Horse and Buggy EE Programs

8 06 2010

In many states, energy efficiency programs are meeting annual savings goals and their incentive cash is depleted in a fraction of the year.  States where energy efficiency programs are a new offering are especially quick to meet goals.  These states include Ohio, Michigan and Illinois.  These states rely heavily on lighting, which accounts for somewhere in the range of 90% of the total savings.  Even mature states like Wisconsin and California still get well over half their savings from lighting and other prescriptive measures (rebates).  Wisconsin surpassed goals and ran out of incentives last program year.

There are many ways to solve the “excess savings problem” from reducing or eliminating incentives on some things or eliminating program offerings.  In Wisconsin, they are sort of cutting incentives across the board and getting rid of comprehensive energy retrofit in existing commercial and industrial (C&I) facilities, where everyone knows the greatest potential exists.  Comprehensive energy retrofit in WI is dead because they killed feasibility studies.

Wisconsin must know something Minnesota, Iowa, Illinois, Michigan, New York, California, Johnson Controls, Honeywell, Siemens, and dozens of energy service companies (ESCOs) around the country are oblivious to.  These states’ programs rely substantially on comprehensive energy retrofit and it’s actually the holy grail of energy efficiency.  But not in Wisconsin.

Wisconsin instead relies on the discount model.  See Incentive or Discount, January 12, 2010.  The powers that are believe this is the most cost effective (only) way to deliver savings and that feasibility studies once paid for by the program just rot on the customer’s shelf.  But there are numerous ways to avoid this.  You just have to develop an integrated program that holds customers accountable for implementing measures.

When Wisconsin (Focus on Energy, Focus for short) took over the energy efficiency programs from the investor-owned utilities about 10 years ago, one of the goals was market transformation.  Market transformation simply means making energy efficient products and services the normal way of doing business such that ratepayer-funded programs are no longer needed, or their need is greatly reduced.  Market transformation has long since been cast aside.

Instead, Focus has been transformed into something that seems to be directly at odds with its market transformation charter.  Service providers in the market, ones with expertise and no bias (don’t sell stuff) are locked out by an apparatus that cannot work for them.  Eliminating feasibility studies was the equivalent of adding a mote full of alligators around the fiefdom with razor wire atop the castle wall to keep the serfs out.

The idea that feasibility studies are a waste of money is just plainly incorrect.  Nearly all of our feasibility studies are acted on.  Last year we kicked off a retrocommissioning program with three pilot studies – no commitment from the owners whatsoever.  We just wanted to demonstrate potential.  Two of three have already been implemented.  One has almost a year’s savings accumulated with 25-30% electric and gas savings, on their bills.  The third project is close to implementation, which will probably be completed by year’s end.

In another study, we projected 30% savings for a high school. Actual results were 40% savings, indicated by energy bills.  One college campus: 20% gas and electric savings projected, 20% savings realized.  Another campus 15% and 22% electric and gas savings projected, respectively.  Actual savings from bills: 25% and 20%.  A medical clinic with about 25% savings projected:  actual savings in the first 3 months of post-implementation operation total a full half year of projected savings.  Every one of these projects needed measure identification, cost and savings estimates, and return on investment analysis.  We started with a blank slate.

We have a study underway for a huge food processor and are projecting 3.5 million kWh savings, from only a portion of their air handling systems (68 units).  We are looking forward to moving on to the ammonia refrigeration and compressed air systems. This customer has been very progressive with energy projects over the past 7-8 years and is willing to get everything that meets their financial criteria.  In fact, when we delivered the proposal they agreed to move forward with the study on the air handlers but said, “but I don’t think you’ll find anything”.

The bottom line is, a comprehensive program that includes front-end screening, study, Implementation design, implementation, functional performance testing of measures, and customer training will be acted on by customers.  Of the 10 or so projects, including dozens of campus buildings, where we have used this process, savings have been 20% or more in every case, up to 40%, and actual savings from pre and post implementation bill comparisons have always come in above study projections.  Projects include everything from retrocommissioning to major equipment/system retrofits to new controls systems.

