Wednesday, March 19, 2008

So I have an Energy Audit. Now What Do I Do?

A good first step is to translate the highlights of the audit report—a technical document—into non-technical terms that will resonate with non-technical business leaders. The report’s simple list of recommendations should be evolved into a business plan for action. Your energy audit report probably says nothing about which department in your organization should pay for improvements, which department will book the savings, or if your staff or an outside contractor is best able to do the work. The report says nothing about the disruption that such work might cause. How will you prioritize projects? How will you measure the financial impacts of each? These are the questions that an energy business plan should answer.
So here’s the take-away message about an energy audit: Don’t look at it only as a cost. If you do, you can certainly save money by not securing the audit in the first place. Rejecting the audit opportunity is a very high risk strategy, because each dollar saved by avoiding an energy audit can cost many more dollars in energy waste. Understand that an audit is only the first step. Energy costs are controlled by actually pursuing the opportunities that an energy audit recommends.


Thursday, March 13, 2008

Sustainability and the Triple Bottom Line

The “triple bottom line” concept is gathering momentum especially among publicly-traded companies. In broad terms, it describes a corporate effort to focus on more than just financial results. We all understand the bottom line to mean “money,” but for a variety of reasons, businesses are forced to recognize their environmental and social impacts as well. The sustainable business model is one that optimizes financial, environmental, and social performance all at once.

As you might suspect, there are plenty of business arguments about the merits of focusing on any outcome other than the creation of wealth. Nevertheless, businesses are actively managing the scrutiny imposed by consumers, shareholders, boards of directors, and other observers who are increasingly likely to challenge business operations that impose negative social or environmental impacts. Complaints against business encompass anything from unfair labor practices through the environmental impact of industrial waste handling. When a business “does good by doing no bad,” it is minimizing certain costs while offsetting the risk of business lost due to adverse publicity. In the end, the triple bottom line still comes down to money.

Forward-thinking corporations are protecting themselves by demonstrating their social and environmental stewardship. Many companies simply offer the public a sustainable business vision statement. But at some point, words must be followed by action. The challenge to corporations is to pursue sustainability in a way that provides an economic return on the time and money that they invest in this effort.

Energy cost control is high on the list of sustainable business opportunities. Why? Because of all the measures a company can take to demonstrate its social and environmental credentials, energy improvements are best able to pay for themselves—and in the end, create more income. When a business pursues energy improvements, they will:

1. Improve the “money” bottom line. Energy consumption is reduced as waste is eliminated. This allows a company to buy less energy. Those savings translate, dollar for dollar, to operating income. At the very least, those savings can be used to generate investment income. Another option is to reinvest the savings in the business in ways that create new revenue opportunities.

2. Improve the “environmental” bottom line. As energy waste is eliminated, the emissions from fossil fuels such as coal, oil, and natural gas are reduced proportionately. While these fuels are used in many industrial processes, they are also used for space and water heating. Even if your business is not industrial, or if does not use fossil fuels, it still uses electricity. Electricity is generated from a mix of fuel sources, including fossil fuels (notably coal). By turning on a light fixture or other electric appliance, a business is ultimately causing the combustion of fossil fuels. Carbon and other emissions from fossil fuels are the focus of environmental concerns. So even though your company is not in the business of generating electricity, it still has a direct, causal link to the amount of fossil fuel emissions released during the generation of electricity.

3. Improve the “social” bottom line. Anyone who uses electricity places demands on the national power grid; anyone who avoids energy waste removes stress from that grid. The U.S. infrastructure for power generation and distribution is operating at capacity, and much of that capacity is in need of updating. The investment needed to meet future power demand is enormous. Business and industry represent a large share of power demand (and the potential for waste reduction). Reducing waste means keeping investment in electricity infrastructure to the minimum that is needed—and no more. The alternative is to live with energy waste—which means inflating investment in power capacity so that we can feed that waste. Anyone who doesn’t generate electricity in their own backyard is forced to pay for investment in the national power grid. Cutting energy waste means not only savings on your energy bill, but ensuring that society’s investment capital is not wasted on power capacity that can be avoided. How’s that for social responsibility?

Returns to the triple bottom line—economics, society, and the environment—await corporations that adopt a sustainable business model. Energy improvements can be the vanguard of that effort.


Wednesday, March 05, 2008

Brilliant! Why Air Conditioners Run All Winter Long

The decision to operate both heating and cooling sources at the same time is a waste of energy and money in several ways. I'll tell you my story below. But first, consider this:

1.) The air conditioner's compressor and other critical components were not designed to achieve heat exchange in cold temperatures. Sure, it will "run," but doing so will hasten its mechanical demise and accelerate its need for replacement. Ice formation on the evaporator coil is a clue that something is amiss.

