TMT: Is Now a Good Time to Buy Energy?

Video Transcript

Hello everyone! Welcome back to another Nania Energy Advisors’ Two-Minute Tuesday. I’m AJ Brockman, Nania Energy’s Content Marketing Manager. And today we will be talking with Senior Energy Advisor Mike Zaura.

We’ve seen a lot more market volatility recently, which has led to some clients asking us, “Is now still a good time to buy?” And that’s what Mike and I will be talking about in today’s video.

Recent Market Movement

AJ: So Mike, most states started putting COVID-19 measures in place in early March. What have the energy markets looked like in these past two months?

MZ: Thank you, AJ, for the question. Yes most states started those in early March, but we started seeing energy markets go down as early as the end of February. And as the chart shows here, you can see the steady decline.

Source: ino.com, New York Mercantile Exchange Natural Gas 3 month history

So that coincided with equity markets. As we all know, stocks went down quite a bit and everybody felt the pains of watching that happen.

But energy markets went down quite a bit as well. Now, while stocks and equity markets have recovered, the energy markets have not. They’ve recovered a little bit, but a lot slower than the equity markets.

So, while the energy markets are still down, there’s a lot of volatility still out there right now. A good example of this is what happened a couple Mondays ago. There was a pipeline explosion in Kentucky, and overnight and going into Tuesday morning gas markets spiked about 8.5 percent.

Now that’s volatility that’s not COVID-related, but it gives you an idea of some of the spikes that can occur and how the market recovers after that.

Is Now a Good Time to Buy Energy?

AJ: Okay Mike, let’s answer the question that’s on everybody’s mind. Is now a good time to buy?

MZ: An excellent question, and yes it is a good time to buy.  But, more importantly, it’s a better time to explore your options. A lot of the questions we’ve been getting recently are “With all the volatility going on, should I even think about buying? Should I wait? What should we do?”

If you explore your options, that’s one of the best things you can do right now. This puts you in a position to at least see what’s out there — you can see what rates and term options are available to you. Regardless of when your agreement is up, whether it’s a few months from now or the end of 2021, exploring your options now gives you ability to make a good decision on whether to buy now or wait.

What Do You Recommend?

AJ: What would you recommend to your clients today?

MZ: Exactly what I touched upon a little bit earlier: explore your options. In addition to looking at what’s available now, it also sets you up if you do decide to wait. If you’re willing to wait and are a little less risk adverse, then you are set up to take advantage of a little volatility in the market.

To give you an example, say the market goes down 3-5 percent on a given day. If you did explore your options, you’re already set up with suppliers with your account information and they have everything they’re looking for. If the market goes down, you can easily jump on an opportunity to grab those savings. You wouldn’t be able to do that if you weren’t set up earlier than that.

So exploring your options is the best recommendation. Maybe you’d see 10-15 percent savings right now, maybe 20 percent savings. What kind of impact could that have on you and your bottom line during these times? So you can act now by exploring. If you like what you see, great. If you have a little more time to wait on your agreement, that’s even better. You can take on a little more risk if you have the appetite for it and then jump on the market opportunity when it presents itself. Those would be my recommendations right now.

AJ: Well thank you so much, Mike, for all of that awesome information. And thank you to you all for watching! If you found this video helpful, please like, comment, or share below, and be on the lookout for next week’s Two-Minute Tuesday video.

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Pass-Through Product: An Alternative to Fixed All-In

Video Transcript

Hi everyone! I’m AJ Brockman, Nania Energy Advisors’s Content Marketing Manager. For today’s Two-Minute Tuesday, I’m going to be talking with Senior Energy Advisor Calvin Cornish.

With the effects of COVID-19 and everything else that’s going on right now, suppliers are starting to offer the Fixed All-In product less frequently. And so today, Calvin and I are going to talk about a product that is a good alternative to Fixed All-In.

What is a Pass-Through Cap & Trans Product?

AJ: So Calvin, what exactly is a pass-through cap and trans product and how is that different from fixed all-in?

Calvin: With a fixed all-in product, you have one set rate for all of your energy components. Your total energy supply cost is actually made up of several different components besides just the physical energy itself. The energy makes up about 60 percent of that total cost.

When you start to break those pieces apart, you take capacity and transmission (which are demand-based charges) and pass those through at their actual realized cost.

What are Capacity and Transmission?

AJ: Can you go into a little more detail about what capacity and transmission are?

