Energy costs can be a major source of budget stress for commercial and industrial facilities, especially when electricity rates fluctuate with no notice. Combined heat and power (CHP), or cogeneration, is an approach that helps facilities produce reliable on-site energy at a lower price than an electric utility supplier.
CHP simultaneously produces electricity and reclaims waste heat, redirecting the captured thermal energy to steam or hot water. There are multiple system configurations, including gas turbines, reciprocating engines, steam turbines, absorption chillers, and fuel cells. This type of distributed energy generation has several key benefits over energy purchased from a utility:
“Nearly two-thirds of the energy used by conventional electricity generation is wasted in the form of heat discharged to the atmosphere. Additional energy is wasted during the distribution of electricity to end users. By capturing and using heat that would otherwise be wasted, and by avoiding distribution losses, CHP can achieve efficiencies of over 80 percent, compared to 50 percent for typical technologies (i.e., conventional electricity generation and an on-site boiler),” notes the EPA.1
Until recently, CHP was only used for new construction, district energy systems like college campuses. But today cogeneration packages can be used for projects between 500kW and 3MW. This allows industrial facilities, offices, hospitals, K-12 schools, hotels, and mixed-use facilities to take advantage of CHP.
Combined heat and power can also be an economically viable option if you are facing one or more of these issues:
High energy demand – Facilities that use energy-intensive processes, have a large footprint, or 24/7 operations experience high energy consumption regardless of how many energy-efficient measures they implement.
Variable utility costs – The cost per kWh for commercial users averages 10.47 cents but can range between 8-17 cents across the U.S.2 These rates can shift depending on time of day, season, weather conditions, and the market price of fuel sources.
Energy resiliency – Most businesses can’t risk unexpected downtime from a blackout or brownout. Because the electric grid is aging beyond its intended life expectancy and most transmission lines are at capacity, the American Society of Civil Engineers gave the U.S. energy infrastructure a D+ grade on its 2017 report card3. Because CHP generates energy at the point of use, it minimizes issues with transmission and distribution.
Environmental responsibility – CHP offers a number of sustainable benefits, including
reducing greenhouse gas emissions by 40% and consuming almost no water6. The system can also use biomass like wood waste or agricultural residue, landfill or digester gas, or hydrogen in the case of fuel cells.
Aging equipment – The EPA recommends CHP for properties that need to replace or upgrade central plant equipment or expect a facility expansion within 3-5 years.4 Either scenario is a good opportunity to make capital investments in this type of energy system.
A1 Energy has been involved in developing CHP projects over the last 5 years and continue to develop more.
The majority of industrial and commercial businesses have shopped competitively for electricity supply for the last 6-8 years. Often we humans get into a routine and we stick with it without questioning it … “If it is not broke why fix it?”
Careful adherence to the following three strategies will help an energy buyer minimize their long-term cost of energy:
1) Market Timing
Energy is a commodity and is subject to significant price fluctuations in the marketplace. Just as with any purchase, you want to buy your energy when prices are “low” as opposed to when prices are expensive. Inexperienced energy purchasers often consider new supply contracts only as their existing contract is nearing expiration. Unfortunately that habit leaves the inexperienced purchaser at the mercy of the market. The prudent course to follow is to continuously monitor energy futures for the next opportune time to go out for bid for a future energy supply term.
2) Contract Structure
Electricity has different value depending on both the time of day and season of the year. And there are different choices in terms of how to secure the amount of energy your facility needs at any particular point of time. That complexity results in multiple types of contract structures that energy consumers can consider when buying power.
Many businesses gravitate towards fixed price, full requirements contracts when buying energy because the contract structure is simple, it allows easy comparison between different suppliers or a utility default rate and offers 100% price certainty. Fixed price contract structures have their disadvantages though … in that over the long term they are the most expensive way to purchase your energy. Hybrid type contracts, called structured products, that allow you to lock in energy prices during volatile times of the year but allow some of your energy to by fulfilled out of lower cost spot markets during non-volatile periods, allows energy consumers with significant off-peak energy consumption to realize lower long term prices.
Other organizations are able to react to market shifts so they can secure a more competitive price in real time. Flexible pricing gives them the latitude to choose when they buy energy and how much.
3) Load management
Consumers that have flexible energy requirements have additional potential to lower energy costs. Clients that can curtail load for 2-3 hours at a time can use that capability to reduce future capacity and transmission service needs. Larger institutional and commercial clients with substantial HVAC or chilled water loads can modulate their loads in conjunction with power grid sponsored programs to generate new revenue streams.
It often pays to re-visit your existing contract and buying strategy to be certain you are optimizes your costs.
On October 30th, Governor Wolf signed into law House Bill 118 that closed the state to the import of solar renewable energy credits ("sRECs") generated by systems installed in other states. sRECs can generate a secondary revenue stream for owners of solar PV systems and have been a powerful incentive to encourage solar development in states like Massachusetts and New Jersey. However, PA sREC prices, which exceeded thirty cents per kilowatt-hour ("kWh") in 2010, have languished under a penny per kWh for much of this decade due to oversupply coming from other states. House Bill 118 is expected to eventually push PA sREC prices higher since there is insufficient in state solar capacity to meet the Pennsylvania requirement for solar.