2.) Is the space too warm? That means the heating system is running too long at too high a setting. If you have control of the heating system thermostat, why not lower the setting? If you have no thermostatic control, open windows to various degrees to vent the excess heat.

3.) On an apples-to-apples basis, a unit of electricity is more expensive than a unit of fossil fuel (natural gas or heating oil). Running an air conditioner during winter is an expensive cure for excessive heat consumption. It's like hitting yourself on the head with a hammer to cure a headache.

4.) Electricity for air conditioning must be generated; generating assets must be capitalized by the provider-- and the provider will simply recoup its investment by charging customers that much more.

5.) Energy use is not without consequence. Heating and cooling systems both rely ultimately on fuel combustion. Combustion emissions collect in the atmosphere to the detriment of our climate and health. It's a good idea to use the energy you need, but no more. Running heating and cooling systems at the same time is a choice of dubious merit.

Bear with my little story here. A checklist will appear at the end, extremely relevant to industrial decision-makers from Maine to Missouri, and a few other places, too.

I own one 847 square-foot residential rental property. Understand that this is a fifty year-old condominium. The building contains six apartments, all of which are served on one master meter for natural gas and electricity. That’s the way they were built back in the 1950s. As a consequence of this design, all utility costs are included in the rent. Regardless of how much an occupant runs air-conditioners, lights, televisions, video games, or any other appliances, he enjoys the same, predictable out-of-pocket costs each month.

These apartment units have been rehabbed over the years, but some more so than others. Being the energy geek that I am, I have updated mine with Energy Star appliances and energy-efficient, double-pane insulated windows. Unfortunately, most of the neighboring units do not have similar upgrades. Old, leaky single-pane windows are predominant throughout the building. There is nothing to compel unit owners to make any improvements over and above the usual safety and sanitation requirements imposed by the building code and related regulations.

Space heat is provided by a hydronic (hot water) system of radiators. The management turns on the boiler on October 1, and it stays on through April. The apartments lack individual thermostats for controlling the ambient temperature during heating season. The radiators do have knobs for restricting hot water intake, but these are not really effective. The boiler is cranked up to suit the needs of the coldest residents—that is, those with the old, leaky windows. The rationale here is that too much heat is preferable to too little. If there are any unseasonably warm days during this time (and there always are), people who are too warm usually open the windows to attenuate the heat.

Everyone, that is, except for the young man who rents from me.

I popped in to handle a routine repair on a chilly Saturday in February. The tenant was out, so the unit was unoccupied. I found not only a number of lights on, but also a 2.5 amp oscillating pedestal fan. And if this was not enough-- the air conditioner was running. In FEBRUARY. This was apparently to counteract the excess heat trapped in the unit by the very efficient windows that I had installed just last year.

I’m sharing this with you because the underlying facts of my story help to explain energy waste in an industrial setting. Think about it:

Commitment to vintage technology. It’s not unusual for a 1950’s vintage multifamily property to have centralized meters. That’s a design choice that would have repercussions for decades to come. Similarly, there’s a lot of industrial activity taking place in facilities that are 30 years old or more. When it comes to technology, many manufactures continue to “dance with who brung ‘em,” and the cost of doing so is becoming increasingly dear.

Lack of accountability and awareness. The “all utilities included” format made a lot of sense for years—as long as energy was cheap. But if you never see the bill for the service you consume, why bother to use that service wisely? Apartment or factory, the outcome is the same.

Overhead instead of direct cost accounting. Okay, so the utility costs for a master-metered multifamily building are pooled and divided evenly among the participating units in the monthly condo fee. One person may be careful about energy use, but ends up paying for the waste of others. In industry, accountants will take the energy bill for the whole plant and divide it across departments according to the number of labor hours booked that month, or by the number of square feet. Result: no incentive to save because there’s no way to trace the benefit.

"That’s the way we've always done it." People in multifamily housing have been using windows in place of thermostats for years. It’s an institutionalized habit. The same is true for a lot of industrial energy housekeeping.

Bad return on investment (ROI). How can you guarantee a bad ROI for an energy improvement? Do random, isolated projects instead of system-wide optimization. I needed new windows anyway, but opted to make them as efficient as possible. But note the unintended interaction—a tenant running the air conditioner during the winter to offset the space heating! At least I can take some measure of comfort in knowing that the cost of this waste is being pooled with my neighbors. Think now (true story) about the fabrication facility that refuses to fix compressed air leaks, so it runs 50 percent more compressor capacity than it needs to make up for the volume lost due to leaks!

Industrial energy waste exists for a reason. Disjointed fiscal authority and accountability under one roof is deadly. Think about my condo building. Do the departments in your facility work the same way?


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