Upon reading some manager/principal/owner interviews in business publications, the publisher asks, “What keeps you awake at night?” My answer to that would be: Nothing. The reason for this is utilities are regulated monopolies and the energy efficiency program portfolios they run are cost effective. I.e., we, as an industry, are contributing to net wealth generation for consumers and not just redistributing it – it’s EE or power plants, poles and wires and either way, the consumer pays, and we are helping them pay less.
A major reason I am a huge advocate of EE programs is that they are cost effective, and what does that mean? – it typically means it is cheaper to run programs than build power plants and requisite transmission systems to pipe the electricity to points of use (distribution). I sleep knowing I’m contributing to a wealthier, more efficient society that also happens to burn less resources.
One such cost-effectiveness test is the ratepayer impact measure test or RIM test. The RIM test “measures what happens to customer bills or rates due to changes in utility revenues and operating costs caused by the program”. Programs that pass the RIM test have a benefit to cost ratio greater than 1.0, indicating unit energy costs are reduced as a result of programs and therefore, programs benefit all customers whether or not they participate in programs.
So, I’m really liking this. Customers that choose to do nothing benefit, but participants benefit even more. However, like everything else, politics, do-gooderism, and waste seep into program portfolios.
Regulators generally frown upon and disallow utilities to make money on their programs. This needs to change, and I’ve discussed this in the past. The regulated utility business was created on a forever upward trend in demand and sales. This has ground to a halt, and in some cases reversing largely as a result of EE programs. Well by golly, whaddya say we let utilities in on the action in a cost effective manner where all B/Cs are >1.0? Not allowing this is kind of the mirror image of do-gooderism. Do-gooders don’t allow utilities to make money because they are obliged to give it away, apparently.
Small business programs are generally not cost effective but they exist often in the form of direct install (DI) programs for equity, as in fairness, reasons. Small businesses as a whole send millions of dollars in EE riders (EE charges, typically 1% of the bill) to fund programs, but they are very difficult to serve effectively for a whole raft of reasons that can be part of another rant. Rather than market to, and actually get small businesses to pay for projects like everyone else, it is less expensive from a program perspective to just give them stuff – replace lighting for example. I.e. cost of free < cost of laborious arm twisting. I understand this angle, but it is doesn’t make a lot of sense in the presence of a RIM B/C > 1.
Another political thing that seeps in is workforce development and jobs. This torques me as it often adds to the cost and subtracts from the benefits to ratepayers. In our space (buzzword of the year, which means market), it takes years and years and years to gain expertise to look at a building and say, that was built in 1979, it has rooftop units, electric reheat, the comfort is terrible, and half the variable air volume boxes likely do not function properly, partitions (interior walls) have been erected and demolished four times over and the zoning is dorked – all information gathered by Google Earth and street views without even stepping foot in the building or even the state in which it resides. And so on and so forth for 20s buildings, 60s buildings, 80s buildings, 90s buildings. A person learns what to expect after having been in dozens of these buildings and simply looking at a satellite image, and a street view is a bonus.
Regulators, administrators, and possibly third-party program implementers in some jurisdictions expect to train contractors how to fix these buildings. Again, it’s do-gooderism over greater net wealth generation. I would hire business partners (subs) that are competent and highly qualified to deliver results, as needed and locally when it makes sense. I do not want to teach a 7th grade science class to set a broken femur – pins, rods, casts and all, which is essentially the equivalent of effectively indentifying and developing all cost effective measures that exist in a typical poorly-performing, wasteful facility or process. It takes years, not a couple days or week to develop these skills. Doing so is expensive, inefficient, ineffective, and bad for ratepayers.
We will create the need to hire people for our subs and ourselves. What difference does it make if Jimmy and Sue work on our team or someone else’s? That’s the way it works – the best for everyone involved. Does anyone expect Fluor to be forced to hire local schmucks to build its power plants? When it makes sense, such as buying concrete locally rather than trucking it from three states away, yes. For structural engineering, not so much.
 California Public Utilities Commission
 From the architecture – dark and depressing.
 Can see them on Google Earth.
 Because Jimmy Carter thought we were going to run out of natural gas – no kidding.
 Because they distributed heat from the ceiling and heat rises.
 Everyone on the perimeter has a 1500 Watt space heater at their work station.
Believe it or not, I did not have a rant topic in mind going into Saturday morning – my rant writing time. But the fog burned off quickly as a topic came into view – one that arose during the prior week. Incidentally, I once heard a “meteorologist” instructor say he always scolded his students for saying fog “burns” off. Instead, they should say the fog lifted. What? Fog is suspended water droplets, not vapor. Water vapor in air, or as steam, is invisible. When fog “burns off,” it changes from visible water droplets to invisible vapor, so while “burn off” isn’t exactly correct, it’s better than “lifted”.