Calvin: Absolutely. So capacity and transmission are dollars that are collected to incentivize the generation of electricity and taking care of the network. They are demand-based charges, which basically means that they’re based on your peak load usage over time as opposed to how much you use every day. So think of $10 per day as opposed to $.02 per kWh.

How Risky is a Pass-Through Product?

AJ: From a risk perspective, obviously with Fixed All-In and having all your components under one rate offering the most budget stability, where on that risk spectrum does a pass-through product fall?

Calvin: Well, when you’re passing through just capacity and transmission, it’s only slightly more risk than a fixed all-in product because those charges, as we mentioned, are flat dollar per day charges. They don’t change frequently, so we’re able to predict them with a lot of accuracy for the upcoming year. They change on an annual basis than, for example, energy supply which changes on an hourly basis.

AJ: So it still gives you that budget stability that you’re looking for without having your demand charges as part of your fixed rate.

Calvin: Yes, and in some cases it’s almost more budget stability because when you lock them in as part of the all-in rate, then your entire cost is affected by your usage. So you can’t control them.

When you pull out capacity and transmission, they’re no longer factors of your usage. And so those costs are actually going to be more dead-on with the predicted calculation.

What are the Benefits of a Pass-Through Product?

AJ: So besides budget stability, how does a pass-through cap and trans product benefit the clients who choose to use it?

Calvin: Well one of the benefits of passing through those demand-based charges is that they potentially can go down over time. If you improve your efficiency by doing a lighting project or some other way that reduces your peak load, then in the following year you’ll see a lower peak load factor. That factor is what is multiplied by your capacity rate. So you can reduce those costs over time by improving your efficiency.

What are the Drawbacks?

AJ: Are there any drawbacks to this product type?

Calvin: Well, the flip side of that coin is if your efficiency were to decrease over time. There is the potential for your capacity rate to go up. And as we mentioned, rates are fluctuating less for capacity and transmission, but they do change on an annual basis. So there’s a different rate each year.

Historically, especially in the ComEd market for example, those rates are known up to 3 years in advance, so we do still have a lot of stability there. But that is something that can change over time, so you could possibly see a different rate every year.

Who’s a Good Fit for a Pass-Through Product?

AJ: Finally, is there any customer type that you would recommend a pass-through cap and trans product to more over another type?

Calvin: I’d have to say that customers with a very predictable load, like a residential building or an office building, are good clients to pass those charges through. Additionally, clients looking for a high level of budget stability like schools who want their costs to not fluctuate as much as possible and be able to predict those costs. I think those are the best clients for this product.

A manufacturing facility or someone that has a lot of variation in their usage may have changing peak loads and may require a little more attention. They may actually want to pass through even more components to give themselves more flexibility to match up with their needs.

 

AJ: Gotcha. Well thank you very much, Calvin, for all of the great information! And thank you to all of you for tuning in to our Two-Minute Tuesday today. If you have any questions about pass-through products or any other product types, feel free to reach out to us and let us know. And if you found this video helpful, please like, comment, or share below.

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Your Guide to Mentally Surviving a Shelter-In-Place Order

By AJ Brockman

With about 75 percent of the country under shelter-in-place ordinances and our weekly schedules interrupted, a lot of us are wondering: “What the heck are we supposed to do inside all day??”

To help answer this question, I asked my fellow co-workers what they’re doing to keep themselves and their kids entertained after work hours. And, using their responses, I’ve put together this guide that’s designed to give you some ideas on ways to pass the time inside.

If you have an activity you’d like to share, feel free to leave it in the comments section below!

What We’re Watching

Mike Z., Senior Energy Advisor: “We just watched Knives Out over the weekend and it was quite good.”

Michael D., Senior VP of Sales: “Tiger King

Catherine B., Energy Solutions Specialist: “I started watching the show Schitt’s Creek on Netflix. It’s a lighthearted show about a family making lemonade out of lemons and it’s really funny!”

Diana B. Energy Solutions Specialist: “Project Blue Book. They only just finished the second season, but it’s my new favorite.”

