2016 Energy Industry Predictions

2016-energy-predictions-blog2015 has proven to be a very interesting and dynamic year in energy. Events large and small have had an economic impact both globally and locally across the country. A few notable highlights include this year being the hottest year on record, oil prices trading below $35 a barrel, and renewable energy possibly reaching a global tipping point.

I have spoken to many clients over the past couple of months inquiring about what 2016 has in store. The most frequent inquires I get pertain to what will happen with the markets, legislation, and regulations affecting how they will do business in the upcoming year.

I spent the better part of the fourth quarter researching and interviewing fellow industry experts to ascertain where the industry will go in 2016. Below are my energy industry predictions for 2016.

  • Nationally, the supply of natural gas is up compared to this time last year. The regional transmission grid (PJM) serving Ohio has announced it has adequate capacity to meet energy demands this winter. This winter is projected to be warmer than average. Taken collectively, this means businesses should expect energy prices in our region to trend lower and costs to be down this winter compared to last year.
  • After two consecutive summers of dramatically increasing electric rates, consumers in northeast Ohio can expect much better pricing during the summer of 2016. Many consumers wisely locked into longer two and three year fixed rate contracts over the past two years. For a large number of consumers, those contracts are expiring during the first half of 2016. Now is the time to explore new contract terms with your energy advisor.
  • LED lighting technology, efficiency, and pricing improved dramatically over the past year. Though there will continue to be improvements to the technology, it is unlikely the industry will achieve improved pricing at quite the same rate. Businesses that have been waiting to install LEDs until the market reaches a plateau on pricing, may want to consider 2016 as the year to make their move.
  • Contrary to popular belief, there are still incentives available for energy efficiency retrofits; you just need to know where to look. There is a very good likelihood that SB 310, which froze the energy portfolio standards in Ohio, will expire by the end of the year. That means businesses could expect a return of the rebates First Energy once offered. But large electric consumers still have incentives they can capitalize on in the form of an exemption to costly riders attached to their electric use. Businesses should consult their energy advisors to learn more.
  • Columbia Gas of Ohio customers will continue to have access to favorable rebates. Columbia provides service to a majority of counties throughout Ohio. Their rebate program is very comprehensive extending from residential to commercial and new construction.
  • President Obama’s Clean Power Plan will continue to foster dialogue and potential turmoil within the energy market. State lawmakers and utilities have cited that the plans objectives will prove prohibitively costly to plant operations. A number of states, including Ohio, have already filed suit against the EPA in court. Either way, the end result will affect energy markets.
  • The Federal Government passed, and signed into law, a $1.1 trillion budget and tax extenders bill at the end of 2015. Included was an extension of Section 179D in the tax code that allows for qualifying businesses to receive up to $1.80 per square foot in deductions for eligible energy efficiency projects.

The energy markets are historically too volatile to perfectly predict. One certainty though is those businesses that are prepared with a plan are better insulated against unexpected weather anomalies, global crises, and unforeseen regulations. Be sure to consult with your energy advisor about implementing a contingency to properly manage your energy portfolio in 2016!

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Energy Upgrades—Is Total Cost of Ownership the Best Way?

total-cost-of-ownershipWhen evaluating energy upgrades, the #1 question a business will ask is always, what is the return on our investment (ROI)? How much am I (really) going to save from doing this project? Traditionally in energy efficiency projects, Total Cost of Ownership analysis is the universally accepted way of determining ROI. While total cost of ownership is a good benchmark for evaluating the value of energy upgrades, it isn’t the ‘be all end all’ way of determining the projects benefits. In this blog, I’ll discuss total cost of ownership analysis, as well as additional methods for getting the most accurate ROI projection for your energy efficiency project.

Total Cost of Ownership (TCO) is defined as, “an estimation of the expenses associated with purchasing, deploying, using, and retiring a product or piece of equipment. “ Let’s look at a school system deciding whether or not to upgrade to LED lighting. While the florescent lights the district is currently using has a lower starting price, LED lights may have a better value over an extended period of time. If the total cost of ownership shows an advantage of LED lights over florescent lights in the next 2-5 years, than the LED lights are most certainly the better choice. However, there are complicating factors, such as access to capital, alternative capital expenses, and the current economic situation of that particular school district that should also be considered.