As I understand it, certain regulatory agencies are getting bored with lighting. Hallelujah! Lighting is kind of like the Star Wars movie that nerds watched 26 times. At some point, it reaches saturation; it is no longer interesting, and it becomes boring. And even as a seven year old, I would be asking how can that garbage can on tiny wheels propel itself in sugary sand?
What comes after lighting? There are a number of packaged control products for mass markets including convenience stores and rooftop units. I’m actually excited about these widgets because they require sound HVAC design knowledge so certain things like the following do not occur: coils freeze into a block of ice, warm air stratifies into wide temperature variation from floor to ceiling, cold air dumps onto occupants making for cold spots in the occupied space, occupants die of asphyxiation (a slight exaggeration), and god forbid the beer isn’t cold.
After lighting, there is also of course, my favorite: the elimination of stupid and/or incomprehensible HVAC system design and the riddance of most energy hemorrhaging from systems and processes. This is virtually limitless in large buildings.
Moving onto the main topic of this rant: new construction. First, let me interject this hot tamale. Some program metrics for new construction success include post-construction energy consumption that matches energy model predictions. No. No. No. No. No. Say it with me. NO! Who cares if the answer is correct? This is the WROOONG metric. How much energy does the building use compared to similarly functioning ones? That is the metric. Customers shouldn’t give a rats if the answer is correct. They don’t get paid for that, and their energy bills aren’t lower as a result. This is an issue I came across TWICE last week in two different states! Regulators and program administrators – are you listening?
Now, understanding that the goal is low energy consumption, NOT right answers, although right answers are typically illusive, there are generally two categories in which to achieve low energy consumption. The first one is to select designs that are inherently simple and extremely difficult to screw up, and NOT extremely difficult to run with low energy cost. The second category includes innovative design, and I mean innovative design. There is nothing so common as “innovative design”.
What am I talking about? Innovative design? I can define this two ways, one for energy geeks and one for common people (not the song – BTW, the William Shatner adaptation is hilarious – good listening for a bad day). The energy geeks dividing line between standard fare and innovation is the common building simulation engine, DOE-2. If DOE-2 can handle the simulation in its entirety, there is no innovation; only incremental upgrades for a multitude of building and equipment characteristics.
The common person definition can be demonstrated with cars. The common automobile with four wheels, engine in the front, and sundry features such as a moon roof and rear camera dummy crash avoider is not innovative. Make em small. Put in tiny engines. Lower the drag coefficient (make them aerodynamic) and so on. Unfortunately, at this point there are few examples of innovative cars, but let’s just use the hybrid and the plug-in hybrid as examples of breaking the mould. The key breakthroughs include energy recovery from braking and an engine that operates in its sweet spot efficiency-wise whenever it needs to run. From an energy perspective, it smashes the model.
Similarly, there are building features that smash the model in ways that aren’t exactly like splitting the atom. Some include radiant heating and cooling, displacement ventilation, smart but easy demand controlled ventilation, and multiple types of energy recovery. The key is application of the technology to appropriate building types with specific needs, keeping it simple and making it difficult to screw up operationally, and keeping occupants comfortable. The DOE-2 engine doesn’t handle this stuff.
Since physical and absolute barriers for efficient equipment – lights, heating, cooling, controls for standard systems are nigh, I would guess the next moves would include the riddance of theoretically efficient but practically unworkable systems from energy codes.
 To use the old cliché, broken clocks are right twice a day, and so there is a difference between correct answers and correct calculations in many cases, especially when entering an error band.
A couple weeks ago, I wrote about nationalizing pieces of energy efficiency programs, namely technical resource manuals from which energy impacts (savings) and measure costs are derived. The post explained why this is a bad idea for a number of reasons. This week features chaos at the state level.
It seems states with their energy efficiency policies are parallel to people who go to Washington DC and operate in the alternate universe inside the beltway. The longer they exist, the more schizophrenic and/or demented and/or dysfunctional they become.
Utilities are forced, for lack of a better term, by regulators to meet savings goals with their energy efficiency portfolios. They also need to spread it around so segments that are difficult to cost-effectively serve, such as small business and low income, essentially get their money back. Regulatory agencies are, as far as I know, all state-run organizations. Now, imagine if the state itself runs an enormous energy efficiency program that competes with the utility-mandated programs for the same customers.
Competition is normally good as it promotes better products and services more cost effectively, generally advances society, and makes life better in many ways. However, this sort of competition would be like forcing Coke to advertise and sell a certain number of twelve packs from the grocery store, but when shoppers get to the checkout line they are offered free Pepsi from the state. Coke: back to the grocery isle. Pepsi: thank you very much.
