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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 Old or outdated machinery could be using more energy than necessary and causing you to be over budget.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.

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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Run an Effective Energy RFP – Energy ABC’s #3

Video Transcript

Figuring out when to buy energy and what to include in your energy RFP can mean the difference between an operating budget bust or surplus for your District.

Get your notes ready! Because I’m about to rapid-fire some best practices for running an effective energy RFP for your district.

Give yourself plenty of time.

Let’s say you get yet another call from an energy provider asking you about your gas and electric contracts. You spout off your standard answer of “We’re locked in for another three years, so we’re all good” and hang up the phone.

While you’re not interested in taking a sales call, it does jog your memory that you haven’t looked at your actual contracts in quite a while. So you track them down and see that you’re up in the next 12 months. So now what?

I’ll give you a hint: the answer is not file it away in a cabinet until a month before your contract expires.

Give yourself ample time to review this process. Engage with new providers. Watch the market. And get buy-in from any necessary parties, such as your Board.

By giving yourself plenty of runway, you could save thousands of dollars and add to your bottom line.

Know your contract end date.

Because all energy supply contracts are purchased on the futures market, they’re all technically forward-facing agreements. So, you can go to market at any time during your current agreement for your renewal.

Let’s say, for example, you have a December end date on your current agreement. You can go out to RFP in January, if you’d like. And you would set a parameter for a December start date. Suppliers can start the new contract whenever you’d like.

How this would work is your new contract would bookend to your current agreement. Just make sure you have accuracy in what your current contract end date is. What you don’t want to happen is to have an overlap of two supply agreements or have a gap in service — both which can result in large penalties to your District.

Watch the market.

So is there a better time of year to buy than others?

Not really.

In theory, it makes sense that you would buy in the off-peak seasons — so you would buy gas when it’s warm outside and buy electricity when it’s cool outside.

But anymore, the market’s not really weather-driven because we’re at a surplus of natural gas domestically. You want to pay more attention to geopolitical speculations and financial gains of any traders, and that’s really what’s going to affect the market.

If you’re trying to “time the market,” you’re better off to give yourself enough runway to watch the market for opportunities. And if you don’t have the time to do that, align yourself with a partner who will and will notify you of any substantial changes.

Consider competitive bidding.

Which brings me to my final point. Call your peers and ask for referrals of any energy partners they utilize. Then pick their brains on RFP parameters that they have.

Keep in mind any changes you have upcoming, such as a closing building or solar installation. These partners should be able to help you build out an effective energy RFP to run on your own, or maybe you trust them enough to run it for you.

Also, keep in mind that energy procurement in public schools does not require a formal bidding process per school code. So, you’re able to work and align with partners that you trust and value.

However, competitive bidding is always a great option, whether you do a traditional sealed bid or maybe you utilized a more tech-advanced option, such as a reverse auction software. Competitive bidding where multiple suppliers compete against each other can really drive down your overall cost.

Build your own effective energy RFP.

Now that you have a jumping-off point, pull out those dusty old contracts and see when they end. If it’s in the next 12-18 months, now is the perfect time to start gathering information and engage with new partners.

Thanks for watching! Check us out in our next video in the series Energy ABC’s.

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3 Ways to Purchase Energy – Energy ABC’s #2

Video Transcript

Hey guys! It’s Becky with Nania Energy, back with the second video in our series “Energy ABC’s.”

Today we’re going to cover a heavy topic of the different ways to purchase energy.

There’s a lot of different options available to you: there’s consortiums, using a broker or consultant, or going direct through a supplier. We’ll cover the pros and cons of each so that you can figure out which is best for your district.

Option 1: Consortiums

Alright, so let’s start with consortiums — or, buying groups or co-ops.

These are typically large groups of similarly-structured businesses, like a K-12 school, that band together to purchase energy in bulk.

A lot of these were created over a decade ago when electricity was first deregulated in Illinois and there was a lot of volatility in the market. So they banded together for safety in numbers.

Consortium — Pros

Think of it like a glacier — it’s large and slow moving, but doesn’t veer much off course. That’s the way that consortiums typically purchase energy, which is great for you as a school district because it’s little to no maintenance.

Consortiums are typically governed by an appointed board, and they oversee a third party — such as a consultant or a supplier — that makes a purchasing decision on your behalf. So it’s kind of a set it and forget it option for your school district. This is really great for you if you’re a smaller school and energy isn’t a large portion of your budget, and you just don’t have the time to dedicate to it.

