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Energy Efficiency for Manufacturers – MES #5

March 4, 2021 – In the final video of our Manufacturing Energy Success series, Senior Energy Advisor Michael Zaura, CEM talks about the process of choosing an energy efficiency project.

Video Transcript

Hello, and thank you for joining me for our final installment of Manufacturing Energy Success. Thank you for watching!

Your monthly energy cost can be thought of as a simple equation: the rate you pay times your monthly energy usage. In today’s video, we’re going to talk about energy efficiency as a permanent way to reduce the usage portion of that equation.

We’re going to talk about efficiency projects and how to identify those in your facility. We’re then going to talk about which projects should be done in order of importance. And lastly, we’ll touch on ways to finance those projects so they can get completed.

Step 1: Undergo an energy audit.

The biggest impact to your energy cost is that kilowatt-hour or therm that is never used. An energy efficiency project helps eliminate that waste from old or outdated equipment. The first step in this process is to undergo an energy audit.

An energy audit identifies how energy is being used in a facility and highlights cost reduction opportunities.

A first-level audit is typically just a walkthrough of your facility. It takes two to three hours, maybe more depending on the facility’s size, to identify those cost reduction opportunities. This could be in the form of LED lighting, HVAC, building automation systems, or maybe a boiler or a chiller.

The auditor will then present a report on which opportunities exist for energy efficiency. This usually includes a list of incentives available as well. There are higher-level audits, depending on how detailed you want to get. Once you review the report that the auditor gives you, it will help you identify which projects to tackle first.

Step 2: Prioritize your projects.

So, your energy audit is now complete. The energy auditor hands you a list of cost reduction opportunities, and you’re wondering which project to prioritize first. Most organizations will use a metric like simple payback period in order to determine that.

Say your organization has a simple payback period of three years or less for any capital improvement projects. You might choose, say, a compressed air system to upgrade or fix the leaks in it versus a boiler system. The simple payback on a compressed air system is much lower due to the utility incentives available, and you can usually fix leaks in a compressed air system at little or no cost.

Another factor to consider when prioritizing your efficiency projects is utility or federal incentives.

A good example of this is an audit that was done for a manufacturing client of ours three years ago. The simple payback on that project was 3.2 years. New federal incentives have since become available, and that proposal was updated just a couple weeks ago to include $60,000 worth of incentives. That took the simple payback from 3.2 years to 1.1 years for an LED lighting upgrade.

So, federal incentives, utility incentives, and simple payback are all factors to consider when prioritizing your efficiency projects.

Step 3: Choose a financing option.

Now, you’ve identified which efficiency project you want to complete first. How do you pay for it?

Two options our clients typically consider. The first is simply CapEx. The have the funds available, they pay for the project, and it gets completed.

Option two — what if you don’t have those funds available or it’s just simply not in the budget for that year. You may want to consider on-bill financing.

With on-bill financing, there’s little to no upfront capital required to complete that energy project. An energy supplier, in exchange for a supply agreement, will pay for those project costs upfront. Over the course of the agreement, you’ll get a line item on your bill repaying those project costs. So, you can pay this back over time instead spending all that capital upfront.

While there are other options available for financing and energy efficiency project, these are two of the options most of our clients consider most often.

Thanks for watching!

Thank you for watching today and over the last four weeks of our video series Manufacturing Energy Success. If you missed any of the previous weeks’ videos, please feel free to click on the links below.

I look forward to any comments, conversations, or feedback you have for me on your unique energy situation. I hope you found these videos valuable, and I hope you have some takeaways to utilize in your energy strategy. Thank you!

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Previous Videos:

MES #1: Kickoff Video

MES #2: Contract End Dates

MES #3: Special Edition – Operational Flow Orders

MES #4: Demand Response

Manufacturing Energy Success #1

“Manufacturing Energy Success” is our new video mini series for manufacturers looking for ways to save money on their energy costs in 2021. Check back every Thursday in February for a new video!

Video Transcript

Hello! My name is Michael Zaura, and I’m a Senior Energy Advisor here with Nania Energy Advisors. Thank you for watching!

This month we’re doing a video series for you, the packaging manufacturer. Each week you’ll be receiving a new topic that will help make you successful in 2021 in regards to your energy planning. Here’s what we’ll be discussing.

Topic #1: Knowing the importance of the end date of your electric or gas agreement and the impact it may have on market timing.

Topic #2: Demand response and creating another revenue stream for your facility.

Topic #3: Energy efficiency. We’ll walk through the steps in the process that can help you reduce your natural gas or electricity usage for your facility.