It gets even worse for energy efficiency; in particular for service-oriented programs where information, knowledge, and technical expertise are needed to sell energy efficiency. Energy Service Companies, or ESCOs, are a perfect example. ESCOs deliver performance contracts, which are huge energy efficiency projects that may include everything from new control systems to window replacements. For a nauseating example, Google “Empire State Building” and after weeding out the Wikipedia hits, the next 5000 hits will be about the performance contract with Johnson Controls, where they say it’s saving energy, but they never prove it to me or the rest of us with billing data.
In general, the ESCO invests a lot of time and money on the front end to generate a contract. For the 100,000th time, buildings are not like cars, trucks, mopeds, and chocolates. They are all very different, and you never know what you are going to get. First, there is benchmarking the facilities against similar ones to determine energy intensity and savings potential. This can cost thousands because the ESCO has to build rapport and trust with the customer just to get to the point of looking in their underwear drawer (energy records, building square footage, and so forth). Then, there is the actual benchmarking.
Supposing the facility, or facilities, pass the benchmarking test, or fail it, depending on how you look at it, the buildings are clearly wasting a lot of energy. The ESCO must establish a more defined project. They must identify actual measures that save gobs of energy cost effectively and put relatively accurate cost and savings estimates together. If this sounds like some sort of energy assessment or feasibility study, it is.
Somewhere along the line the owner and the ESCO agree to a contract, and the project is locked in. The ESCO performs all this front end stuff at a cost of tens of thousands of dollars with the contractual obligation of the customer moving forward with the implementation, to be provided by the ESCO for a lot of money – a story for another day.
Competition for the entire package from rapport building through project implementation is fine, but you cannot start competition half way through the process, and this is what some states do. For example, in the above case, suppose Johnson Controls, Honeywell, Siemens, Ameresco, or another ginormous performance contractor invests a quarter million dollars in project development and the state says, “Wup, wup, wup, wup, wup.” You have to bid out project implementation (construction) to ensure the customer gets the best deal at the lowest price. There goes performance contracting – the end of the world as we know it, and I don’t feel fine (if I’m a performance contractor). Nobody will spend all this front end development cost to have it handed to someone else for the payoff.
In some unnamed states where we work, this is pretty much exactly what happens. The utilities have to meet their goals. They already have the rapport with the customer. Their programs lead the horse to water and then the state pulls up a trough next to it with apple juice in it. The horse suddenly loses its appetite for water and takes the apple juice instead, provided by the state. Thank you very much, sucker utility. Now get back out there and get your goals, and I’ll swipe the next one from you too. By the way, I’ll stick you in the eye with a sharp stick too if you don’t meet your goals, loser.
Actually, what happens is, the state offers greater monetary incentives, in many cases, than the utility. The state does hardly any marketing, provides no intellectual value, and brings nothing to the table to speak of. In another uh, environment, I have another term for the state: parasite, free rider, poacher.
Speaking of nationalizing EE, Omaha/Lincoln report that $3.5 million of a $10 million EE stimulus project has been spent. Results: 1/3 of the spent amount is on marketing alone, not including administration. The grant was to “create” 300 jobs. A reported 13 have been created, which means it’s probably closer to 3, but even at 13, that’s $270,000 per job. Congratulations!
 The payer of the incentive gets full credit for the savings.
Earlier this year I was partaking in an interview for a large project and we were asked a formal list of specific questions, the last of which was, why should we hire your team? While one possible response would be to ramble on for a few minutes about how great we were as demonstrated by this, that and the other, I thought of a different direction.
We are passionate about energy efficiency. We are passionate about getting it right. We are passionate about making a difference and improving things.
If you do not want these things, we are not your firm; and I’m serious because I do not believe some clients really want these things.
Passion to get it right simply means savings are going to be as accurate as we can reasonably get them as the budget and client allow – not only are the calculations sound, feasible and the answer relatively accurate, but is the project eligible per the rules of the program? Is the baseline, or less expensive, less efficient alternative reasonable? Is the less efficient alternative less expensive?
Making a difference and improving programs covers both the project level and the program level. We’re not here to beat people up and go home. If savings are fake or not eligible, we want to help clients identify and develop other substantial projects that are actually having an impact compared to the status quo.
As I am quoted on our website, I will tell people what they need to know, not necessarily what they want to hear, and this is consistent with the entire company. On rare occasion we stray off the ranch by trying to engineer a less expensive half-baked solution to a problem that needs a larger more comprehensive overhaul to fix correctly and sufficiently – such as trying to use too much of the currently-installed crap rather than ripping it out, spending 50% more and doing it right. But this isn’t really what I’m talking about in this post.
