Category: Sustainability

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Hybrid Heating Systems: a Logical Step in Decarbonization

Decarbonization of building heating systems is a huge challenge, due in large part to the sheer scale of the endeavor, but also due to technical challenges and at a very basic level, typical purchase patterns for heating system components. Creating retrofit hybrid heating systems greatly reduces the magnitude of these problems, and while decreasing on-site greenhouse gas (GHG) emissions by 90% or more.

What are hybrid heating systems? Hybrid heating systems are heating systems that consist of more than one heating technology. Sometimes hybrid systems share system components, like a distribution system or emitters, but they don’t have to. Ideally, hybrid heating systems are integrated via one control. A typical hybrid heating system would consist of a legacy boiler or furnace that runs on natural gas, heating oil, or propane, and a heat pump of some sort (e.g. mini-split, air-to-air, etc.). Choice of operation of the heat pump or its fossil fuel alternative can be automated; whichever happens to be optimal at any point in time.

Thinking broadly, hybrid systems are seen in a wide variety of contexts and they are used to solve a problem. In silviculture, grafting branches from one type of apple tree onto the stem of another variety can create a productive and long-lasting hybrid. Hybrid cars provide drivers with better fuel economy and the ability to drive long distances conveniently. Sailboats have hybrid propulsion when they are outfitted with motors to help with navigation in harbors and on windless days. Even drying laundry can loosely be considered hybrid when outdoor drying on sunny days is combined with machine drying on rainy days. Hybrid heating systems have similar appeal as the two main components can complement each other, and actually solve several problems at the same time.

Advantages of Hybrid Heating Systems for Decarbonization

There are actually several good reasons to consider hybrid heating systems for decarbonizing buildings.

1. Efficiency – Hybrid systems can operate much more efficiently than single-source fossil fuel systems, provided a heat pump is one of the components. Higher efficiency leads to reduced GHG emissions.
2. Flexibility – Hybrid systems exercise the relative advantages of each heat source, including the ability of a fossil fuel boiler to operate during peak electricity demand periods*, or when the heat pump would be operating at it lowest efficiency.
3. Proactive – Because planning is easier when adding a second heat source, a heat pump can be added to a system at any time of year, which gets around the replacement cycles that center around component failures.
4. Additional weatherization (e.g. insulation, air sealing, etc.), which are highly desirable (even necessary) when heating with a heat pump only, can be accomplished over a longer time frame.
5. Additional system adaptations, such as retrofitting for “low temperature” distribution (i.e. 120F maximum) can be accomplished over a longer time horizon if necessary.
6. Financial benefits – Setting up a hybrid heating system is easier, and less costly than a complete system changeover. Financial incentives for heating retrofits are never unlimited. More GHG emissions can be eliminated by shifting more buildings to hybrid systems, than by shifting half as many buildings to 100% heat pump.

*This is not a huge advantage at this moment, but with increased electrification of heating systems, electricity demand peaks in winter will surpass the level of demand peaks in the summer.

Other Advantages of Hybrid Heating Systems

1. Hybrid systems are redundant. If a boiler or heat pump fails, the building can continue to stay heated.
2. Hybrid systems can heat and cool, so they can replace central a/c and window air conditioners.
3. As long as proper weatherization is in place, hybrid systems can be switched over to single technology/100% heat pump at any time.

More on Flexibility

The ability of a hybrid heating system to be operationally flexible is one of the most important benefits in the race to decarbonize. The reasons why have to do with two things; clean electricity generation and the capacity of the power grid.

Hybrid systems have the ability to reduce peak electricity demand. There is value in having that capability. Much more clean electricity will be generated from solar and wind in the years to come. These are intermittent energy sources. Because of the intermittency, long term battery energy storage systems will be utilized to help provide power when solar and wind aren’t available. Even so, there will be times when supply is limited and demand from electric vehicles and building systems outstrips the supply. So the value of being able to temporarily reduce electricity demand, such as is possible with hybrid systems will grow as more intermittent energy sources feed the grid.

Grid capacity is the other limitation, especially during peak weather events like very cold mornings in winter. As more building heating systems shift from fossil fuels to heat pumps, this will become a bigger issue. Just as described for intermittency issues, buildings with hybrid systems have the ability to temporarily reduce electrical demand by switching to a different energy source, which directly reduces demand on the grid.

More on Financial

Heat pumps operate at very high efficiency, particularly when outside temperatures are not near their winter lows.  So building owners (or those paying the energy bills) can save money over combustion-based alternatives that can’t achieve above 100% efficiency.

With regard to asset and installation costs, home and commercial building owners will need some financial assistance to retrofit a system that reduces or eliminates GHG emissions. In what form, and at what level the support takes are worthy of debate but in any case, at any one time, any available support is likely to be limited. Investments in retrofits could be made on hybrid systems, or a smaller number of full changeover heat pump systems where the previous heat source is eliminated. The full changeovers can more than double the initial cost of an add-on heat pump because of the system and weatherization adaptations that are necessary at the start.

Increasing the number hybrid systems will have a greater decarbonization effect than would be the case with fewer transitions to stand alone heat pump systems. This is true at least for the initial period where speed of decarbonization has a high priority.

Summary

Using hybridization of heating system retrofits as a logical step for transitioning buildings with fossil fuel systems will result in the fastest cuts in GHG emissions. Where building owners have the resources to make a full changeover, they should probably do so, as long as they make other changes to reduce demand at the same time. But where external financial incentives are needed, hybrid systems make sense.

New buildings are different. They should be built with no accommodation for fossil fuels, and should be built to minimize the need for heating and cooling through building to passive house standards or similar.

What are the Next Steps?

Clearly hybrid systems can play an important role as a bridge to the future of 100% GHG-free heat. Questions that remain include:

1. what policies and incentives make the most sense to maximize near term GHG reductions?
2. what carrots and sticks make sense in areas like demand charges, energy storage, and variable energy charges?
3. where should subsidies come from and who should benefit?
4. at what level are subsidies or grants needed to achieve GHG reduction goals?
5. what controls are necessary for hybrid systems to operate optimally for GHG reductions?
6. what data should be collected on systems operations to help optimize or balance GHG reductions and end-user costs?
7. should operational data collection be required in return for a grant or other incentive?
8. how are environmental justice and other communities going to be equitably served?
9. how does the workforce need to change to ensure that this will happen?

These and other questions need to be explored, debated and pursued.

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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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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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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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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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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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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” 🙂