So, those are the three topics that we’ll cover in this video series. And I look forward to sharing these topics with you each week around this time. Thank you for watching, and I look forward to seeing you next week!

 

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3 Energy Opportunities for Your 2021 Budget – TMT

Video Transcript

Welcome to 2021! By the end of last year, you probably set some pretty aggressive goals for this year’s budget. Now, you’re a couple weeks into the new year, and you’re wondering, “How are we possibly going to hit all of these goals that we set?”

In today’s Two-Minute Tuesday, we’re going to explore three opportunities in energy that will help you hit those goals for 2021.

Opportunity #1: Review your current agreements.

Opportunity number one is probably the easiest: review your current electricity and natural gas agreements. You’d be surprised how many people think their agreements expire much later than they actually do.

Say, for example, your agreement expires in June. You have six months’ worth of opportunities to evaluate all of your options. You can set up a market alert or market watch to hit a certain price point that you’re looking for.

When the market hits that price point, you’ll be alerted so you can take action. Your new rate will take effect after your agreement expires in June. Let’s say it was a seven percent savings. You now have seven percent extra dollars in your budget that you didn’t otherwise plan for.

So, taking this simple step of reviewing your agreements can have a significant impact on your budget.

Opportunity #2: Generate revenue.

How big of an impact would it be to your budget if you were to create another revenue stream that you didn’t plan for?

Demand response is a program you can enroll in where it asks you to curtail energy usage during the time of a grid emergency. You get quarterly payments based on how much energy you can curtail, which is determined by a one-hour test event every summer.

If there is a grid emergency, you can earn extra energy payments based on how much energy you curtail during that emergency. Luckily, in our PJM territory, there has not been a major grid emergency where anyone has been asked to curtail energy in over ten years.

If generating a new revenue stream would be important to your budget, you’ll want to act now because the deadline to enroll is coming up in the spring.

Opportunity #3: Energy efficiency.

Say you have dollars allocated in your budget this year for an efficiency project, but you’re not sure which one to tackle first. Consider doing an energy audit.

An energy audit will help you identify areas of need, utility incentives currently available, and the ROI for that project. Whichever project you tackle will significantly lower your energy usage not only for this year and this year’s budget, but also for many years to come.

Seize these opportunities and make the most of your 2021 budget.

Energy can have a positive impact on your 2021 budget. By reviewing your energy agreements and their end dates, generating a new source of revenue, and reviewing efficiency projects, not only will this impact your budget for 2021 but also in the years to come.

Thank you for watching! And if you liked what you saw, please like, comment, or share below.

Illinois Utility Rebates for Schools – TMT

This is a clip from our October webinar in which Senior Energy Advisor Becky Thompson chatted with Vanessa Perkins from Resource Innovations about utility rebates for schools.

Video Transcript

VP: I know that a lot of you are dealing with COVID right now as well, and it’s critical for you to have outside air coming in and ventilating through your building. And I know that’s going to cost more money because you’re going to have to heat and cool that air. Every new chunk of air has to be conditioned.

So some ways to have a quicker payback and better ROI is to look at the ways you’re heating and cooling that air and start in that area. Like a boiler tune-up, for example, and making sure your boiler is running at the optimal pace and has the optimal fuel-to-air ratio. Those types of things that might be considered “maintenance” might be covered by the utility programs.

So it’s always worth seeing, even if you’re not doing projects right now, just find out what’s laying around that could possibly be paid for by the utility or subsidized by the utility to help you start saving on costs that you’re experiencing. Especially with the outside air intake.

BT: And that’s such a great point because a lot of my districts are telling me that energy efficiency is low on the list right now. It’s all about student and staff wellness and health and safety. So they’re putting in the MERV filters and all of these kinds of things that are really decreasing their efficiency, and they’re doing it because they have to have a plan to reopen.

But eventually, that’s going to be a substantial cost that the district is going to have to take on. So, if I’m understanding what you’re saying correctly, maybe there’s not an incentive directly for increasing your indoor air quality. But some of the other pieces that affect that that are part of that process you can get money back for, so you can offset that cost so it’s not such a kick in the chin for you.

I know lighting, specifically, if you haven’t already done that it’s typically less than a year payback. And upgrading to LEDs reduces your lighting expenses by 80 percent and increases the efficiency by 80 percent. So within a year, your lights are paid for, and now you can take that money and maybe look at the some of the bigger projects that are maybe lower on the list that suddenly you have the money to fund them.

It’s all about shifting things around and just getting creative with that. It’s really important to know an efficiency program doesn’t just mean a new rooftop unit or a boiler replacement. There are so many ways that these programs operate and tons of money just sitting there ripe for the picking.