A total cost of ownership analysis takes into consideration multiple factors including initial cost, product lifespan, energy cost to operate, frequency of maintenance, expense of product replacement, hours of operation, utility incentives, and how the product will be used. While this is the go-to method of gauging the value of energy efficiency projects, EPCO likes to take this analysis a step further. It is common practice to determine TCO by using industry standard figures for maintenance, repair and operation (MRO) expenses. EPCO has found this isn’t always the most accurate method for determining ROI in energy upgrades.

At EPCO, we believe interviewing the client and understanding their unique energy fingerprint, is the best method for understanding the true inputs and cost of operational expenses. Some businesses have energy expenses that are higher than the industry standards. For example, manufacturers that operate and run equipment more heavily during second shift will likely have a more unfavorable load profile than their counterparts producing mostly during first shift. This effects avoided cost values. EPCO will always review historical billing and consumption patterns to determine the true value of an energy efficiency project.

Although SB 310 led to the discontinuation of small commercial energy rebates throughout northern Ohio, larger businesses and school systems have the potential to capitalize on remaining incentives and tax credits for energy efficiency projects. One such example is receiving an exemption to costly utility fees and riders that appear on all electric consumer bills. EPCO has the expertise to identify, prepare, and submit exemption applications on behalf of clients. Most energy firms overlook this option, but it has added benefits for many large businesses and school districts.

Total cost of ownership is the standard way of determining the added value of energy efficiency projects. Though this analysis can give an accurate judgement of savings with projects, industry standards are not always the best indicator of true ROI. It is important to take an individualized, case-by-case approach, when evaluating energy efficiency projects. To learn more about how this could help your organization, email EPCO at info@energyplanners.com, or visit us at www.energyplanners.com

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Ohio’s Ranking Drops on ACEEE Scorecard for Energy Efficiency

Every year, ACEEE (American Council for Energy-Efficient Economy) ranks states on their energy efficiency policy and program efforts and also provides recommendations for ways that states can improve their energy performance. The State Scorecard is a benchmark, which serves to encourage states to continue “strengthening their efficiency commitments as a pragmatic and effective strategy for promoting economic growth, securing environmental benefits, and increasing their communities’ resilience in the face of the uncertain costs and supplies of the energy resources on which they depend.” Last week, the 2015 State Scorecards were released and Ohio was ranked 27th. This is a drop from Ohio’s 2014 placement at 25th.

This drop in ranking is no surprise after Ohio became the first state to reverse energy efficiency and renewable fuel mandates in 2014. Ohio Governor John Kasich signed Senate Bill 310 in 2014, which froze annually-increasing energy mandates until the year 2017. At which point, the “the automatic levels are to be restored”, a provision that Kasich requested to be part of the legislation, according to The Plain Dealer (Cleveland). The bill also included language that establishes a legislative study committee tasked with evaluating the effectiveness and future of the original portfolio standards.

Senate Bill 310 counteracted Ohio Senate Bill 221, which was passed in 2008 and established the efficiency standard. Under Senate Bill 221, Ohio ranked #1 in the nation for advance energy and renewables, “bringing in more renewable energy facilities than any other state,” according to JobsOhio. Under the legislation, utilities can count improvements made by their own customers and also roll over any savings above a given target into the next year. Language in SB 310 created a provision that permits large industrial users to opt-out of utility offered programs; allowing these users to develop and institute internal programs. Concern has arisen that this may adversely impact the effectiveness of the utility offered programs; potentially increasing the cost and burden of compliance on smaller commercial entities.