Good clients want their consultants, vendors, and contractors to report what is happening and offer solutions to improve their programs or systems. In a recent post, Don’t Ask, Don’t Look, Don’t Tell, I explain how some program folks by all indications aren’t so much interested in what the real impacts of their programs are. They filter information, they limit the scope in their requests for proposals to neuter impact evaluation, and/or they provide too little budget to do a decent impact (program-attributable savings) evaluation.
In another recent post, Rogue Choir Boy, I explain that many people in our industry, for pretty much other bizarre reasoning, agree that impact evaluation is a waste of time because it can’t be accurately assessed anyway. If we as industry are skimming 1-2% off all energy bills that customers are paying and not using it cost effectively, as indicated by a number of cost effectiveness tests, especially ratepayer impact measure (RIM), where benefits should be greater than cost, I’m out of here. Is the program a parasite on society like a tapeworm, or is it a benefit to society like a honeybee, pollinating foodstuffs and making honey on the side – i.e., everyone wins. Without rigorous impact evaluation, prepare for the march of the tapeworm.
The American Council for an Energy Efficient Economy says energy efficiency is by far the least cost resource – i.e., doing things to not use energy and capacity (demand) is cheaper than building more capacity and producing more energy. In fact, ACEEE has an entire conference devoted to this later this month. Portfolio managers should have to prove programs are cost effective with third party evaluation. While not all programs may be cost effective, the portfolio has to be. Some non-cost-effective programs are needed for equity purposes. For example, small business pays a large percentage of EE funds but “giving it back” by boosting cost effective measures is very difficult to do because there is no economy of scale with small business projects – impacts for the needed marketing/promotion required to get these customers to act.
Portfolios should provide wins for all stakeholders – utilities, consultants, vendors, contractors, customer participants and non-participants. I get the strong sense that for some portfolios the utility/implementers and the participants get wins but the non-participants get the shaft because the participants may be getting too much incentive for the impacts they are accomplishing. Actually, the participants may be getting the shaft too because they may not be getting the savings they should be getting. If utility/implementers can “fake” their way through with no one looking under the hood, they likely aren’t saving what they should be, the regulators don’t know it, and the customers don’t know it.
I go back to my conversation with the guy at the ACEEE summer study for industry a couple years ago. He said all evaluations should be on behalf of the regulators. I agree and not because working for the utility would bias outcomes, but utilities don’t think they have problems with impacts in some programs and some of these programs are very large. We know from experience time and again that program verification and in some cases measurement and verification helps, but in many cases does not come close to ensuring reasonably accurate results. Regulators I would hope would want more than a wink and a nod for impact evaluation
There are consultants all too happy to tell clients what they want to hear. How smooth can that be? There are consultants on the implementation side who will challenge and defend indefensible evaluation findings – projects that are not eligible, bad applications of engineering principles in determining impacts, or facts like large volumes of logged data showing assumptions / stipulated values are clearly wrong. Then it’s a sampling problem, the time of year, the economy or the dog ate the hard drive.
On the flip side to all this of course are clients, utilities, program implementers that strive for accuracy and reality, and continual improvement. They want to learn how to do things better and avoid problems and improve poor realization rates (“actual” savings divided by initial estimated savings).
As consultants we also greatly appreciate partnerships with our clients, whether they are other consultants, utilities, or prime contractors. Partnerships include shared sacrifice and shared benefit. Shared sacrifice includes project or program development time and expense in return for substantial work, revenue, and profit. Tip offs include not wanting to pay for program development but asking, what would that look like? Good grief. For great long-term clients we do many things for free, including “what it would look like”, preliminary analysis and development, spending time and attending functions with their customers and not charging for it, rounding up some data. Bargaining tooth and nail for a blanket in Juarez may be novel, but it isn’t how we like to do business for real.
Finally, it’s always nice to get paid. The worst clients not only recoil when told replacing their early 20th-century HVAC system won’t save more energy than they currently use, and then they refuse to pay because they should have been told the answer ahead of time.
Imagine this, Johnson Controls Inc. wants congress to pass the President’s jobs bill, whatever it’s called this time. I’m sure they have a billion or two (billion) with their name on it in the bill.
