produced in each cycle, the costly waste of latent heat (see below) that results from overshoot (and thus overheated rooms and opening of windows) is partially avoided. The downside of this control technology, outdoor reset, is that it’s not able to account for outdoor temperature changes ahead of time, so a conservative buffer is required, which has a cost in lower efficiency.

What Leanheat technology does is take this concept of active energy saving quite a bit further, with more and better factors used to determine the amount of steam produced by the boilers. For example, rather than base the heat production of a long-lag heating system on the outdoor temperature right now, Leanheat factors in where the outdoor temperature is going (based on weather data), solar effects (e.g. expected sunshine or cloud cover), windchill effects, and so on. It also factors in how quickly room temperatures change when the boiler is running.

As a result of the Leanheat upgrade, less of a temperature buffer is required, and temperatures are more consistently comfortable throughout the building. The system also runs more efficiently, lowering costs.

More Reading

Read more about this topic in the blog post on outdoor reset here, and in the context of a building’s Unique Energy Fingerprint here.
And how lower energy costs effect property values here.

*It takes about 8,000 BTUs of energy to turn a gallon of boiling water into steam. An 80% efficient steam boiler would require over 10,000 BTU to make steam from a gallon of boiling water. The energy in the steam, know as latent heat, is given off as it condenses in the pipes and radiators.

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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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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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Control and Reduction of Peak Power Loads


Peak power loads are high points, sometimes spikes in demand for power. Peak loads are a problem for utilities and their customers alike. For utilities, peak loads must be balanced with supply to avoid power shortages. When the utilities can’t respond quickly enough with their own power, they need to source power on the open market, where price spikes of 1000% or more are possible. Utilities will often attempt to reduce the occurrence of demand spikes by charging power users higher rates for peak power. It’s then incumbent on the customer to reduce or eliminate spikes in power consumption to avoid those charges.

Peak Power Background

In buildings, peaks in power usage are often, but not always associated with a high demand for cooling on summer afternoons. Aggregations of power users all using their air conditioning at the same time result in demand peaks. It shouldn’t be surprising that these aggregations of power consumption are hardest to control because they are all independent of each other and are all responding to the weather, which is out of their control. On the other hand, larger consumers of power may be better able to reduce their peak power consumption by taking steps to reduce power purchases during these peak times. This is possible either by anticipating power peaks and taking proactive steps to reduce demand from the utility during those times, or by supplementing with other power sources.

Utility Rate Structures for Power

Energy Rate

Utilities charge for the power they produce by charging for delivered energy. Energy in the form of electricity is sold in units of kilowatt hours (kWh). Along with a charge for distribution, the energy charge covers most of the costs incurred by the utility for the power it produces and delivers. What these charges do not cover are the added fixed and variable costs associated with peak power production and delivery.

“Demand Rate” for Peak Power Consumption

Where the utility has reliable base load but is challenged in meeting peak loads, they may institute a demand rate billing structure. The demand rate structure imposes a higher charge for power consumption at peak times. The demand rate structure is common in industrial and large commercial application, and has been seen in some residential applications as well.

Responding to Demand Rates

As utilities impose demand rates as a response to their challenges is meeting peaks in demand, a logical response by the customer is to lower demand at those times. If a utility charges different rates depending on time of day, the natural response is to buy energy at the less expensive time of day, and use it when rates are higher. An example of this is when a power buyer makes ice at lower rates, and then melts the ice for cooling purposes during peak rate hours. This is great for cooling, but if electrical energy is what’s needed at peak hours, then other solutions are needed.

Combined Heat & Power (CHP)

CHP is a technology that large energy users can turn to for producing their own economical baseload power, while also reducing peak levels of purchased power. As described on the CHP post, the technology can be cost-effective on its own, in economically producing heat and power, and by increasing the reliability of power. The cost savings CHP can offer by avoiding costly demand rates can also be compelling.

SCADA

Demand control for large energy users can also be accomplished with SCADA applications. From a simple metering device with peak demand warning to a full monitoring network, SCADA can be used to reduce power usage automatically or manually, as needed. This type of demand response is appropriate in situations where reducing power consumption in an ad hoc manner is realistic. Therefore, this may not be a good option for hospitals, hotels, and commercial buildings.