Stay tuned as there is more to come regarding this post...
Most commercial building owners know that LEDs are one of the simplest ways to reduce energy costs. But many companies don’t realize that these efficient lights also increase worker efficiency. There is a direct link between better illumination and productivity that can improve your bottom line.
Flinchbaugh Engineering, a manufacturing company in York, PA, recently upgraded part of its facility to LED. “Not only was the payback a great investment, but I soon realized after talking to our long-term employees that they were feeling better at the end of the day. They specifically contributed that to the new lighting,” says Justin Sponar, facilities manager. “I had to research this and found there have been similar situations in other companies. We have now made the commitment to upgrade the rest of our facility to LED.”
Studies have shown that LED lighting increases employee productivity:
25% decreased absenteeism (PPL Electric Utilities)
16% increase in claims processed (West Bend Mutual)
Improved product quality worth $25,000 per year (Hyde Tools)
20% improvement in defect rate (Boeing)
*From Green Building and the Bottom Line a study by the Rocky Mountain Institute and U.S. Dept of Energy
Four ways LEDs can create a more productive and energetic work environment:
1) Increased Alertness and Visual Efficiency
Soft, warm mood lighting is great for your living room but not in the workplace. Dim lighting can trigger drowsiness, which lowers focus, concentration, and motivation. The brighter, cooler light emitted by LEDs can help occupants stay alert because it is similar to natural daylight.
Additionally, the researchers found that “In terms of psychological and cognitive performance, volunteers showed increased fatigue ratings with fluorescent relative to LED, and this effect was associated with slower response times on tasks measuring spatial and verbal memory.”
2) Healthy Happy Eyes
Do employees keep taking time off for headaches? Are students squinting to see the board or read an exam? Both dim and harsh lighting can result in eye strain and headaches because the eye muscles are overworked. Overhead light can also cause unwanted glare that bounces off of computer screens, walls, and furniture surfaces. When spaces are evenly illuminated with LEDs, occupants are less likely to work their vision so hard.
3) Safer Workplace
There are many factors that can lead to a workplace incident but lighting doesn’t usually come to mind. Employees depend on quality lighting to recognize and avoid hazards. Shadows that impair depth perception or lighting that distorts color rendering makes it harder to spot a potential accident or danger. Well-designed LED lighting not only brightens the entire workspace, but also eliminates any shadowy areas, making for a much safer environment for employees.
4) Improved Quality Control
Particularly in industrial settings, quality control is a major production concern. With ample bright light, inspectors can more easily detect deficiencies in a product line or even in assembly equipment. The ability to quickly recognize defects ensures corrections can be made before a product reaches customers.
Does your company have an overall energy plan, and if so, how well are you following it? Your company spends thousands, if not millions, of dollars on electricity costs every year. But to view this as an expense that can only be managed is a missed opportunity. These easy energy tips for commercial buildings will help you make strategic choices about how much energy your property consumes.
1) Identify Your Energy Hogs
A utility bill only tells you what your total energy consumption is, not which area uses the most kilowatts. When you know which system is your largest energy hog, you can implement retrofits or operational changes that lower costs. Depending on your building type, there are several methods that will help you calculate which equipment requires the most electricity.
If you run a warehouse facility, this will likely be your lighting system. A simple audit of the existing light fixtures to determine the energy consumption values will give you great insights. A lighting audit will survey all existing fixture/lamp types, existing kWh usage from the lighting, propose recommended retrofit fixtures/lamps with costs and calculated savings.
Do you manage a large commercial building? If so, the HVAC system is mostly likely the greatest energy consumer, followed by lighting and plug loads. An Energy Star Benchmarking audit/report will provide you with building and portfolio data. This report also compares your facility to similar facilities.
For manufacturing facilities, an ASHRAE audit may be the best analytical method. Data loggers and submeters will dive into even greater energy detail to flag your biggest energy users. Once the largest energy users are identified, an actionable plan can be created.
2) Understand Utility Costs
It is important to understand how much you are paying for the utilities. It’s common for a facilities team to handle energy projects while a CFO or purchasing department will oversee the utility procurement. But there’s more to energy procurement than knowing the current rate and the term length of the contract.
It is critical to understand how the property uses energy when shopping for ideal market conditions. For example: is the load all on-peak, or a combination of on and off peak, do you have the ability to shed load at peak times? You also need to understand how proposed energy efficiency projects will affect the load profile.
3) Look at the Entire Financial Picture
You should also examine the entire financial impact of an energy retrofit. There may be federal and state tax incentives available for energy savings projects as well as local utility rebate programs. There may be sales tax exemptions available on the utility costs that can help offset the costs of energy projects. Be sure to investigate the availability of energy project financing mechanisms if upfront investment costs are a concern.