Ironically, we completed a “no risk” study with Focus last year including controls, refrigeration and HVAC.  The customer went forward with all recommended measures.  Again, all we started with was a customer that wanted to cost-effectively save energy, a blank sheet of paper.  No “pre-packaged” projects.  I.e., no free rider.

From a program perspective, this is very cost effective because savings are huge and concentrated and studies do not get stranded.  The problem with some (as in, not all) program administrators whether they be third parties or utilities is they are steadfastly wedded to the status quo with a divorce rate Vatican City would cheer.  The typical disjointed process with reams of paperwork and delays at the outset, no assistance between study and implementation, no hook or commitment from customers to do anything with the study, and no functional testing at the conclusion of implementation is doomed to fail.

The solutions to the “waste of money” issue are simple and they work very well, but some administrators and in some cases regulators need to open their minds and ditch their horse and buggy program paradigms.

And by the way, the attribution rate, which is the savings that occur as a result of an integrated program including feasibility studies, is near 100%.  See the food processor guy’s quote above.  He didn’t think we would find anything.  Tell me.  Would these 3.5 million kWh savings have occurred in the absence of a thorough investigation?  How does a customer who buys an efficient boiler have any idea what the incremental cost and energy savings of his new equipment are?  Does that constitute decision making based on energy efficiency?  Perhaps some programs could improve their attribution rates on C&I programs if they would actually lead customers to implement energy efficiency measures rather than chasing contractors, like lawyers chasing ambulances, to capture savings that are going to happen in the marketplace anyway.

written by Jeffrey L. Ihnen, P.E., LEED AP





Fortune 100 Energy Efficiency

30 03 2010

One of the downsides of the surging awareness and growth in energy efficiency and renewable energy, in my opinion, are all the Johnny Come Lately energy services arms of giant corporations.  Companies include Lockheed Martin, United Technologies, Eaton, and Chevron.  These giants have revenues of $45 Billion, $53 Billion, $12 Billion and a meager $176 Billion, respectively.  Poor Chevron’s revenue dropped from $275 Billion from the year prior.  Maybe they should focus on their core business and leave the energy saving to the rest of us.  Among these, only measly Eaton isn’t in the Fortune 100 (Eaton comes in at 207 on the Fortune 500).

Why do these giants want to get into energy efficiency?  Revenue from their energy efficiency services wouldn’t show up on the first six significant digits of their total revenue, but yet this is huge business compared to peons like Michaels Engineering and dozens of other service providers.  Lockheed probably charges the government more for one tire on an F-35 joint strike fighter than we earn in a year with 40 people.

On the other hand, these behemoths have to get huge projects like those for large college campuses or military bases to be worth their while and to be cost effective to carry their crushing overhead.  This leaves plenty for us little guys to fight over.

On the third hand, they provide competition for the other titans of performance contracting, including Trane, Honeywell, Siemens, and Johnson Controls, and I’m all for that.

Having provided technical support and program evaluation for dozens of utilities, I don’t think we have yet seen any requests or applications for incentives from these giants, for their customers.  Why would they leave all this free money their customers could claim on the table?  Could it be they don’t want anyone looking at their underbelly?  Customers should demand this.  But then again, customers are typically state and federal government entities.  Even though these incentives are theirs to lose, it’s really ours.  So who cares?  What a racket.

Of course most of these huge companies, except Lockheed and Chevron I believe, use performance contracting to peddle their wares, whether customers need the stuff or not.  As mentioned last week, they’ll “give away” studies and other services, and sometimes even equipment to hook (or harpoon) these customers.

Within the past couple years, one of these performance contractors had seduced a local school district by offering them “free” equipment in exchange for maintaining their buildings’ heating, cooling, and control systems over 10-20 years.  What were they thinking?  Remember last week; nothing is free.  The whole spectacle can be most vividly portrayed in Warner Bros’ Hansel and Gretel episode on Bugs Bunny.   Guess who the characters represent.  As soon as reality set in and the invoices started coming for the maintenance services, the district wanted out yesterday.  Another happy customer.