Mary C., Energy Solutions Specialist: “I did a RomCom-a-Thon where I watched a movie a night for two weeks.” Here’s her list:

  • When Harry Met Sally
  • Broadcast News
  • Jerry Maguire
  • Bridget Jones’ Diary
  • You’ve Got Mail
  • Sleepless in Seattle
  • Notting Hill
  • Sweet Home Alabama
  • Princess Bride
  • How to Lose a Guy in 10 Days
  • Four Weddings & A Funeral
  • 500 Days of Summer
  • The Big Sick
  • Silver Linings Playbook

What We’re Reading

Catherine: “Books that I loved recently:

  • Where the Crawdads Sing
  • Tattooist of Auschwitz
  • The Woman in the Window

AJ B., Content Marketing Manager: “I recently discovered Sue Grafton’s ‘Alphabet Mysteries’ series (A is for Alibi, B is for Burglar, etc.). I’ve gotten through E, and the endings are always surprising!”

Mike Z.: “Finished 2 books recently: Can’t Hurt Me by David Goggins, and The Rooster Bar by one of my favorite authors, John Grisham.”

How We’re Entertaining Our Kids

Sarah R., Director: “Swimming in the bathtub, art projects, playing dress-up, yoga, virtual dance classes”

Danielle H., Senior Energy Solutions Specialist: “Building a fairy garden, building obstacle courses, exploring at different forest preserves”

             

Mike Z: “We have introduced the kids to some board games and had them watch Goonies.”

Diana: “We have been playing so many board games. My son’s new favorites are Clue and Jenga. He’s also been continuing to teach me to knit and to teach my husband to play chess.”

Chris L., CFO: “The Field Museum has some great activities to choose from.”

How We’re Working Out

Derrik L., Business Development Analyst: “I meditate for 15 minutes in the morning and exercise each day.” Here’s his routine:

  • 45 push-ups
  • 30 incline push-ups
  • 24 decline push-ups
  • 40 sit-ups
  • 30 hip raises
  • 60-second plank

Mike E., MidAtlantic Manager: “I use the mat from my son’s play area as my home gym mat. Right next to our emergency storage area.”

Shelter-In-Place Home Gym

AJ: “I use an app called Love Sweat Fitness. It gives you daily circuits that are designed for you to do at home and really gets you into shape!”

Sarah: “Yoga, pilates, lots of cleaning (ha!)”

Matt S., Energy Advisor: “This.”

What We’re Listening To

Sarah: “My go-to is always Britney Spears on rotation.”

Catherine: “I recently learned about binaural beats! It’s a type of music that is supposed to help you focus (study/work). One thing I don’t like about working from home/working alone is the silence, but I definitely feel more productive with them on! I listen to them on YouTube or Amazon Music.”

What Else We’re Doing

John N., CEO: “Karaoke has been in the house for a while, now I have time to practice. I perfected ‘My Way’ and ‘Candyman.'”

Sam G., Energy Advisor: “We’ve completed 3 puzzles so far!”

Shelter-In-Place Idea: Puzzles                   

 

Kristina S., Energy Solutions Specialist: “I took a course called The Science of Well-Being on Coursera. It’s the most popular class ever offered at Yale University, and it gives you a series of challenges that are designed to increase your own happiness and build more productive habits.”

AJ: “If you have a Nintendo Switch, I 100 percent recommend getting Animal Crossing: New Horizons. It’s so relaxing, and it’s a great way to unwind after work.”

Mary: “I’ve been trying some new recipes recently:

Chris: “We’ve been cooking dinner together. One benefit of the stay-at-home order is that we eat dinner as a family.”

We Want to Hear from You!

What activities are you and your family doing to occupy the time? Do you have a movie, book, playlist, or game you recommend? Share your thoughts below!

TMT: Energy Tips for Facilities and Operations Managers

Video Transcript

If you’re a facilities manager, Director of Operations, or COO, you deal with almost everything happening at your facility on a daily basis. And if you oversee more than one facility, your tasks and responsibilities are even greater.

In this week’s Two-Minute Tuesday, we’re going to dive into energy concerns specific to you and share some energy tips for facilities and operations managers that make the process easier for you.

Concern #1: Ease of Procurement Process

One of your concerns is that you need the procurement process to be as easy as possible.

With all you have going on, you don’t have time to sift through mounds of paperwork or charts or spend hours considering every option.

To make the process easier on yourself, consider working with an energy broker or an energy advisor.

They’ll do the heavy lifting for you — requesting pricing, communicating with suppliers, and comparing supplier offerings. Based on their findings, they’ll give you a proposal that clearly states their recommendation based on your facility’s needs.

Concern #2: Efficiency

You also want your facility to be operating as efficiently as possible to reduce your bottom line. Old or outdated machinery could be using more energy than necessary and causing you to be over budget.