How to Fund an Energy Efficiency Project

Video Transcript

Another way you can reduce costs outside of commodity is energy efficiency. This is the replacement of any kind of equipment at your site that reduce both your usage and maintenance costs for energy.

Now you might be thinking, “In these times, who has the capital to pay for these types of projects?”

There are many options out there that can help pay down or even let you walk into new equipment without any upfront costs.

Utility Rebates

First is utility rebates. This is going to depend on your state and utility, but many of these programs will help pay for a good portion of the project.

Federal Tax Deduction

Second is the federal tax deduction US179D. It’s only in place until the end of this year (it’s yet to be renewed), but it’s a tax deduction for energy efficiency projects for commercial buildings.

One caveat is that you need to show a profit to be able to capitalize on a tax credit. That is something that we have had to bring up in a post-COVID world.

Funding Options

Third is that there are funding options out there. Previous to COVID, there were a lot of CapEx projects where you would write the check and then the savings would flow to you every month.

Now, there are options out there where you can walk into new equipment without any out-of-pocket expenditures. To dial down on what these options are, we primarily see three out there.

1) On-Bill Financing

Under this option, the energy supplier writes the check for the project. Then, you negotiate a structured fee on your energy bill over some defined period.

There are certain tax advantages with this option, and we’ve seen a lot of popularity in it.

2) Property Assessed Clean Energy (PACE) Projects

This will depend on if your county participates in this program — it’s a national program. A third party will pay for your project, and then you negotiate a structured fee that would actually be placed on your property tax bill.

These programs are very popular with REITs (Real Estate Investment Trusts) or any kind of location that is bought and sold because they’re a lot easier to transfer to a new owner as part of the property tax bill.

3) Performance Contracting

Again, there are no upfront costs. You would pay the contractor back through a negotiated percentage of the savings that are provided by the project.

 

To access the full webinar recording, email info@naniaenergy.com.

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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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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!

See more posts about Sustainability:

 

TMT: A Lighting Project + Your Energy Rate

Video Transcript

Hi! One question I get asked quite a bit is, “What impact would a lighting project have on my facility’s energy rate?”

If you’re looking to reduce your electricity usage, a lighting project will help you do that. But another surprise benefit is the impact it’ll have on your electric rate.

In this week’s Two-Minute Tuesday, we’ll show you exactly how.

What pricing factor does a lighting project impact?

One factor that suppliers take into consideration when giving an electric supply rate is your PLC number, or Peak Load Contribution.

This is the capacity and transmission — “demand” — charges that are attached to your facility.

Your PLC is measured over the 5 heaviest days of grid usage in the year. Think of a summer afternoon when everyone’s using a lot of air conditioning.

PJM will measure your usage on those 5 heaviest days and assign a PLC number (PLC tag) to you. The utility — in this case ComEd here in northern Illinois — will post that number to your account in December and it will go into effect the following June.

Lighting Project and PLCs

So here’s how a lighting project affects PLCs.

Think about an LED bulb that you’re putting in, replacing an old incandescent or metal halide or whatever bulb you currently have in your fixtures. The LED will put out much less wattage and use fewer kilowatt-hours over the course of those 5 days that the grid is measuring over the hot summer months.

The immediate impact you’re going to see is on the next month’s bill following the project’s completion. Your usage (kilowatt-hours) will be lower because those LEDs are using less energy compared to older bulbs.

You’ll experience a later impact to your PLCs in June the year after you complete the lighting project. So while you see an immediate change in your usage on next month’s bill, your change in PLC number will impact next year’s bill.

What does this look like?

Here’s a quick customer example.

Working with one of our local manufacturing clients, we started looking at new rates for their electricity contract that’s expiring this year. The did a lighting project for efficiency last spring.

While they got the full benefit in the summer from lower usage (the lighting project reduced their usage by about 1 million kWh), where we really saw the benefit was in the PLC number.

In November, we started looking at pricing for them. And the original pricing came in significantly higher than their current rate. Lighting Project and Energy Rate

Waiting until December when ComEd came out with new PLC numbers starting in June 2020, that PLC number was cut in half — they were in the 500 range and got cut to about 250. This resulted in around 14% savings over their current contracted rate.

A lighting project can impact your energy rate.

As you can see, a lighting project can impact more than your usage. If you’re considering a lighting project for your facility, feel free to reach out to us for guidance.

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

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Ask An Advisor: LED Lighting Upgrade

December 16, 2019

Video Transcript

Hi! I’m Michael, the Senior Vice President at Nania Energy Advisors. Now you’ve probably heard that upgrading your facility’s lighting to LEDs is one of the easiest ways to reduce your energy costs and to reduce your carbon footprint.