Overall, the passage of SB 310 has negatively impacted the implementation of commercial energy efficiency retrofits throughout the First Energy territory. Unlike other state utilities, First Energy has opted to discontinue any rebates for energy efficiency work performed by its customers. As a result, there has been a decline in the number of small and mid-size commercial entities instituting energy efficiency related projects. This concern may persist beyond the current two-year freeze in place under SB 310.

Recently, the legislative study committee released a report recommending an indefinite freeze on the mandates. This has largely been met with criticism from environmental groups, politicians and industrial entities alike. In response, Governor Kasich stated that “a continued freeze of Ohio’s energy standards is unacceptable”. There is much debate still to take place before a final determination is made on the future of Ohio’s renewable and energy efficiency portfolio standards. EPCO will continue to provide additional review and analysis as more information becomes available.

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Can a Single Business Battle the Effects of Climate Change?

Is it possible for just one person or one business to battle the effects of climate change? Perhaps a more appropriate way to evaluate that question is to simply ask if you and your business could. It seems like an unrealistic expectation; the idea that a single company can impact a global crisis. Such a goal may not be as out of reach as you may think.

Earth

Let’s take a step back for a moment to appropriately set the stage. Recently, a peer reviewed article outlining the critical effects of climate change began receiving some notable attention from outlets such as CNN and USA Today. The research article painted a grim and distributing image of what Earth’s future may look like in the absence of necessary change in global human behavior.

Originally appearing in Science Advances, the premise of the article argues that Earth is possibly facing the 6th mass extinction event in the planets history. Since 1900, nearly 500 species have gone extinct. During that period, historical data indicates that number should have been just 9.

Arguably, the most alarming conclusion is that the loss of biodiversity would lead to a mass extinction event in as little as three generations. According to the CNN article, the data shows it is possible for humans to wipe out nearly 75% of species on Earth if drastic and needed changes aren’t made. That window to effect change is rapidly closing.

Scientists are not the only ones advocating for considerable change in human behavior. In June, the Pope published a manifesto regarding climate change. In his writings, the Pope argued the reckless behavior of humanity is adversely affecting our planet; a common good that we all must take care of.

Whether advocated by science or the Pope, the steps we all can take amount to the same. It boils down to reducing your carbon footprint. This simple concept is the impetus for energy efficiency, and the foundation for all that I do with my clients. Regardless of your motivations for energy efficient behavior, we each can do our part.

Let’s revisit our original premise. It is difficult still to imagine that a single person or company can effect change on a global scale. But what happens when millions of people and thousands of companies work in concert.

At the end of the day, it wasn’t simply one business, government, or entity that created this problem. It was countless participants, spanning decades, within countries around the globe. Each has played a singular role in what is quickly developing into a global catastrophe.  It stands to reason that we can reverse this trend in much the same way; one business and one person at a time, doing their part.

The one remaining question is what role you will play moving forward…

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Energy Efficiency: Transaction vs. Consultative Approach

Tell me if this scenario sounds familiar. You’ve been tasked with managing the energy portfolio for a building. Your company may be a manufacturer, hospital, school or commercial real estate property. Regardless of your specific operation, the common thread is that you likely have a very small operating budget, minimal staff, and host of ongoing issues that land on your desk.

You want to be proactive; planning for future issues before they arise, but the resources you are given forces you to be reactive.

As I meet with clients in varying industries, I continually hear this same narrative. To add insult to injury, many of these managers express the challenge of juggling additional responsibilities outside their defined position. Obviously, this further strains their budget, time, and personnel.

Building Construction

This struggle sets the stage for two opposed energy management methods, transaction versus consultative.

A transaction sale can be categorized by solutions that are specific to equipment failure or end of life. You would see this for example with an old boiler or HVAC unit. After decades of operation, they simply stop working. This requires the consumer to engage in a point of sale transaction.

Usually, the replacement comes with a premium cost because of the urgency. In many cases, this could easily erase whatever capital budget you had planned to use for energy efficient upgrades.

Contrary to a reactive transaction is a more proactive consultative approach. We can simplify this with two specific examples.