Outrage of the Week
Meanwhile, a bunch of other companies are pressing for another energy bill that would “help companies make their supply chains more efficient; as provisions to update national model building codes to increase energy efficiency of new buildings”. Good grief! This better go down in flames. If anyone thinks the role of government is to fix company supply chains, their name would be Vladimir, Hugo, Raul, or Kim.
written by Jeffrey L. Ihnen, P.E., LEED AP
A couple years ago I was attending an ACEEE conference and I was speaking with a gentleman who with his company was a program implementer. I remember him saying that program evaluators should always work for the regulators. If evaluators worked for the program implementer, which in many cases is the utility directly, the results would be biased. I thought, no way. There is no way our profession is to be swayed by the desire to not make waves with the client. As I say on our staff page I will tell people what they need to know, not what they like to hear.
As I think someone once said, if you live long enough, you will see everything. While I/we have not compromised our principles, the guy from the ACEEE conference was right. Evaluators should work for (report to) the regulators. In Don’t Ask, Don’t Look, Don’t Tell, I talk about program implementers (utilities in this case) only providing filtered information they think we need to complete energy analyses, and blocking our access to project information for evaluation so we can get to the bottom of things. Well this has been taken a step further.
On a previous project, we provided too much of what they needed to know and not enough of what they wanted to hear. This time we are not to go on site and investigate and gather actual project information or log key operating parameters to precisely measure gross savings for prescriptive measures. We are to do a file review but not call the customer. Good grief. This is like looking at the silhouette of an automobile from 400 meters by moonlight in the fog and verifying the mileage. We can’t even tell if it’s a 1982 Yugo, 1984 Escort Diesel, or a 1977 Royal Monaco. Why bother. The report can be summarized in the following sentence. “The gross savings of 5,000 GWh achieved by this program do not seem unreasonable as viewed from the perfect pitch black vacuum in which we evaluated the savings.” Congratulations. The lack of information leaves us with no choice to in any way determine gross, let alone net, impacts.
We as an industry sell energy efficiency as a resource, like thermal power plants, wind turbines, photovoltaics, hydro and other sources of electricity, whatever they may be. Stepping a bit out of my area of expertise, utilities regularly provide integrated resource plans, IRPs – 20 year projections of how they plan to meet customer demand. If energy efficiency is a resource per an IRP and the evaluation team is bound, gagged, blindfolded and duct taped to a lightning cut-out switch such that plus-or-minus-50% savings are being achieved, how can the utility use energy efficiency in its plan? It is ignorant denial to believe a program delivers exactly the projected savings. Moreover, it is doing ratepayers a disservice by claiming return on their investment in EE that may be significantly in error – not just for trailing years, which is forgivable, but for future years, the ignored errors for which are not forgivable.
At the same time in other jurisdictions, there are crazy, meaningless instrumentation calibration and accuracy requirements. Consider, the typical evaluation provides 90/10 results. That is, there is 90% confidence that the results of the evaluation are within plus or minus 10% of the actual PROGRAM results. Meanwhile, a kW logger needs to have accuracy to within plus or minus 1%. Does the US Congress write these requirements? In a rather depressing analysis of all statistically possible outcomes using a Monte Carlo model (a hideous mathematical model, not a 6,000 lb tank disguised as a car), a typical measure has a range of possibilities of plus 150% or minus 95% after all the possible “errors” are piled on top of one another. But by God, it could have been plus 152% or minus 96% so it’s a good thing we have accurate data loggers.
On top of that, there is this harsh reality: we can monitor and investigate the bajeebas out of a project and it may all change next week. Who eventually wins the Republican nomination for President or even the next debate for that matter will impact savings more than the accuracy required for the instrumentation will. If a category three hurricane makes landfall on Fort Lauderdale in August, it will change the results of a lighting program in Massachusetts by 1.5%. If it makes landfall in October, the Massachusetts results will be off by 3%. Why? For the same reason a butterfly in New Zealand causes a two foot snowstorm in Washington DC. Seriously, there is no way to measure known and unknown influences or travel through time to estimate/verify savings with anywhere near that accuracy, so why bother with the ridiculous instrumentation requirements?
Recommendation – First, program evaluations should be reported in their entirety to regulators. Reasonable (budget restrictions) and unreasonable (don’t want anyone to know) constraints on accuracy and usefulness of the results shall be described in the evaluation report. Second, leave the assessment of gross and net savings estimates to the expertise of professionals in the industry, not someone who doesn’t understand real world influences on savings.
You may know how much a fan I am of electric cars. Last fall I had responded to an opinion piece in The Wall Street Journal regarding electric cars. The writer claimed the electric car would develop like cellular phones have over the past 30 years. I wrote that this would not happen because of physical constraints in electrical infrastructure. To wit, you would have to change out step down transformers feeding homes or you would have to wait forever to “refuel” your electric car. An un-subscribed do-it-yourselfer electrician wannabee blasted my assertions. Well wouldn’t you know it, a couple fine folks from Itron in a paper listed transformers as number two (2) on their list of the top 10 challenges for electric vehicles. They conclude plug in hybrids will serve as the primary vehicles while EVs will serve as a secondary vehicle. A $40,000 secondary vehicle! Gee, I think this is what I meant when I said EVs will be a frivolous novelty. A much more appealing frivolous novelty would be a slightly used 911 Cabrio for that kind of money.