Throttling down, or completely shutting off power to one or several powered items is called load shedding. It makes sense to shed load from one application in order to temporarily provide load somewhere else, and when the power is constrained in some way. The constraint may be peak power pricing, or it may be a limitation in the power infrastructure. In any case, load shed is most often a temporary measure, and SCADA can be used in that way.

Conclusion

Building owners and operators have multiple avenues available for reducing energy costs through peak shaving. Having a working knowledge of these options is a step in the right direction. Contact CIMI Energy to find ways to reduce your energy costs.

Additional Resources

The Peak Load Management Alliance exists, with more detailed information about peak loads and demand response.

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CHP (Combined Heat and Power)


CHP (Combined Heat and Power)

Combined Heat and Power (CHP), also known as cogen, or cogeneration, is a fast-growing energy technology in North America and around the world. A large reduction in energy costs (up to about 50%) is the primary reason for this growth.

For typical applications, where there is no change of fuel, the energy cost savings result from dramatically higher system efficiency (power + heat instead of just one or the other), and minimal distribution losses due to power produced on site. In many applications, another cost-saving benefit is peak shaving (the reduction of peak power load bought from the utility). Lowering peak power purchases can greatly reduce costs by avoiding demand rates when they spike.

In areas where electricity costs are high, and natural gas prices are low, CHP yields an excellent payback on investment due to the inherent efficiency in maximizing the utilization of the energy content of the fuel.

How CHP works
As its name suggests, Combined Heat and Power creates both heat and power at the same time.

Various fuels can be used for CHP, such as natural gas, oil, or biomass chips or pellets. The most efficient and cost effective systems use natural gas. Creating power from the combustion of a fuel yields heat as a byproduct.

Ordinarily, most of the heat that’s created during power production, such as at a utility-owned power plant, is wasted. That’s because heat is not transferable over distance the way electric power is. Heat has to be used nearby to where it is produced, and at the time it is produced, or it is lost.

By using the byproduct of power production, heat, CHP uses a higher proportion of the energy content of a fuel than is the case with power production alone.

The sankey diagram below provides another look at how much energy is wasted from the production of power at utilities. That wasted energy is largely in the form of heat, which is what you capture when the CHP power production is at your site.  Further energy losses from utilities occur in transmission and distribution (T&D).

Reliability and Resiliency
One of the great advantages of CHP is the capability to provide heat and power to a building even during power outages. This is a great advantage where the grid is not so reliable, or where large storm events like hurricanes, tornadoes, ice storms , and human-caused events can cut power.

Not every CHP unit is capable of providing power during a blackout. The  units that can do so have inverters to support this capability. 

Typical CHP Applications
As mentioned above, CHP is most attractive in areas where electricity costs are relatively high, and where natural gas prices are comparatively low. Applications such as large multifamily buildings, industrial plants, hospitals, and schools are all good candidates because they all use both heat and power.

Selling Electricity for a Profit with CHP
In some multifamily buildings, power comes in through a single metered connection, from which power is separately metered to individual units. In such cases, it may be possible for the landlord to pay a lower, commercial rate and charge tenants a higher, retail rate. This adds to profits, as well as to the value of the building.

Investigating CHP
CHP is worth investigating to cut energy costs, increase your capacity to produce heat, and to lower your peak power from your utility.

Take a look at the blog post on evaluating your options here.

Additional Resources

The US EPA has an in-depth overview in a 24 page PDF on their website here.

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Continue reading “CHP (Combined Heat and Power)”

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Distributed Energy


A powerful business case can be made for harnessing distributed energy, making it a fast growing category within the energy field. The fast pace of growth results from a combination of the maturation of a variety of alternative energy technologies, and the unwinding of utility regulation. The alternative energy technologies that typically comprise distributed energy provide building owners with the ability to cut energy costs, increase energy efficiency, reduce carbon emissions, increase reliability, and eliminate peak utility charges.

The Energy Market Transforms

Distributed energy equipment suppliers have invested heavily in hardware and software in order to achieve the goal of safe and dependable integration with the grid.  Having achieved this goal, the available options for building owners to utilize alternative energy have broadened out.

A “mature” distributed energy sector means that all aspects of a distributed energy network operate safely, predictably, reliably, and cost effectively.  Tying in new energy sources becomes a straightforward matter, and doing so does not adversely affect production and distribution from other parts of the grid.  A mature sector also means that the power produced meets acceptable standards.