In the first example, your energy advisor can help you address the unique pain points your facility must deal with. A common one I often come across are issues with facility lighting. It may surprise you to learn that with older lighting technology, you will experience over time lumen degradation. This is a fancy way to say your fixtures aren’t emitting as brightly today as they did when first installed.

(A simple solution for this is to install an LED fixture. Prices for LED solutions have come down dramatically and have become more economical. The life of an LED fixtures last substantively longer than outmoded CFL solutions.)

The second example is the purest form of energy consultation. In this instance, your energy advisor would work alongside you to draft a comprehensive energy management plan. This includes identifying all existing pain points, categorizing remaining equipment life, and producing an analysis on potential retrofit costs and payback periods. This latter portion should factor available incentives and rebates as well as creative or alternative financing mechanisms.

This enables you to prepare, well into the future, for all contingencies and eventualities. You can include capital improvement projects in annual budgets, factor in the energy savings, and ultimately avoid untimely failures that can dramatically disrupt production.

For many dealing with complex energy issues, transaction selling has become the norm. Emerging resources in the market can help you better plan, prepare and manage energy portfolios. Leveraging an advisor can enable you to develop a more structured approach and avoid the roller coaster that has been your energy management strategy to date.

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Should Businesses Invest in Wind and Solar?

Recently, I had the opportunity to visit a friend in Colorado. It was a trip designed to give me some much needed R&R and a chance to hike, run, and just be out in nature; the latter of which I should probably do much more often. Despite being a recreational trip, the energy consultant in me couldn’t help but notice the prevalence of renewable technology… everywhere. It was common to see turbines and solar farms or houses whose rooftops were lined with solar panels. It was an interesting contrast compared to Ohio.

I had asked my friend, a celebrated thought leader in the sustainability industry, how solar, wind, and other renewables became so prevalent around Colorado. The answer was really quite simple. People wanted it. From consumers to legislators, it was a function of demand and political will. There is a burgeoning industry of installers and a fair amount of incentives pushing people in this direction. And it almost seemed like the utilities were going along with it without a fight.

Back home, I am often asked by clients, if installing solar panels or erecting turbines is a good investment to make. The answer of course depends on why they are doing it. If the intent is to be used as a marketing tool, or simply because the company feels it’s the right thing to do, then yes. But if someone in Ohio today is pursuing renewables as a cost savings measure, then no, it is not a recommendation that I would make.

So why would someone who promotes energy efficiency and sustainability not recommend renewables? Let’s look at Ohio’s recent renewable history to better understand.

Colorado Pic

At the beginning of the decade, it appeared as though Ohio was making strides within the renewable sector. This included creating thousands of “Green jobs” along with massive increases in wind and solar production. Despite this, Ohio still ranked near the bottom in renewable electricity and generation capacity compared to the nation.

Over two-thirds of electricity in Ohio is derived from coal, and another twenty percent from natural gas. Only 1.5 percent was from renewable sources in 2010. To make matters worse, the renewable energy industry has shifted dramatically in just the last year. In 2014, the state legislature passed Ohio Senate Bill 310, imposing a two-year moratorium on Ohio’s renewable energy standards.

I am hugely in favor of developing renewable energy sources through improved technology and more cost effective production. The reality though is Ohio is not ready for that. Ohio is still a coal state and will continue to be for the foreseeable future. Also, it’s probably going to take a federal effort along with public-private partnerships for investment in renewables to garner the necessary results.

When working with clients, my job is simple. Improve their energy portfolio and identify cost savings with strategies that are effective and efficient. Unfortunately, renewable options today don’t fit into that paradigm. Until they do, I will continue to advocate for smart efficient solutions that meet the unique needs of the businesses I work with.

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Identify Energy Solutions with an Energy Advisor

The energy industry today is more dynamic and complex than ever before. The advent of new technologies, shifting energy costs, and the constant barrage of federal and state legislation, has made it extremely difficult for consumers to stay adequately informed. For these reasons, EPCO is a huge proponent of the idea that every business should have an energy advisor.