On a couple unrelated notes:

A group of scientists wants to create a new unit for energy savings, the “Rosenfeld”.  He may have been a great guy, but I would vote no on that.  All the units and named thermodynamic cycles I can think of are named after one or two-syllable names, and Rosenfeld doesn’t just roll off the tongue.  Joule, Newton, Volt, Tesla, Kelvin, Rankine, Curie, Diesel, Otto, and Watt.  The only major oddball I can think of is Fahrenheit.  There should be a contest to replace that.  He deserves it because it’s such a stupid scale.

The Rosenfeld thing would replace kilowatt-hours, three billion of them to be exact.  What about Mr. Watt?  This is a diss to him.  What is special about three billion kWh: it’s supposed to be the annual output of a 500 MW power plant.  Per my calculations, it’s closer to 4 billion kWh.  And who is ever going to use this metric?  “The results of our study indicate that you can save 0.00016 Rosenfelds with a two year payback.”  I think they would eject us from their building and not pay us for such pathetic looking savings.

So there you have it, a “Rosenfeld” is too long, too much, incorrect, goofy, and it runs roughshod over Mr. Watt.

Then there’s this laugh out loud headline, suitable for an article in The Onion.   “Warning Biofuel Targets May Hit Oil Industry”.  Just think about that for a moment.





Black Monday Stampede

10 03 2010

July 1992: Tickets for U2’s ZooTV show at RFK stadium in Washington, DC go on sale by Ticketmaster.  The tickets are snapped up in a few hours, as fast as the phone lines could handle the traffic.  This was before anyone knew what the internet was (no Al Gore jokes).  Fortunately, a second date was announced and the roommate waited for the crack of 12:00:00 AM for a shot at the second batch, successfully.

March 1, 2010:  Federally funded rebates become available for efficient appliances in Iowa and Minnesota.  Phone lines jammed with 10 times expected volume and internet traffic at 100 times expected traffic took down the website of the contractor running Iowa’s program in the first hour, within minutes of opening.  Ultimately, Iowa’s share of the funds was gone within 8 hours.  Minnesota’s program dragged on until the next morning.  It was a Wal-Mart-style black Friday digital stampede.  Thank goodness for (don’t use Al Gore jokes) technology – I didn’t see any reported injuries or fatalities.

Some of these federally funded appliance incentives run two to ten times utility incentives.  What were they thinking?  Combined with utility incentives the total can exceed 50% of the purchase price for crying out loud.  See “Policy to Curb Carbon” (government doesn’t know how to do energy efficiency) and “Incentive or Discount” (people trained to wait for handouts to buy).  This is pretty much a giant transfer of wealth from people paying taxes to people taking the rebate checks, and I don’t begrudge the people taking the money.

Apparently the people who designed these state programs, which are actually handouts at these rates, don’t understand the market and/or supply versus demand.  Obviously they gave away too much money and taxpayers got far less than they should have for their “investment” in terms of reduced energy consumption, emissions, and sales and in some cases manufacturing here in the states.

And to top off the environmental benefits of the appliance programs, participants are to send their old appliance to the scrap heap, with self-policing enforcement.  Who’s going to do that?  They will either end up with a second refrigerator or freezer in the basement or the old stuff will show up on Craig’s list.

Recall cash for clunkers last summer.  The intent there was to offer a total of $1 billion incentives, up to $4,500 per vehicle and it was planned to run from late July through November.  Within a week or two the billion dollars was gone and congress quickly shoveled in another $2 billion.  THAT was all gone by Labor Day.

While attending the International Energy Program Evaluation Conference in Portland, OR, last fall I was engaged in a small group discussion – was cash for clunkers a free rider?  A free rider is somebody who takes an incentive for something they were going to do anyway.  This is considered to be a waste of incentive money.  That’s arguable in this clunker case because it more than likely moved the purchase date forward for buyers, but I also think it’s the wrong question to ask.  The more appropriate question is, was it cost effective?