Consortium — Cons

Some of the disadvantages that come with this, however, is that they’re not a low-cost provider. They don’t set out to be. They’re trying to flat-line the price and eliminate any of the big highs and lows that may exist.

So any opportunities that pop up like we saw in summer 2019 — when we had the lowest prices in the last decade — you’re not able to take advantage of, and you’re limited in the flexibility that you have to look outside of the buying group itself.

A lot of times, to even exit the group once you’re a member could take 3 or 4 years. So you have to be pretty committed to the process if you’re going to join.

 Option 2: Advisor, Broker, or Consultant

The second option you have to purchase energy is to use an ABC — an Advisor, Broker, or Consultant.

While there’s differences between those three, one similarity is that they’re all a third-party that acts as a middleman between your district and your supplier.

ABC — Pros

They often have several supplier relationships, so when they run an RFP for you they’re able to bring a large level of competition — which translates into a lower rate for your school.

They also can offer a range of services to help make your life easier and save you time and energy. This includes:

  • Bill auditing services
  • Handling customer service issues you have with the utility
  • Helping you forecast your forward fiscal budget
  • Validating any ROIs you have on efficiency projects.

ABC — Cons

Some disadvantages to using an ABC, however, is that there is an additional cost. You do pay them a fee, and you should know what that fee is to know that it’s fair and reasonable for your district.

Each ABC handles this a little bit differently. Some require an up-front consulting fee, some bill you directly monthly, and others will actually bake their fee into your fixed rate on your supplier bill.

Make sure you have the conversation ahead of time and know what this is. If your current ABC isn’t willing to share this information with you, it’s generally a red flag that something’s probably not right.

Another drawback of using an ABC is that there are unfortunately low barriers to entry in our state. There’s literally hundreds of brokers in the state of Illinois.

Make sure that you do your due diligence and ask them for references of other K-12’s they’re working with. Check up on them and make sure that they have a full understanding of how your school business operates. It’ll be most important to your bottom line.

Option 3: Directly through a supplier

A third option you have is to work directly through a supplier. These are the people you receive your invoice from each month.

Direct through Supplier — Pros

By working directly through a supplier, there’s no third-party administration cost like there is with using a consortium or a broker.

They also may be able to offer you some completely customized products that you’re not able to get by running a standardized RFP.

Direct through Supplier — Cons

However, this option is really best for districts that have the time and energy that it takes to understand the energy world and make sure they’re not putting their school at risk.

 

There’s a lot of moving pieces to energy, and having a partner to help guide you through that process is imperative to ensure you’re making the best decision for you and your school business.

I hope you enjoyed this video and found it helpful in determining which method you’ll use going forward. If you have any questions, drop us a line or shoot us a note — we’d be happy to help.

Otherwise, we’ll see you next time on Energy ABC’s!

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How to Switch Energy Suppliers

By AJ Brockman

If you want to switch energy suppliers, there’s one section of your current energy agreement that you need to look at first: the “term” or “delivery period.”

The “term” or “delivery period” section contains auto-renewal language, which is a standard part of any energy contract.

Usually, this clause states that the contract will automatically renew for a certain amount of time (ex. 12 months) on a variable or holdover rate unless you submit a notice to terminate in specified terms (ex. 60 days) before your contract expires.

For a smooth supplier switch — and to comply with the terms of your agreement — there are two documents you need to submit to your current supplier: a non-renewal notice and a termination letter.

What is a non-renewal notice?

A non-renewal notice (sometimes called a “Notice to Shop”) tells your current supplier that you intend to shop for rates and you don’t want your contract to automatically renew.

This notice can be retracted and does not automatically terminate your service if you decide to renew with your current supplier.

  • See a sample non-renewal letter here.

When should you submit a non-renewal notice?

You should submit the notice as soon as you decide to shop for rates — which should be at least 6-9 months before your contract expires. This ensures that your accounts don’t automatically rollover while you’re shopping, and you’re following your contractual obligation to give formal notice.

What is a termination letter?

A termination letter notifies your current supplier that you will be using a different energy supplier when your contract expires. It clearly outlines which account numbers and service addresses you wish to terminate.

The letter also states that you are not responsible for any energy delivered to your accounts after your termination date.

  • See a sample termination letter here.

When should you submit a termination letter?

You should submit a termination letter after you sign an agreement.

Note: it is imperative that you submit the termination letter before the deadline that’s stated in your contract. This may require you to submit it before you sign a new agreement.

This deadline varies by supplier — some want the notice 60 days before your contract expires, others require 90 days or even 6 months’ notice.