The concept of an energy advisor hasn’t fully taken hold throughout the marketplace. Perhaps it is because most businesses don’t clearly understand what an energy advisor is, or, how they would use one. Think of it in these terms. A typical business will utilize a lawyer for legal needs or a CPA for accounting. There are many professionals and firms that can provide the same consultative services for managing your energy consumption.

Advisor Image

For smaller enterprises, you may leverage the expertise of an energy advisor to negotiate better rates for your gas and electric utility. But if you are a larger consumer, like most clients I work with, your energy management needs could be substantial. The right advisor can help identify and craft energy solutions for a myriad of concerns. This may include lighting audits and retrofits, power factor correction studies, or improvement to process cooling / heating performance.

You want to be sure to work with the right advisor, not all are created equal. Each client that EPCO collaborates with receives a unique and customized energy evaluation. No two businesses have the same needs or operate in the same way. Your energy consultant should provide you with a distinctive energy saving solutions that will allow you to make immediate and lasting cuts to your operating budgets.

Working in concert with you, and focusing on your specific needs, a reputable advisor will design a sensible compilation of measures that provide for turnkey energy efficiency solutions. Ultimately, you will want to take a long-term planning approach, leveraging short term savings opportunities that are invested into more capital intensive projects. This diversifies energy portfolios and ensures a cost effective and sustainable path into the future.

There are many more factors to include. You will want to leverage potential financing and rebates as well as develop a structured strategic plan to help guide you. The first step though is to find and work with the right team of professionals. The world of energy procurement and management is virtually the Wild West. Make sure you are coming armed with the right support.

 

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Yes… Lighting is Your Low Hanging Fruit

Let’s say you’re the director of facilities for a local manufacturer or the business manager for a school district. By now, you’ve likely had a parade of salespeople knocking on your door to sell you a lighting retrofit. Each comes armed with a very similar pitch. Lighting technologies are the most advanced that they’ve ever been. ROIs are up and payback periods are down. And the most overused saying, lighting is your low hanging fruit.

In your job, you have to wade through all the gimmicky sales jargon and back of the envelope math to figure out what’s real and what’s a mirage. The difficulty is you wear many hats, and finding the time to learn the truth is challenging.

Having a clear understanding of your opportunity, along with a defined plan, will help streamline and simplify the process.

First, let’s be realistic. Just because a lighting retrofit reduces energy, doesn’t automatically mean it’s the highest and best use of your capital improvement dollars. As we have previously shared, you should start with a comprehensive facility audit. This will help to determine what projects, if any, you should focus on.

Assuming, lighting is a true cost-saving opportunity, you should understand what the current environment looks like. It is true that LED lighting efficiency is on the rise and costs have continued to decline.  This has made retrofitting your facility more economical than ever before.

However, lighting is no longer as simple as swapping out a light bulb. Advancements in lighting solutions have required the industry to move away from simple one-to-one replacements, opting instead for structured and thoughtful design. This is where it becomes imperative that you work with the right lighting firm that understands your specific needs.

Church Lighting

Many lighting firms still use antiquated methods for installing lighting. Worse yet, some firms attempt to sell you a solution you don’t need, simply to increase project costs. Ultimately, the lighting solution you choose should be unique and customized to your facility. It should incorporate the most efficient and effective design with products that maximize lumens and comfort for employees and guests of your facility.

Don’t be afraid to utilize a design-build process. Your energy advisor can work alongside you to create the right facility design and layout, and then solicit bids for the cost of the fixtures to ensure you receive a favorable market rate.

Opportunities for energy efficiency will continue to increase as technology improves. Surround yourself with a competent energy advisor that will ensure clear, transparent, and efficient energy solutions for you and your facility.

 

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Four Steps to Reducing Inefficiency in Your Building

Is your facility as energy efficient as it could be? How does your energy rates compare to current market conditions? Do you have equipment and systems needlessly using energy when off-cycle? These are more difficult questions to answer than most would think. Many clients I work with are wearing multiple hats each day. I am confident you are too. It’s extremely challenging for them to keep up on prevailing technologies or fluctuating rates while trying to juggle production schedules and personnel.

