Nicht Tee Kugel, Dos

8 03 2011

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 jli@michaelsenergy.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.

Tidbits

  • 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

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You Are SO Fired

28 09 2010

As a sub-consultant or as a prime contractor we must do about 25 “major” proposals per year.  By “major” I mean there is a formal request for proposals (RFP), sometimes there is an “intent to bid” form to submit, formal question submittals to the buyer, formal distribution of all questions and answers to all bidders, and then bids are due.  All questions from all bidders and their answers are provided to all bidders to help maintain a level playing field.

I think I/we have only asked questions when there are contradictions within the RFP.  For example, the due date is provided in one place and in another place it is different.  I want to know for sure when it is due – almost always the latter date, but I take nothing for granted so I ask.  Just about all other questions I would ask, even if good ones provide me with no advantage at best, and are self-destructive at worst.  Remember, all bidders get all questions and answers.  Questions give away ideas, strategy, and almost always reveal how stupid some people are.

I don’t think I coined the statement but the following definitely applies for these things in many if not most cases.  “There is no such thing as a stupid question – only stupid people asking questions.”

I have three sets of questions to poke at in this post.  I provided answers to each question.

The first examples come from an RFP for engineering services for industrial energy efficiency.  The successful bidder(s) would be providing assistance to industrial end users in the form of identifying opportunities, estimating costs and benefits, and maybe assisting with implementation services.  It is up to the proposer to propose needed services that remove barriers to EE for these end users.

Q:  What is the definition of “medium to large industrial customers”?

A:  Who cares?  What difference does it make?  You are not bidding on a specific job.

Q:  What is the program’s “custom track”?

A:  You’re fired.  If you don’t know what custom is, you should also be fined for asking and wasting my time.

Q:  What types of industries comprise the majority of participants (end users)?

A:  I’ll put that one in the “you lose” box.  This person is too stupid and/or lazy to investigate the types of industries in the region.  Also, if an industry is not being addressed sufficiently, don’t you suppose that might be a good opportunity?

Q:  What typical examples of “non-energy benefits” do you want included in the proposal?

A:  The “non-energy benefit” is that this stupid question tells me that I can put your proposal in the lose box without reading it because you clearly don’t understand this business.

Q:  Are teaming arrangements acceptable…?

A:  Yes but nobody in their right mind would team with you for asking this question.

This next set is for developing an energy management plan for a county at a very high level since the budget is small relative to the scope of the project – the number of buildings and size of the region covered.  This is a big county with hundreds of buildings (many of which will be picnic shelters and stuff like that) and millions of square feet.

Q:  Is there a list of potential bidders?

A:  Yes.  Would you like a draft of their proposals too?  Seriously, we always have to guess who else is bidding and differentiate ourselves from them.  I’ve never experienced or heard of this being distributed prior to proposal submittals.

Q:  My name is Dr. Evil and I am the world’s greatest one man show on earth (intentional redundancy).  Is it ok if I join several the bidders going after this project?

A:  You may do so as long as you give me your real name so I can put the proposals of those pitiful enough to hire you in the lose box.

WARNING: Strap yourself in your chair so you don’t hurt yourself falling over in laughter.  The following question may be the best one I’ve seen.  NOT responsible for personal injury.

Q:  Price is one of the evaluation factors.  What exactly does that mean?  [and he goes on from there]  If we bid less than the not-to-exceed amount provided in the RFP, will that improve the scoring of our proposal?

A:  On behalf of the United States, I should just give you a negotiated reasonable profit in exchange for your permanent relocation out of the country.  You don’t even need to do the project!

Q:  Are all the facilities on the same utility rate (tariff) or are there different tariffs used among the hundreds of buildings?

A:  You are SO fired.  I’m sure a park shelter house is going to be on the same tariff as a major airport.  Not only that, there are multiple utilities serving the county!  But this takes several gruesome clicks on the computer so I understand your plight.

The last RFP was for a combined heat and power (CHP) study.  The CHP would be customer owned and sited for a large region.

Q:  As part of the study are you interested in…, e.g. “switching electric hot water for solar thermal technologies?”

A:  Using a digital voice recorder, read the title of the RFP then your question, three times in succession while recording.  Play it back as many times as necessary for the subliminal message to kick in.

WARNING:   Fasten your seat belt again.  NOT responsible for personal injury.

Q:  Is the mission, vision and values specifically for the state’s energy program?

A:  No.  We felt our letterhead had too much white space so we developed and used that to fill it up.  It doesn’t really apply to anything.  What difference does it make?!  Also, you may want to consider brushing up on your 3rd grade grammar skills.

Q:  Is cost effectiveness analysis to assume “going forward” costs only?

A:  No.  It should include customer expenditures on landscaping from 1997 through 2002.  If you have trouble linking the two together, we are open to alternative ideas.

Q:  What, if any data and source limitations do you have?

A:  The successful bidder will have access to our direct line to God who already knows what you will be doing and exactly when and where you will be doing it as you open our rejection letter addressed to you.

The End

I may have evaluated proposals a time or two but can’t specifically recall any.  However, if I would, I would certainly factor in the types of questions bidders ask when evaluating proposals.  Some questions demonstrate ignorance of our industry.  Some seem to indicate that the bidder would be a pain to work with or needs excessive hand holding to do the job.  Others just seem to indicate lack of IQ or it could be lack of thinking.  But what is the difference?  Don’t you evaluate questions from interviewees who want a job in your company?  I wouldn’t want them either way.  Some questions are superfluous and irrelevant; possibly indicating the bidder has no idea what “this” is about.  Do you really want people who waste your time or are too stupid or lazy working for you?

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