If you submit the termination letter after this deadline, you could encounter issues or even termination/liquidation fees if the contract has already renewed.

What is the process for drafting a non-renewal or termination letter?

If you’re working with an advisor, we’ll draft up the letter for you that includes all the necessary information (account numbers, service addresses, supplier address, etc.).

When we send it to you, you should copy it onto your company’s letterhead and sign it.

To submit the letter, you can either send it to the supplier yourself or send it to us — we’ll send it to the supplier on your behalf. If you choose to send it yourself, we recommend faxing or emailing a copy to the supplier in addition to mailing it.

Ask your broker or advisor how to switch energy suppliers.

These documents are necessary for switching suppliers and submitting them on time will make the switching process seamless. Ask your broker or advisor for templates and guidance.

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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: Building an Energy Strategy

Video Transcript

Hi! I’m Calvin. I’m a Certified Energy Manager and a Senior Advisor here at Nania Energy. When it comes to energy, it’s important to have a strategic plan to help you achieve your goals.

So in today’s video, we’re going to talk about 3 key factors in building such a plan: Define, Design, and Decide.

Step 1: Define Your Energy Goals

The first step in a successful energy strategy is to define your energy goals. 

While everyone would like to get a lower rate, that really is a step toward achieving your goals — it isn’t a goal itself.

Depending on the size of your company and the industry, there are any number of goals that you could have, but here are some common ones:

It’s also important to understand the why behind those goals. If you’re looking to reduce your carbon footprint, is it because you want to be more green for promotional purposes? Or because you’ve got corporate initiatives around sustainability?

Having clearly defined energy goals and knowing why you want to accomplish them will help you to design your strategy — which is Step 2.

Step 2: Design Multiple Paths

The second step in strategy development is to design multiple paths to achieving your goals.

For every goal, there are a variety of ways in which we can accomplish them.

Let’s take the goal of “Reducing operating costs by 10%”. Your operating costs are made up of your rate multiplied by your usage. So there’s a number of things we can do:

  1. Try to get a lower rate
  2. Improve efficiency, which will reduce usage
  3. Shift usage to off-peak times when rates are lower and reduce demand charges
  4. Look for ways to eliminate usage altogether

From here, we look at what goes into each of these tactics and move on to Step 3: Decide.

Step 3: Decide Which Tactics to Use

In Step 3, we decide which tactics to use to achieve your goal.

Choose the 1-2 options that are most realistic for your organization and determine in detail the time it would take to implement them.

Repeat these steps for each goal because in reality, you’re going to have more than one.

Once you’ve place all of these in a single timeline, you’ll have a clear starting point for your energy strategy.

Be at the top of your energy game.

If Tiger Woods has a swing coach and Oprah has a life coach, then you too can have a coach to help you design and implement your energy strategy and keep you at the top of your energy game.

Thanks for watching! And if you have any questions about your energy strategy — or just where to start — please contact us.

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TMT: Thursday’s Natural Gas Storage Report

Video Transcript

For today’s Two-Minute Tuesday, we’re going to talk about Thursday — specifically why Thursday could be a good or a bad day to execute energy contracts.

What happens on Thursdays?

Every Thursday at 10:30am ET, the Energy Information Administration (EIA) releases its Natural Gas Inventory Report. You may have heard it called the Storage Report.

This report details exactly how much gas reserves we have as a nation — specifically how much working gas we have. “Working gas” is natural gas that has been extracted from the ground, cleaned, and is ready for use.

Natural Gas Storage Report - Chart

Natural Gas Storage Report - Graph

What’s in the Storage Report?

There are two time periods covered in the natural gas Storage Report — injection season and withdrawal season.

Injection Season

During the summer, we produce more natural gas than we use, and our excess gas is put into storage. This season is called “Injection Season” in which we see our gas inventories increase week to week.

Withdrawal Season

Meanwhile, in the winter we use more gas than we produce. During this time, we borrow from our storage inventory to meet our daily needs for natural gas. This season is called “Withdrawal Season” in which we see our natural gas stock decrease week to week.

How does the Storage Report affect rates?

Thursday’s natural gas report can affect natural gas and electricity rates either positively or negatively, depending on the final inventory number.

Each week, energy traders predict what the final storage number will be. Any surprise in the positive or negative in the final storage number can cause prices to go up or down.

For example, let’s say energy traders are predicting that there will be a 100 bcf withdrawal in a given week. However, that week we only see a 50 bcf withdrawal. That means our natural gas stock is healthier than we thought, and we would expect to see rates go down after that week’s Storage Report.