To combat this, have an audit performed on your facility to identify possible inefficiencies. The audit will identify both immediate and long-term opportunities for you to lower your energy usage.

And as an added bonus, many utilities currently offer efficiency incentives, reducing your overall project cost.

Concern #3: Budget Adherence and Risk Avoidance

Another important aspect of your job is making sure you’re adhering to your budget.

Can you explain to your CFO why your projected energy costs were ten percent over budget? Are you sure it was due to increased production? What if it was something else?

Taking unnecessary risks with your energy can easily blow up your budget, and you don’t have time to examine the details of every available energy product.

An energy advisor or broker is well-versed in supplier product options and can help you select the one that makes the most sense for your facility. This should be based on your production schedule, sustainability requirements, and any upcoming energy efficiency projects.

Concern #4: Looking for Competitive Advantages

Lastly, you’re looking for ways to give your facility a competitive advantage.

In addition to a strong procurement strategy and doing efficiency projects, consider enrolling in a Demand Response program.

Facilities that choose to participate earn money for voluntarily reducing their usage during test events and peak usage times. The more you can curtail, the higher your payout, and the more funds you have at your disposal for site upgrades.

 

As a facilities or operations manager, you deal with so many variables every day. Your energy consumption and spend is an important aspect of this, but it doesn’t have to be overwhelming.

Keep these energy tips for facilities in mind when looking at your next project or agreement.

Thank you for watching! If you found this video helpful, please feel free to share it with other operations folks, then like or comment below.

TMT: Energy Management Tips for Property Managers

When it comes to managing energy costs, property managers face a number of unique concerns.

It’s not just you making a decision — you have to help your board make a decision and, ideally, make the best one.

You’re worried about:

  • Budget certainty
  • Getting competitive pricing
  • Showing you did your due diligence
  • Saving money
  • Proving that you saved money
  • And did I mention getting consensus from a whole group?

You can’t tackle all of those at once, but we do have some advice on how to address some of these concerns. In this week’s Two-Minute Tuesday, we’re sharing some energy management tips for property managers.

Energy Concern 1: Staying within your budget

One area you’re concerned with is making sure you stay on track with your energy budget.

To achieve budget stability over time, it’s important to stay at least a season ahead of your contract end dates. A good rule of thumb is to test the market 12 months in advance and be prepared to take action in that 9-12 month time frame.

There’s no secret sauce for timing the market. However, following this time frame will allow you the flexibility to avoid rate spikes and take some of the speculation out of the market.

Energy Concern 2: Getting a competitive rate

You’re also looking for competitive rates to save your board the most money.

For larger buildings, a reverse auction is a great option for maximizing transparency and supplier competition. The end result is the lowest possible price on a given day and a very clear documentation to provide the board with confidence in their decision.

For mid-size buildings, you can create similar results with a multi-step bidding process.

Energy Concern 3: Managing board expectations

Lastly, you want to manage your board’s expectations regarding savings potential.

When you’re working with efficiency projects big or small, managing board expectations is critical.

So often I’ve heard about boards who are dissatisfied with a project that is saving them lots of money because it isn’t as much as the sales guy said it would be.

Providing independent savings projections and establishing key performance indicators up front will go a long way to providing your board with the confidence necessary to move forward. It will also make verification of project success much easier.

Keep these energy management tips in mind.

As a property manager, you have a lot on your plate. But keeping these energy tips specific to property managers in mind will make this part of your job easier and keep you looking good to your board.

Thanks for watching! If you found this video helpful, send it to a fellow property manager, then like or comment below.

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Wall Street and Natural Gas

By Michael DeCaluwe, CEM

This winter, natural gas rates have continued their fall below the $2 per dekatherm price point. Weather and decreased production typically create a floor to gas prices. However, neither has been able to slow our run to historically low gas prices.

What’s Wall Street’s role in the market?

Typically, Wall Street’s venture capital firms invest in a company and assume an eventual payout.

  • For example, think of Amazon, which lost money for many years even while its stock price went up. Wall Street was investing in the potential of the company to eventually make money.

Investors applied the “loss leader” strategy to the energy sector, but they haven’t seen the same results. Venture capital firms invested heavily in shale during the post-2008 boom. Yet natural gas rates have continued to decrease, and so have the returns from energy companies.

Debt-riddled and highly leveraged, many natural gas producers have been unable to produce a return for investors.