Answering the free rider question, Edmunds estimates that of the 690,000 cars purchased through the cash for clunkers program only 125,000 were incremental.  That is, only 125,000 transactions took place that otherwise would not have.  The rest just displaced a sale that was going to happen soon anyway.  Figuring in free ridership, the taxpayer cost per vehicle was $24,000.  And then consider this: the average trade-in value of the clunkers was about $1,500, which may be worth $1,800 for sale to the next guy.  All these cars were destroyed.  That comes to $1.2 billion in destroyed working assets.  So the feds spent $3 billion to increase profits by car dealers by perhaps $125 million and destroyed $1.2 billion in assets.  Annual energy savings for these 125,000 vehicles would be roughly $120 million.  And maybe the domestic automakers lost a little less money as a result of the program.  Woohoo!

To be fair, the cash for clunkers program may have resulted in the purchase of more efficient vehicles than would otherwise be purchased.  Hardly.  The average fuel economy of cars sold through the program was 25.4 mpg.  The corporate average fuel economy for cars is 27.5 mpg and with light trucks included, it is 23.5 mpg.  In other words, these “efficient” cars were essentially average.

And the doozer of them all: free golf carts thanks to tax credits and sundry other incentives for electric / high mileage vehicles. 

These aren’t incentives.  They are gifts from frugal people to people who probably don’t need this crap.  But good for them, I say.  You have to play the game that’s put in front of you.





Energy Efficiency Stimulus and Oversight

17 11 2009

Most energy efficiency programs are required by regulators to be evaluated to ensure ratepayer money is being spent wisely and reported savings are being achieved.  If only such oversight were to happen for the millions/billions/gazillions being shelled out to state and local governments in the name of energy efficiency.

State and local governments have Amazon-wide budget gaps to fill, and I can assure you that earmarks (dirty word) for energy efficiency will find their way to plug budget holes to keep buildings open, replace roofs, buy new lawn mowers and pickup trucks, and avoid staff reductions.

We in Wisconsin have already experienced this during the last recession.  Starting in about 2000, most money collected by utilities for programs was turned over to Madison to be distributed from the ivory tower.  The recession of 2001 resulted in a major budget gap (major at that time – it probably looks like a hairline fracture compared to what we have now).  There, coming in from investor owned utilities, was a nice cash stream of $80 million per year.  The state government swiped half of it.  It pretty much eviscerated the energy efficiency programs and brought the industry to a slow crawl.  Incentives were pathetic.

Thankfully, the Public Service Commission has taken control of cash flow now to help ensure ratepayer money is used to save energy, reduce demand, and delay/avoid construction of power plants and transmission systems as intended, rather than filling in a tiny portion of a humongous budget hole.  Now energy efficiency incentives in the state are what I consider to be very attractive.

These federal funds should either be funneled through established credible program delivery channels such as utility programs or, in some cases, state governments (as long as it is out of reach of the legislative and executive branches), or there should be third party impact evaluation of projects emanating from block grants to local governments and other private sector grant writers.

If there is no oversight, vendors, consultants, engineers, architects, whoever can declare whatever savings they want. Or worse, as noted above, the funds will go toward new park benches and decorative street lights.

We welcome the oversight and technical review of our work because we are going to do things right regardless of whether others review our work.  In a competitive market, the more technically astute and persnickety the reviewers are, the better for us.  While LEED® takes its lumps for being too cumbersome, time consuming, and nit-picky, I think it would be a big mistake to slack off the review process.  It will weaken a strong brand.

The bottom line is, if you have no rigorous third party review, you can expect pennies on the dollar of proclaimed savings.

written by Jeffrey L. Ihnen, P.E., LEED AP





The More You Spend, The More You Save

3 11 2009

Talk about an oxymoron.  Years ago this was a favorite saying of my roommate and I as we lambasted dopey ads on TV, on paper, or over the airwaves.

Fewer years ago, once I got into this energy efficiency profession, I was speaking with a utility energy-efficiency program guy who frequently interacts with regulators.  This was during a stakeholder meeting for quantifying energy saving potential by sector and by technology.  (technology = lighting, furnaces, chillers, etc.)  Knowing buildings systems rarely work as they are supposed to, I asked, “Have you considered retrocommissioning (RCx) as an energy efficiency program?”  His answer in effect was, that would be great, but it would be double dipping since customers have already been incentivized for energy efficiency.  I didn’t have a response for that.  I do now.

