This week I am testing an additional medium for the The Energy Rant; the cartoon. Click here to try it out. Send email comments with your thoughts regarding this mechanism to me at email@example.com.
Major barriers to EE for large commercial and industrial end users include;
- Lack of time
- Lack of expertise
- Lack of capital
- Risk aversion
If you don’t think end users are short on availability, just ask them. Most end users don’t have time to commit to energy efficiency projects and most of the rest think they don’t have time. The ones who really don’t have time get seven paid holidays and two-three weeks vacation while the latter group gets eleven paid holidays and six weeks vacation, if you know what I mean.
Most commercial building owner/occupants think of lighting retrofit, adding roof insulation and replacing windows or maybe replacing a boiler they think is 60% efficient. Lighting may be ok but the rest of this stuff is almost always going to have a negligible impact on energy consumption. Efficiency to most industrial end users means, just keep it rolling – widgets per shift, less maintenance. Many times increasing widgets per shift and reducing maintenance is accompanied by energy efficiency, especially when EE is the primary reason to do project. However, there are bails of cash on fire in many places that are invisible to folks who focus solely on keeping things going. In other cases, we’ve seen industrial end users think they’re going to meet their 10% reduction goals by turning lights off. Pssst. Your lights only consume 4% of your energy bills.
Not enough money. I’ve investigated commercial real estate from both an owner’s and leaser’s perspective. The owner makes the tenant pay the utility bills in many/most cases, so there is little incentive for the owner to do anything. The tenant’s perspective is “I have a three-year lease, this isn’t my building, and I don’t even know if I’ll be here after three years.” For industrial end-users, capital is very precious and can take force majeure to get.
Then there is a real risk that savings won’t transpire as indicated. Lighting is about the only measure customer’s can count on with high probability. This is unfortunate because it doesn’t need to be that way. It’s just that there are a lot of schlocks who make assumptions like an old boiler is 60% efficient. As my boss says, if a boiler is really 60% efficient, turn and run as fast as you can because it may be about to blow. We’ve seen schlock estimates indicating over one therm per square foot savings by adding insulation. You might achieve these savings if one of the walls on your facility was missing prior to implementation.
Now we arrive at the subject of this week’s rant: efficiency bid programs. We see a lot of efficiency bid programs, some of which are delivered by clients of ours. They are typically an alternative to conventional custom efficiency incentive programs provided side by side. They work like this: develop a project with cost and savings estimates and submit a proposal to the utility for an incentive. The incentive is always greater than the standard custom efficiency incentive or why bother with the development and bid? The program is purportedly competitive – i.e., a “free market” for incentives to maximize bang for the program buck. If it’s competitive, somebody must lose. This isn’t tee ball.
I cannot see how these programs don’t get slaughtered in a net to gross analysis. Net savings are actual savings attributable to the program. Gross savings are actual savings, period. What’s the difference? Net includes the effects of the program. Did the program influence the customer’s decision to move forward with an EE project?
Let’s get back to the barriers now. Time. It takes just as much time for a customer and a contractor and/or consultant to develop the project for bid as it does to develop the project for a standard incentive. And it takes more time to shepherd the thing trough the bid process. Efficiency bid takes MORE time. Which leads me to…
Risk. As mentioned, there is risk the project won’t generate savings because the energy analyst is a schlock. But for efficiency bid, there is risk, presumably, that there won’t even be an incentive after thousands of dollars are spent developing the project. Remember, if this program is competitive, somebody loses. Who is going to spend gobs of time not knowing whether they will get an incentive? If the standard custom efficiency incentive is the consolation prize and it’s enough for a “go”, then why would the program waste money on a premium efficiency-bid incentive?
True story, last week we considered pursuing one of these bids for an industrial customer for which we had done a study. We decided against it because (1) we only had a month to get it submitted and in that month you need to get the customer on board and a month is a nanosecond for a capital intensive corporation to allocate (2) extremely scarce capital, and therefore, (3) it was too big a risk for even us, the consultant, to get the whole thing pulled together in a month, at the mercy of the corporate bean counters. There is far too little upside for our risk of getting something we have almost no control over to happen.
Somebody has to lose if this is competitive. Most likely only the biggest customers are going to pursue these projects. A major customer spends a bunch of time to put a bid together and then is told, sorry, you lose. Now the utility is faced with a colossal PR disaster with a major customer that will raise Cain all the way to PSC’s office. OR, the customer takes the standard custom incentive as a consolation prize, in which case the whole bid thing was a ruse to get extra program money – a free rider.
These efficiency bid programs probably look great on the surface but if one really understands market barriers and how large end-users allocate and budget capital, it seems like a big free rider program to me. They take more time, not less. They add risk rather than decrease risk. They potentially provide more capital assistance, but at what I see is a disproportional addition of risk.
- Ameren Missouri says they will pare back EE programs because they are costing shareholders return on investment. Wow – although I consider it unfortunate, it’s understandable and refreshing to some degree to get straight talk from a utility that actually believes this. I think a good portion of utilities really think this way but lead on as though they are saving the universe. Do what it takes to look good to the regulators but with minimal real impact. Come to think of it, these utilities may be like The Firm. Once a partner in the EE programs and made aware of the scam, you’re stuck unless you want your car to accidently explode when you leave for home. BTW, programs can be developed for utilities to make money on EE. Just call 608.785.1900.
- Don’t look now, the Chevy Volt has even less than the advertised 40 mile battery range – like about 40% less during cold weather as batteries don’t work well in cold weather. Not only that, as mentioned in “A Frivolous Novelty” it takes about 5 kW to heat the cabin of the vehicle. I “mistakenly” thought this was a big deal. Not really. At about 0.5 mile/kWh, the battery juice is consumed in less than a half hour. That’s 50 kWh for 25 miles of driving but only 2.5 kWh for heating. Who is going to pay $40,000 to be limited to 25 miles between charging? Raise your hand. Not all at once, it may make the planet wobble.
- In one last bit of refreshing honesty, this guy provides a good assessment of plusses and minuses of the ban on the standard incandescent lamp: Good assessment – far above average for that matter.