How did Wall Street get it wrong?

The biggest aspect of the natural gas market that investors didn’t consider is the decline rate in production at the well head.

Gas Well Decline Rates

A decline rate is the decrease in the amount of gas a well is expected to produce year over year. For instance the amount of gas that a shale gas well produces declines by an average of 70 percent in Year 2 versus Year 1.

Natural Gas Decline Rate

Production and Royalty Declines in a Natural Gas Well Over Time — Source: geology.com

The chart above illustrates why the loss leader approach to investing in the natural gas industry has led to big losses.

If these wells aren’t making money in Year 1, the rate of decline means they surely won’t be profitable in future years.

Producers have had to drill new wells to keep production and cash flow up to repay their creditors. This, coupled with the lower domestic gas demand, has created a vicious cycle that has resulted in today’s sub-$.20 gas pricing.

What happens now?

The party might be over for the natural gas industry.

Investors are starting to pull their money out of energy companies, and natural gas rates are at 20-year lows. Shale producers decreased spending by six percent in 2019 and are forecasted to decrease by another 14 percent in 2020.

The number of natural gas-directed wells also decreased by over 35 percent in 2019.

In spite of this decrease in investment and rig counts, gas rates have continued to fall in 2020. It could take a year (or more) of decreased investment in the market to affect natural gas supply.

How This Impacts You

As a buyer, it’s important to understand Wall Street as a market factor. Here are some articles that explain this concept in more detail:

If you’d like to learn about other macro factors affecting the markets, check out our February Chronicles of Nania or feel free to contact me.

 

About the Author

Michael has served as the Senior VP of Commercial & Industrial Sales at Nania Energy Advisors since 2007. He believes that listening to and understanding clients’ energy needs is vital to becoming a thought leader in the industry and forming a mutually beneficial business relationship. In his spare time, Michael enjoys being a dad, staying active, and playing basketball.

Michael can be reached at mdecaluwe@naniaenergy.com or via phone at (630) 225-4552.

Deregulated Energy Markets – Ask An Advisor

Energy advisors, brokers, and consultants all operate in deregulated energy markets.

In today’s video, we’re going to talk about deregulation. I’m going to ask John some questions and we’re going to have some conversation about deregulated energy markets.

What does “energy deregulation” mean?

MZ: So John, when an energy market is deregulated in a state, what exactly does that mean?

JN: Let me turn back the clock a little bit. So back in the late 1980’s, the federal government allowed states to implement what they called “Choice” for natural gas. But it was up to each state to decide whether they wanted to do it or not.

That experiment produced extraordinary results in the states that implemented it. And the savings that the end users — mostly large commercial — realized was dramatic.

Then, in the late 1990’s and early 2000’s, the federal government deregulated electricity in much the same way. Each state got to choose.

So today, roughly half the states have deregulated natural gas, and probably one-third of all the states have opportunities where end users can purchase electricity in their deregulated market.

Choosing Electricity and Natural Gas Products

MZ: So when you talk about purchasing electricity, we talk to our clients about different products whereas you don’t really get a choice with the utility. Talk a little bit about product mix and what products are available in deregulated energy markets.

JN: Well, if your business or home resides in a deregulated state, with gas and electricity you have the ability to purchase them in different ways.

There’s what we call “floating market” or “spot market” and you could also fix a price for some duration, whether it’s for three months or even out as far as ten years.

If you’re using the utility — whether it’s a default service in your state or your state doesn’t offer choice — the utility almost always provides some kind of variable rate. It is subject to the market and subject to change.

So the products that have been created over time in response to how the utilities provide their prices are generally around fixing a rate. Fixing a rate is the tool that probably 95 percent of customers in deregulated markets use.

MZ: And part of that product mix, too, is green energy and sustainability. Can you talk about that?

JN: When consumers have choice in deregulated markets, it’s proven not only to provide savings but also budget certainty. That means that customers now know roughly what their total cost is going to be for energy.

But a newer reason why people want to be in deregulated markets is that they can choose whether they’d like to go green or not.

Unfortunately, there are not many green options for natural gas — it just doesn’t exist that way. But in electricity, “going green” means that you could be buying your electricity from a renewable source — like solar, wind, water, or waste.  By doing so, you’re aiding the environment.

These are generally not options that you have when you’re operating in a regulated market.