Outrage of the Week
At nearly the same time, the geniuses at Google issued their own brilliant report “mapping out a path forward for the country’s energy sector.” They pulled some financial and jobs benefits of such a program out of the air, but it is becoming obvious Google has no clue about our industry. Here is the outrage: “It [the study] also models the potential effects of a series of federal policies, including a clean energy standard that would mandate a certain percentage of the country’s electricity come from low-carbon sources, increased energy efficiency and higher fuel economy standards.” While Messrs. Bryn and Schmidt may know how to skim billions from their entrepreneurial endeavors over the internet, they are clueless as Congress is regarding energy policy. They have resorted to the General Electric tactic of setting up shop on K Street to make their own market by having politicians do so for them.
Speaking of GE, one of their legions of government money grubbers wants Congress to make policy (mandates for GE technologies) so they can get on with making money for their shareholders – tax free of course.
written by Jeffrey L. Ihnen, P.E., LEED AP
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.
written by Jeffrey L. Ihnen, P.E., LEED AP
The Wall Street Journal this week weighed in on the ban on incandescent from the energy bill of 2007 signed by Bush to phase out the incandescent light bulb by 2014. Naturally, their opinion is that banning products that are essentially harmless and in demand from citizens is bad policy. As usual, I have multiple points of view on this issue as well.
First, I agree with the WSJ that ramming things like this down peoples’ throats is never a good idea. It appears that next month we are going to see the political fallout of such lawmaking processes. In the energy efficiency business we have to remember who we are ultimately working for – energy consumers. There are already plenty of foes of energy efficiency programs. The last thing we need is a public uprising against EE. Ultimately regulators are appointed by governors. I don’t really want to see a candidate ride a wave of uproar into the governor’s mansion on a platform with planks to dismantle EE programs.
If governments want to impose EE and other green standards for their facilities, that is fine by me as long as they are not completely stupid with my tax money. Wait a minute – Snap out of it Jeff… I must have nodded off to the land of gumdrops and lollipops – I was talking about Washington using money wisely and miserly. That will happen as soon as San Francisco makes its way to Juneau by movement of tectonic plates.
As I recall reading an article in one of the greenie publications I get, an author also thought it is bad policy to ram LEED requirements onto the private sector. I agree. It is our job to sell the public on energy efficiency by reward not by training up and deploying an army of the green police.
Secondly, keep the feds out of this kind of stuff because they have a habit of writing bills and passing them without any knowledge of what is in the foot-thick stack of paper they are voting on and/or they are ignorant of the costs and benefits and certainly the consequences the bills they fight over. Do any of them even use CFLs? Do they have any concept that they take a minute or two to reach full brightness from a pretty darn dim start? Do they have any clue that CFLs are even worse at starting in cold conditions and never do come up to rated brightness in many of these cases? Have the Vikings won the Super Bowl in the past 45 years?
Compact fluorescent light bulbs have their place for sure. I use them wherever there are significant burn hours. But there are many poor household applications such as closets, pantries, refrigerator, outdoor lighting, and bathroom lighting (at least for men – ooooh!). Sure, I could get LED lighting for these applications and those would pay back in… see the San Francisco / Juneau connection above. Somebody needs to figure out how to get CFLs to come up to brightness in a few seconds and work in cold weather.
So as usual, congress passed something that is undoable. No. I’m not going to bother to read the law because I’ll be locked up in a seizure after reading (or trying to) just a few pages because it is so painful to read and understand. Come to think of it, how can a ban on incandescent bulbs take more than one page of typed text? Actually, the repeal is two pages. Give that man a bubble gum cigar for brevity anyway. Incandescent lights will still be manufactured or there will be a major rebellion.
Compact fluorescent bulbs have dropped in price by 80-90% in the short 15 years I’ve been in the business. While they still only make up 10% of installed residential bulbs as stated in the Journal, they are flying off the shelf at three times that rate. The market is clearly swinging in the CFL direction. My mother, as one example, has installed them in most of her fixtures and while I hate to admit it, I had no influence on that.
Last week I made up a story explaining how energy efficiency results in more energy consumption as consumers have more money to spend on things. The story started with steel manufactured in China, shipped to Ontario, tires coming and going and so forth. That was a lame attempt at the insanity.