And that’s true. But what does it look and feel like to do a lighting upgrade project?

In today’s video, you’ll get an inside look at an in-progress LED upgrade, along with some before and after shots. You’ll be amazed by the results. Come see what I mean!

How does a lighting project affect day-to-day activities?

Today we’re on site at one of our industrial clients who is currently undergoing an LED upgrade project. As you can see, the contractor is able to do the lighting project with minimal disruption to manufacturing activities.

What can you expect from a lighting upgrade project?

So after the lights have been replaced and the project is complete, what can you expect to see?

1) Energy Savings

Depending on the energy of your current system, you should expect energy costs and usage related to lighting to drop anywhere from 20-80%.

As an added bonus, those organizations with sustainability goals should also see a reduction in in their carbon footprint, improving LEED scores and Energy STAR ratings.

2) Quick Return on Investment (ROI)

The average LED project will have a payback period of 1-3 years.

  • A payback period is defined as the amount of time that it would take for your electricity savings to accumulate to equal the initial project cost.

Your individual payback period will depend on a few factors, most notably:

  • The efficiency of your current system,
  • The number of hours that your lights are on during an average week, and
  • Any utility rebates that are provided to help pay for the initial project cost.

3) Lower Maintenance Costs

While a typical fluorescent bulb will last between 20,000 and 30,000 working hours (or 2-3 years), you can expect an LED bulb to last over 100,000 working hours (or 10 years).

Because LEDs last longer, you won’t have to replace them as often, saving you money on labor and supplies related to lighting.

Before

After

What are the benefits of a LED lighting upgrade?

So how is this industrial client benefiting from their lighting project?

  • This client will see an annual savings of over $31,000 a year on their electricity costs.
  • They’ll see a project payback of 2.6 years.
  • And they will see the lighting quality in their facility improve by over 250%.

How can you pay for a LED lighting upgrade?

Now, if you’re worried about how to pay for a lighting project, the good news is that you don’t have to pay for it all up front. There are many creative ways to pay for an LED upgrade.

For example, this customer selected to use on-bill financing. This project is being funded by one of our electricity supply partners, and the client is paying for the project through a small fee on their monthly electricity invoice.

Consider doing a lighting project at your facility.

As you can see, a lighting project can be extremely beneficial to your facility. If you’d like to learn more about LED upgrades or other efficiency projects, please check out our website or contact us.

Thank you for watching, and look for future energy videos.

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Two-Minute Tuesday: On-Bill Financing

November 26, 2019

Video Transcript

So you’ve decided to do an energy efficiency project. Now, how are you going to pay for it? In today’s Two-Minute Tuesday, we’re going to review on-bill financing as a way to pay for your energy efficiency project.

What is On-Bill Financing?

Under on-bill financing, your energy supplier will pay for the cost of your efficiency project. You will sign a supply agreement with that supplier for some defined period that will include a monthly fee that the supplier will use to help pay back the cost of the efficiency project.

Here’s an example of how this works:

Company A is currently spending $50,000 per month on electricity, using 1,000 MWh at $50/MWh.

Current State

Company A negotiates a 3-year agreement to fund a lighting efficiency project. Once the efficiency project is completed, the energy usage reduces 10% to 900 MWh. This customer pays a monthly financing fee of $5,000 on their invoice. As you can see, their monthly spend on electricity stays at $50,000 during the term of the agreement.

During Project

Once the 3 years are up, the financing fee is eliminated from their bill, and the customer’s monthly electricity spend is reduced by 10%.

After Project

Benefits

So what are the advantages of on-bill financing? Well, most on-bill financing programs are considered “off balance sheet,” so getting internal company approval for these types of programs is often easier than for traditional funding.

Secondly, many clients declare the monthly fee on their bill as an operating expense since it is included on your monthly energy invoice. So there may be some tax advantages* to capitalize on from this financing.

Consider on-bill financing for your energy efficiency project.

In short, supplier on-bill financing for efficiency projects is another way to pay for your energy efficiency project. There are many advantages of this option that aren’t provided by other forms of funding.

Thank you for watching our video, and be sure to catch December’s Ask An Advisor video in which we showcase a client who used on-bill financing to fund their lighting efficiency project.

**DISCLAIMER**

Nania Energy Advisors is not a licensed tax professional, and this article does not constitute tax advice. Tax exemption benefits are unique to each business. Any action you take to manage your exemption status after reading this should be verified with a licensed tax professional before implementation. Nania Energy Advisors assumes no liability.

 

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