MZ: We’ve helped a lot of our manufacturing clients achieve their sustainability requirements by buying Renewable Energy Credits (RECs). In these deregulated markets, people have been asking about RECs a lot more recently as well.

Which states have deregulated energy markets?

MZ: Some of the states or areas of the country are deregulated. Would you mind talking about which ones?

JN: What we saw with natural gas is that the states that were heavily populated with manufacturing were the

States with deregulated energy markets

States with deregulated energy markets

first ones to adopt deregulation. So think about the Midwest and the Northeast. Since natural gas has been deregulated longer than electricity, it has spread a wider net.

So about half of the states in the nation have opportunities end users — whether it’s for commercial, residential, or both — to choose for natural gas.

On the electric side, probably 13 or 14 states are offering choice. Again, a lot along the Midwest to Northeast corridor, California, and certainly Texas which is the biggest market by far.

Benefits of Energy Deregulation

MZ: So, obviously, states have deregulation available. We get asked all the time by customers about why their state isn’t deregulated. What are some of the benefits that you see to deregulation?

JN: Well, the evidence is absolutely conclusive at this point. The end users in states that have implemented choice have realized lower costs.

The best example is Illinois versus Wisconsin. Illinois deregulated electricity early in this process. Wisconsin never deregulated. Before deregulation, businesses were leaving Illinois and flocking to Wisconsin because they wanted to take advantage of the lower electric rates.

That has since ended. Wisconsin’s electric rates today on average are probably 20-30 percent higher that what they are in Illinois. Being neighbors, we source our power from the same places. Nothing else has really changed. The only thing that has is the fact that Illinois offers its businesses and homeowners choice, and in Wisconsin they don’t.

Downsides of Deregulation

MZ: Sure. And some other big advantages besides the lower prices are product mix like we talked about and budget certainty. But there are the naysayers and those that talk about the downsides of deregulation. What are your opinions on that?

JN: The downside of it is that the utilities lose some of their monopoly. So most of the doubts that have been cast about deregulation and its effectiveness have been by those people representing the utilities, who have a vested interest in leaving regulation in place.

The stakeholders are the legislators, politicians, and utility companies in those regulated states, and they want more of the status quo.

In other states, the stakeholders are the end users and they have a voice.

There’s really no downside. We haven’t seen a market that’s re-regulated. At one point, California re-regulated and now they’ve deregulated again. But otherwise, no market has and in fact several states are actually pushing for deregulation.

The Carolinas, Florida, Arizona, Virginia are the most recent ones moving toward deregulation because they know that the benefits to the end user work. And they need to make their state competitive if they want to attract businesses and employment accordingly. They have to be able to make it a better business environment, and what better way to create that environment than giving them the opportunity to lower their energy costs?

The only other downside is in the residential market. There’s been some less-than-scrupulous players that have gone after less-informed consumers and taken advantage of them by putting them in higher rates than they otherwise would be paying.

It’s a bad practice. The states’ attorneys have aggressively gone after those companies, and we as an industry have self-policed aggressively. So to say that no one has ever been harmed by this would not be true.

Aside from that, deregulation is mostly a positive. In Illinois, for instance, almost 98 percent of all the businesses that have a choice are actually taking advantage of it. That means they like it.

Closing Thoughts

MZ: Absolutely. And we’ve seen the overwhelming savings and positivity from our clients in our market, but in the other states that also have deregulation you can see the big impact it has on their bottom line.

Any other general thoughts on deregulation? Anything else you’d like to touch on?

JN: Well, deregulation has brought choice to end users. And that choice comes with options. How long are you going to fix a rate? Do you want to use a different product than the utility company is offering as the default?

But the most recent benefit is that end users can choose to go green now whereas they didn’t have that option before. So whether you’re a business or a resident, you can buy your power from a sustainable source, and that’s kind of cool. It doesn’t exist in natural gas per se — we haven’t figured out how to “green up,” if you will, natural gas — but we’ve certainly done that in electricity.

MZ: Well John, thank you very much for your time today. It was a great conversation on deregulation. And thank you all for watching! If you’d like to learn more about options in your state, please feel free to reach out to us or visit our website.

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TMT: Benefits of a Reverse Auction

Video Transcript

What’s the difference in electricity and natural gas supplied to you between one supplier or another?

The answer? None. They’re both commodities. There’s absolutely no qualitative difference if your supplier is Constellation, Direct Energy, or any of the other dozens of retail energy suppliers.