I popped this open on Sunday night and it tracks a series of manufacturing events I should have dreamed up. Rio Tinto, a huge international mining company, mines and ships iron ore from Australia to a steel plant in China. There it is processed into plate steel that is shipped to Caterpillar’s Decatur, IL plant that builds the behemoth dump trucks – the ones that look like Tonka trucks but their tires are 12 feet tall. From IL, the truck is shipped in pieces to – you guessed it, the Rio Tinto mine in Australia. You gotta love it!
Sorry I couldn’t make that up.
written by Jeffrey L. Ihnen, P.E., LEED AP
Many posts ago, I wrote “The More You Spend, The More You Save” explaining how poor system control wastes energy but results in even greater energy savings for efficient equipment. For example, consider an air handling system that wastes heating energy provided by an efficient boiler. The boiler saves x% versus a conventional model, so x% multiplied by greater use (wasted energy) results in “more” savings.
Recently I picked up on buzz that argues greater efficiency results in greater energy consumption. At one point I recall reading in the Wall Street Journal an editorial that argued more efficient vehicles just result in people driving more. They live further from work. They go on joy rides. They visit the in-laws more. I scoffed at this argument, at least at current gasoline costs and anything near them. If I buy a hybrid that gets 50 mpg versus a “sports car” like an Infiniti G35 coupe that goes half as far on a gallon of gasoline, I will drive more. No. Way.
I will drive more (barely) if (1) I have a car that is fun to drive and (2) I am in an area where it is fun to drive. While I haven’t driven a hybrid, I don’t think it would meet my criteria for #1. As for #2, western Wisconsin is a driver’s and biker’s paradise because (1) it is scenic (2) there are lots of smooth, paved, and curvy roads on which to drive and (3) there is minimal traffic. Quite frankly, I’m much more concerned about striking a deer, coon or coyote than another vehicle. I used to live in the DC metro area. Forget it. You might as well drive a tin can because you are going nowhere fast. I grew up in Southwest Minnesota. Forget it. You can drive for miles without moving the steering wheel. But even so, living here in driver’s paradise, I have limited time so I never, ever think, “ooh boy, a 45 minute drive is only going to cost me $2.79 in gasoline – let’s drive!”
That’s one argument that doesn’t hold water in my opinion. On the other hand, some people do run efficient stuff like lighting for longer hours because it’s efficient.
The other argument made in these articles is that the money freed up by spending less on energy results in redirection of that extra money toward other goods and services – and those goods and services result in more energy consumption to extract, process, manufacture, transport and operate. I do buy into the merits of this argument whether the end-user is a homeowner, service provider, or manufacturer. I never really bought into the notion that energy efficiency programs result in lower revenues for utilities. Maybe they understand this and hence the rah-rah from utilities for energy efficiency programs. I don’t blame them. By far the main driver of EE is saving money and increasing profits. See “This is Not Tee-Ball“.
Just think how this turns the energy efficiency business and policies on their heads. In “Paying to Lose,” I discussed how utilities have to make their savings goals or they may get hammered by regulators. This, in turn, improves the bottom lines of their customers allowing them to expand. What a racket. Rather than utilities spending money for their customers to use less of their product, they are actually using their CUSTOMERS’ money to sell MORE of their product. And how about “Decoupling Stupid,” that allows utilities to recover revenue “lost” to energy efficiency? They spend their customers’ money to increase sales and meanwhile essentially get reimbursed for the “savings”. Cool!
We have also discussed the underperformance of LEED facilities. In “LEED and the NOT Happenin’ Savings,” I described how LEED buildings weren’t meeting energy performance targets because of lousy commissioning. Well hail to the lousy commissioning agents! They are actually reducing global energy demand and greenhouse gas emissions. Now that end user won’t be able to afford a new vehicle manufactured in Ontario with steel from soot belching plants in China shipped across the Pacific, through the Panama Canal to the Gulf of Mexico and transported by rail to Toronto or someplace – and tires from tariff protected Ohio that are shipped to Canada and back to the California border once installed on the automobile. They also won’t be driving their phantom car. (California won’t allow the car cross state lines because of the embedded energy, so Los Angeleans have to drive to Reno to pick up their car – I just made that up but it is probably true or at least accurate or emblematic, but certainly driving a new car across state lines into the golden state causes cancer and birth defects like everything else in CA does)
And I consider Michaels Energy. Our facility uses practically no energy but in recent years our air travel has gone from virtually zero to hundreds of thousands of passenger miles per year. And from the destination airport, we drive all over the place. Soon for example, we will have about five people zigzagging all over California verifying energy efficiency measures that probably save less than the gasoline burned to prove it. Somebody has to do it!