As noted above, deregulation of energy markets has been a driver of growth in distributed energy as well.  With the elimination of utility monopolies, competition from new sources of power give organizations a choice in where they get their power. Among the available choices for building owners is to produce their own power, in whole or in part.  In such cases, consumers become producers as well, leading to the label “prosumer”*.

With distributed energy, power sources can be placed on-site  (such as on-site CHP), or off-site, such as from renewable energy sources like solar, wind, and biomass (usually as CHP). The power sources need not be local, as innovative energy contracts allow buyers to purchase the output from remote energy sources.

The Impetus for Distributed Energy

For building owners, making an investment in distributed energy must of course make sense from a timing perspective, as something that’s working is not ordinarily high on the priority list for change.  The initial impetus that shifts an organization’s “energy inertia” can come from failing energy assets (such as a heating or cooling system that breaks down), or simply an energy audit that reveals costs above achievable benchmarks.

In most cases, there are several benefits that can be identified in advance.  Opportunities in cost savings, as well as in enhanced efficiency and increased security and reliability are usually all present when the decision is made.

Benefits of Distributed Energy

Cost Savings

The most salient reason organizations give for choosing a distributed energy solution is to save money.  The IRR (internal rate of return) for investing in distributed energy must be greater than the anticipated return offered by alternatives, including not doing anything (i.e. maintaining status quo) if that is a possibility.

With the fast pace of advancements in energy systems in recent decades, there are often good cost savings available just from reduced maintenance and repairs.   By incorporating the right solutions at the outset, an on-site CHP project such as producing electricity while making process heat, space heat or hot water can bring predictable cost savings to the user.

Efficiency

Decentralization can also lead to higher efficiency where energy assets allow more energy to be captured from the fuel.  A great example of this is when an organization produces it own power, and at the same time captures the “waste” heat for some internal process.  Combined Heat and Power (CHP) is inherently more efficient than a case where standard power generators are used.

Higher system efficiency is to be had where companies with large electricity demand such as server farms (e.g. IT Services, ISPs, Amazon, Google, and other cloud services) are locating in out-of-the-way places that are newly served by the expansion of distributed energy. Server farms create a lot of heat, so their locations are often being located where electricity is cheap, and either where the climate is cool (making cooling the equipment much more efficient), or where the waste heat from the server farm can be used for some other purpose.

Security and Reliability

The electric grid is old and suffering from technological senescence. It is vulnerable to damaging natural and man-made events. Flooding events that cause power outages are more threatening than they used to be, particularly alongside rivers and sea coasts where much of the traditional power producing infrastructure is located. Wind storms, ice storms, fires, and human threats are thankfully uncommon, but real enough to be taken seriously.

Businesses rely on power. Distributed energy makes the power supply more reliable for those businesses with the foresight to take advantage.

Reduced Carbon Emissions

Alternative energy sources reduce carbon emissions. This result is caused either through the higher utilization of the energy content of fuel (i.e. efficiency), displacing a high-carbon fuel with a lower carbon fuel, or through the utilization of some form of renewable energy, such as wind or solar.

Hedging Against a Possible Carbon Tax

The idea of imposing a carbon tax is routinely discussed in Washington these days.  Supporters include market-oriented conservatives, and progressives concerned about climate change. If a carbon tax were to be passed into law, it will be advantageous for organizations to be positioned with low-carbon utilizing assets in place.

For energy investments in durable goods expected to last 5 years or more, the possibility of a carbon tax is definitely something to weigh.

Eliminating Peak Power Charges

By providing an alternative source of energy to traditional utility-provided grid energy, additional cost savings can be secured by avoiding peak energy charges. More on this topic will be available in a separate blog post on this topic.

How to Proceed with Distributed Energy

What is required to reach cost savings, efficiency, and reliability goals with distributed energy is good planning, modelling, and execution.  These are essential to achieve long-term success.  Working with a team that has experience with all these working parts, and which is willing to learn about your businesses’ energy needs is probably the best way to achieve success.

CIMI Energy will serve as a conducer*, working with you and your internal team to ensure a successful result.


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*An equivalent producer/consumer word blend to “prosumer” is “conducer”.  But what I thought might have a lower chance of getting baked into the language, “conducer” is, as it turns out, an actual word in the dictionary. It means “a person or thing contributing to a specific result” 🙂