An essential tenant of the EPCO philosophy to energy management is having a comprehensive plan to guide you. Your energy plan should be a holistic approach to the energy consumption of your facility.  Utilizing a long-term lens, EPCO designs a plan that factors each component comprising your specific energy fingerprint. This includes how you use energy, when it’s consumed, and most importantly, where you can save without disruption to your operation. As great as this may sound, the next logical question is, how do I create this plan?

EPCO has simplified the process into an easily digestible four-step approach.

  1. Identify your pain points – Work alongside your energy advisor to understand, from your perspective, the energy-related issues you are facing. This could be as a simple as utility billing errors or ineffective lighting to more complex issues such as process cooling / heating and heat reclamation.
  2. Perform an ASHARAE Level Audit – A facility Audit is a great step towards realizing your simple payback. Whether it is an LED upgrade, automated controls, or mechanical equipment retrofit, an audit provides the facilities baseline data needed to understand your opportunities.
  3. Prioritize the Data – Following the audit, review the data to determine where the most substantial and relative savings exist. Cross reference the pain points you first identified with each proposed solution. Calculate what the capital costs are in relation to energy savings. And be sure to leverage incentive and financing opportunities.
  4. Draft and Execute Your Plan – Once you have determined the value and importance of each solution, your energy advisor can work with you to implement each identified energy savings opportunity. Start with the highest prospective paybacks so you can reinvest those savings into more energy intensive projects.

A carefully crafted energy plan will empower you with the ability to more seamlessly manage your energy portfolio. Whether you move forward immediately with each measure, or wait for a more opportune time, you will be better informed and prepared.

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What EPCO Can Do For You

As we approach summer, more and more businesses will begin to think about their energy consumption. In a just a couple of months, higher temperatures will bring increased electric consumption. Consumers will be cranking up their cooling load or increasing production. With increased consumption come increased energy costs. That is the bad news. The good news is that there are steps you can take to mitigate those rising operations expenses.

Energy Planners Company (EPCO) is a full service energy solutions firm committed to providing the best products and services available to our clients and partners. Leveraging our proprietary approach to energy management, EPCO will work alongside our clients to create a long-lasting advanced strategic plan to address all their current and future energy related needs. EPCO’s carefully designed methods and portfolio will help your business realize savings in areas you may not have known existed.

Electric & Natural Gas Utility Bill Review

For each metered account, EPCO will review all supply side charges related to the acquisition of, and costs associated with, electric and gas procurement.

ASHRAE Levels 1, 2, & 3 Assessments & Design

ASHRAE level energy audit & lighting assessments determine where, when, why and how energy is used in a facility. The main outcome of our customized energy audits is a list of recommended energy efficiency measures (EEMs), associated energy savings projections, and a calculation of whether EEM installation costs are a good financial investment for your facility.

Rebates, Incentives & Financing

EPCO specializes in creative and alternative financing mechanisms. Our team of professionals will leverage the energy efficiency projects you perform to exempt your facility from costly utility fees or apply for rebates through either your local or regional utility.

Long-term Energy Planning & Strategy

EPCO takes a holistic look at an entire building or campus to choose the appropriate approach to create cascading savings and improve asset value. EPCO will help design a clear and customized business case for a deep energy retrofit through quantifiable savings and empirical research.

Project Management & Implementation

From project identification, to design, and ultimately installation; EPCO can manage and facilitate the entire retrofit process for your facility. EPCO works with all energy intensive industries and consumers and understands the complexities of retrofitting a facility such as yours. Areas of project management expertise for EPCO include, but are not limited to, the following.

  • Lighting
  • HVAC
  • Motors, Drives, & Controls
  • Roof Top Units (RTUs)
  • Air Handling Units (AHUs)
  • Combined Heat & Power (CHP)

EPCO prides itself in its ability to cultivate unique and customized solutions for each client it works with.

Audit Image

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