So, what does matter? Making sure that you’re getting the best effort from all qualified suppliers to provide your organization with the best results.

In this week’s Two-Minute Tuesday, we’re going to talk about how a reverse auction for energy procurement can compress supplier margin and drive energy savings for you.

How does a reverse auction work?

In a reverse auction, all qualified energy suppliers are invited to compete against each other in a live event that you can watch through an online portal.

With each bid, suppliers attempt to win your business by under-bidding one another. They can’t see who the lowest supplier is, but they can see the price to beat. This gives each supplier “last look” and dramatically improves the level of competition.

What happens when the auction ends?

At the conclusion of the auction, when no supplier is willing to go any lower, you’re left with the supplier who was willing to put their money where their mouth is. And the lowest possible energy rates achievable.

You’ll also have a report with time and date stamped bids from all suppliers during the auction.

Consider using a reverse auction for your procurement.

For commodity procurement, there is no more efficient and transparent platform than the reverse auction. But it’s important to note that the auction is just one tool in your energy management toolbox. You aren’t guaranteed the best results just by virtue of using one.

Your consultant or broker should also be:

  • Helping you develop an RFP that defines your energy goals and assists you in making the best decision
  • Monitoring the market for you to advise on the timing of your purchase, and
  • Partnering with you directly to meet the reporting needs of your organization.

When you’re considering options for your upcoming commodity agreement, check out a reverse auction. It might provide some valuable competition you might be missing from your process.

Thanks for watching! If you found this video helpful, please like, comment, or share below.

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Green Options for Schools – Energy ABC’s #4

Video Transcript

One of the hottest topics on the streets today is about sustainability and green energy.

You’re likely already facing some pressure from your Board members and community to become more green as a District but still maintain that limited budget that you have.

So, in today’s video we’re going to cover 3 green options for schools that can help you become more sustainable as a District and discern which is best and fits best with your budget.

Green Option 1: Solar Power

The reason that solar is such a big deal and a big talking point in Illinois right now is there are new financial incentives to improve the overall ROI of solar installations.

These incentives include:

  • Utility rebates in the form of a check that you get after the solar installation is completed
  • Solar Renewable Energy Credits (or SRECs) that you can sell for money for any power that’s produced from your solar array
  • Federal tax incentives that you don’t really qualify for as a tax-free entity.

Because you can’t take advantage of the tax incentives, you may want to consider a Power Purchase Agreement, or PPA, in which an outside developer takes advantage of the incentives and installs the solar panels on your rooftop or your ground mount. They get paid by you over the course of a 20-25 year agreement.

You don’t have any upfront capital outlay — you simply pay the installer for any power produced by the array over the 20-25 years. So if you have no bond ability, no capital outlay, and you can’t purchase the array directly, this may be an option that you want to consider if the numbers are favorable.

The final question you want to ask yourself is how quickly can you act as a District. Those SRECs that we talked about  — those Solar Renewable Energy Credits — are on a diminishing scale. So you’re getting paid less and less for each kWh of electricity that’s generated the longer you wait to install a solar array.

If this is something you can act on quickly, the can drastically change the ROI on your project and may make it cost prohibitive.

Green Option 2: Lighting

A second option that you can explore is to lower your carbon footprint through lowering your overall energy consumption. This is done by completing efficiency projects.

One of the lowest-hanging fruit in this category is lighting upgrades, or installing LEDs.

The beautiful thing about this option is that the cost of LEDs has come down considerably, but there are still utility rebates available for completed projects.

You can also reduce the lighting portion of your energy usage by as much as 80 percent with an LED upgrade. So it’s definitely something worth considering.

The best part is if you can achieve an ROI under two years, that may be an easier sell to your board than a 20-25 year PPA for a solar project.

Green Option 3: Purchasing RECs

A final option you can take is purchasing green, renewably-sourced power.

For a small premium — usually 2-3 percent of your overall energy cost– you can purchase power that comes from, wind, solar, or water generation sources. So you have the PR to say that you are a District that is powered by 100 percent green renewable energy.

While this isn’t a direct offset of your carbon footprint, it will help appease in many situations any initiatives that your Board or community may have for your District.

 

Hopefully this gives you a great overview of the green options available to you to become more sustainable as a school District. For more information on any of the topics we talked about it this video, check out the links below or certainly reach out if you have any questions.

Thanks for watching, and we’ll see you next time on Energy ABC’s!

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