So go ahead and turn that thermostat up, open the window for some fresh air and click on that 70 inch plasma TV, have a beer and save the planet, Homer.
written by Jeffrey L. Ihnen, P.E., LEED AP
Jenny Craig customers do it all the time – pay money to consume less. This may make perfect sense to people who understand customers’ needs, but to others it seems really stupid to pay somebody to help use less of something. This is a bit like utility programs that spend money for customers to use less of their product.
The vast majority of our energy work comes from referrals and repeat clients. On numerous occasions, we seemed to have customers at the tipping point, only to have them bail out at the last minute. Why? The utility introduced us to the client, and knowing that we are more or less paid by the utility to provide energy efficiency services to the end user, they believe this is a conflict of interest and/or they don’t trust the utility to lead the end user to use less of the utility’s product – power or gas.
Memo to end-users: Utilities have to generate energy savings. They have no choice.
Investor owned utilities are in most states fully regulated monopolies. The only way a consumer can buy from another utility in regulated states is to move to a different service territory. This isn’t very practical for a school, hospital, or pretty much anybody. In exchange for a virtually guaranteed consumer base, utilities’ profits and prices are essentially determined by regulators and consumer advocacy groups.
Saving energy, or using energy efficiency as a resource, is less expensive than building power plants, transmission, and distribution systems, Willie Nillie. Therefore, regulators and consumer advocacy groups require the utilities to run energy efficiency programs. As a result, utilities that run energy efficiency programs can either exceed goals or come up short. Guess which outcome the regulators want to see. Get it? If they come up short, raising prices and building required infrastructure becomes really difficult politically – it’s difficult enough anyway.
“Yes, but they’ll just cheat or make up savings”, some people may think. Wouldn’t be prudent. Programs have third party evaluations to determine program cost effectiveness and actual savings compared to utility-claimed savings. Lousy energy-saving estimates will come back to bite the utility hard. This is detrimental to their next rate case, which is a request to raise prices and therefore, profit.
Smart utilities will genuinely encourage and achieve greater savings for their customers, first because they have no other choice, but second because reducing their customers’ costs improves their bottom line. Like paying taxes, it is better to have a customer that pays a little less than none at all after they flee the service territory or go broke. Moreover, if the customer is more profitable, eventually they will expand their business and use more energy, but efficiently.
To sum things up, utilities have to save energy or making return on investment for their shareholders gets really difficult. Saving energy for customers also improves the bottom line resulting in long-term customers that will hopefully expand business in the utility’s service territory.
When the utility wants to help you save energy, believe it.
written by Jeffrey L. Ihnen, P.E., LEED AP
Any carbon-reduction policy that includes paying Washington for permits to emit carbon is the wrong way to go. Why? Two words. Social Security.
Washington has no spending restraint. Earmark nation is alive and thriving. Everyone has heard of the Social Security Trust Fund; Al Gore’s “lock box”. Social Security has been running surpluses in the hundreds of billions of dollars per year for a long time. If you think your payroll taxes are piling up for your retirement in a bunker under Washington somewhere, you are sorely mistaken. Our profligate government has been taking the surplus and spending it on everything else, leaving behind “IOUs”. Those IOUs are worth less than the lint behind my dryer because they will never be paid off.
What’s the point? Permit revenue (tax) is supposed to be used for R&D for new fuel and fuel efficiency technologies, energy efficiency and so forth, per these bills. Like social security and the state of Wisconsin’s disaster (see Energy Efficiency Oversight rant), this revenue will be pilfered for any number of other things including, for example, a congressman’s airport, a senator’s library, a study of mating habits of insects, why hog farms smell and so forth.
Instead, the drive to reduce utility-related carbon should come from utility and regulatory administered state programs, where consumers’ money spent to fund the reduction is plowed directly back into energy efficiency and low carbon production of energy. Regulators and consumer advocacy groups ensure consumers get their moneys worth through independent program evaluations.
Yes. I think that is the role of government. To help ensure people don’t get ripped off. If the feds get the money, who is going to watch them? They have a dismal record of self-policing. In fact, they practice bookkeeping methods that would land corporate accountants in jail. Imagine if a corporation took employees’ contributions to their 401ks, replaced it with corporate bonds and called it revenue (ala the Social Security raid). Without this switcheroo (watch the hand), those surpluses from the 1990’s were actually deficits.
Thanks to Wisconsin, we have a case study in failed government takeover of energy programs. Let’s demand to avoid this scenario by ensuring Washington only gets the lint behind the dryer to control carbon.
written by Jeffrey L. Ihnen, P.E., LEED AP← Older posts