Incentives are based on building systems working as they should.  Unfortunately, this is rarely the case.  Buildings almost always use more energy than they do on paper (or computer).  See the recent Illinois LEED performance report, Figure 14.   Buildings underperform badly compared to design models.  I would venture to guess that the majority of this discrepancy is lousy controls.

Therefore, my response to the “buildings have already been incentivized and therefore, RCx is double dipping” is twofold:

  • Incentives for efficient equipment and systems are many times actually too low.  The building’s systems and controls are performing so poorly that the boiler actually has to make more hot water and the chiller has to make more chilled water than planned.  The lights are saving more because they are on longer than they should be.  If you’re going to waste energy, you may as well do it efficiently (oxymoron alert).  The more you spend, the more you save!  Other measures probably under-predict savings but these are typically control measures and control measures make up a small fraction of incentives and associated savings that programs take credit for – a thesis based on my experience – a thesis I am very confident with.
  • Savings from RCx IS NOT double dipping.  When I poll our own recent RCx projects, I find that 75% of the savings are derived from measures that either (1) fix control issues that wouldn’t even be eligible for incentives in the first place or (2) implement measures that are required by energy code.  Some buildings aren’t built to comply with prescriptive energy code requirements – imagine that! and (3) implementing new measures that exceed code requirements.

Conclusions:

  • Incentives in many cases are too low because systems perform poorly (the more you spend, the more you save)
  • Incentives in other cases are too high because they are controls-based and the control sequences are wasting energy
  • Reducing over-use and fixing things that aren’t even incentive-eligible almost certainly outweigh fixing control issues on measures that were already incentivized.  Therefore, the net of RCx measures is all new unrealized savings.

By the way, the utility mentioned above has an RCx program now.

written by Jeffrey L. Ihnen, P.E., LEED AP





Tax Deduction Pennies

21 10 2009

Recently, we received our umpteenth “request for proposal” (RFP) to provide the engineering required to capture the elusive $1.80 tax deduction on new or remodeled buildings.  We spend a lot of time, money and effort to drive business through our doors but I’m not sure I want to see another one of these.

Like the rest of the universally incomprehensible tax code, the engineering piece of this is relatively complex.  If we did this all the time, it wouldn’t be a problem.  But it seems we get the next RFP just as the rules are overwritten in my long-term memory banks.  What do we compare to?  Does this apply to both retrofit and new construction?  Does retrofit compare to new construction baselines or actual pre-project conditions?  How do these partial incentives for HVAC, envelope, and lighting work?  How do the two lighting approaches work?  What suffices for demonstration of percent savings?  Half day – gone.

To do the engineering right, which is the only way we do things, it takes a lot of energy modeling time and expense (with the exception of the isolated lighting calculation).  Also, consider:

  • It is impossible to save anywhere near 16.7%[1] with envelope measures , relative to energy code, so you’re left with 50% total building savings.  As a side note for COMMERCIAL buildings, in many if not most situations, it is not cost effective to save energy by adding insulation, and you can save some but not much with enhanced glazing.
  • We need to save 50% of the total building consumption with HVAC and lighting, but on average per benchmark data, HVAC and lighting only account for 67% of building operating energy cost.  See where I’m going with this?  Your combined HVAC and lighting savings need to be 75% more efficient than baseline!  There’s a reason LEED has about 50% set as the threshold to capture all possible energy points!  You have to use a genius designer, perhaps have deep pockets, plus all the stars have to align for a “lucky” baseline system to have a shot at 50% savings[2].

Conclusions:

  • Only the lighting power density approach for a $0.60 per square foot deduction is worth pursuing.
  • The threshold for the rest needs to be reduced, to perhaps 30% savings, which is still impressive and also certainly not something one can achieve without trying.

[1] End users can get partial deductions for (1) envelope, (2) HVAC, and (3) lighting, by saving 16.7% of the total for any of the three.  This 16.7% is one third of 50%..

[2] We are actually shooting for all 10 LEED 2.2 points on one project, but “only” 42% savings are needed for that.

written by Jeffrey L. Ihnen, P.E., LEED AP