Any volatility that we see in energy pricing on Thursdays will depend on the difference between the predicted storage number and the number that we see in the final Storage Report.

Keep Thursdays in mind when fixing a rate.

So: is Thursday a good day to fix energy rates? Well, it depends on the week. Thursday’s Natural Gas Storage Report can mean a bullish day for energy rates — or, it could be an excellent to lock in lower rates for those that are closely watching the market.

Thank you for watching our Two-Minute Tuesday! If you found this video helpful, please like, comment, or share below.

To see the states of the current markets, check out this month’s newsletter.

TMT: Best Time to Purchase Natural Gas

Video Transcript

Hi! My name is Mike, and I’m a Senior Energy Advisor here at Nania Energy. One of the most common questions I get asked by clients is “When is the best time of the year to purchase natural gas?”

It’s a great question, because natural gas is a traded commodity — meaning prices go up and down with supply and demand. Should you purchase in the summer when there’s less heating demand? Or maybe in the spring and fall when the weather is a little more temperate?

In this week’s Two-Minute Tuesday, we’re going to answer just that.

How Buying Natural Gas Has Changed

Twenty years ago, purchasing natural gas seasonally made sense. You could purchase in the spring, summer, or fall when there’s less gas demand and generally make out pretty well.

But in the past few years, something has changed with natural gas. It has become the #1 source of electricity generation in the United States — meaning there is now year-round demand for it.

The chart below from the Energy Information Administration shows that in 1998, natural gas accounted for 15% of domestic electricity generation. In 2018, you can see that it accounts for 35% and is easily the United States’ number one source of electricity generation.

Sources of Electricity Generation

Source: U.S. Energy Information Administration, Monthly Energy Review, Table 7.2a, March 2019

So, when you’re in the dead heat of summer and you have your AC blasting, guess what’s cooling you down?

That’s right — electricity generated primarily by natural gas.

How does this affect your gas purchase?

So back to our original question: When is the best time of year to purchase natural gas?

Because of the growth in use of natural gas, there’s not a “best” time to purchase it. Supply and demand are battling each other, and they’re doing it every season of the year.

But that doesn’t mean that you can’t create a strategy that takes advantage of the market. Some options that you can include in your strategy are:

  • Planning hedging opportunities throughout the year, or
  • Setting a price target for your upcoming agreement.

What I would NOT recommend is waiting 2-3 months before your agreement expires to take action. Who knows what the market will be doing at that time?

Make sure your current broker is following a purchasing plan that matches your goals and makes sense. If you don’t have a plan or would like help developing one, that’s what we do.

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

 

Want more tips on energy purchasing? Check out these articles:

Green Energy 101: How to Go Green in 2020

By Michael Zaura

January 13, 2020 — The end of a decade and the start of the next is the perfect time to reflect on the past and plan for the future.

Green (renewable) energy has already made a significant impact on the energy industry, and it’s going to play a huge part going forward. The U.S. Energy Information Administration (EIA) predicts that renewable sources will generate almost half of the world’s electricity by 2050.

Green Energy 101

Source: U.S. Energy Information Administration, International Energy Outlook 2019

Have you been thinking about green energy for your facility? In this post, we’ll:

  • cover the basics of green energy,
  • answer some FAQs, and
  • explore a couple ways you can incorporate renewables into your energy strategy.

What are sources of renewable energy?

Renewable energy is energy that is not generated from fossil fuels (coal, oil, and natural gas). Sources include:

  • Sun (solar energy)
  • Wind
  • Underground heat (geothermal energy)
  • Water (hydroelectric power)
  • Biomass
  • Hydrogen and fuel cells

These sources are naturally replenished over time, which is why they’re considered renewable.

Is nuclear energy green?

Yes…and no.

Nuclear energy produces far fewer greenhouse gas emissions during electricity generation compared to coal or natural gas. It’s also more reliable in generation from an efficiency standpoint. Some suppliers even market nuclear as a “carbon-free” product. In those regards, it could be considered “green.”

However, nuclear energy contains uranium, which is not a naturally-occurring resource. Also, the radioactive waste created from the generation process is definitely not environmentally friendly.

Fore more on nuclear, check out these articles:

How to Buy Green Energy

When you’re looking to “go green,” you have two primary courses of action:

  1. Purchasing RECs
  2. Owning a renewable asset

What is a REC?

A Renewable Energy Credit (REC, or SREC for solar) is proof that 1 megawatt-hour of electricity has been generated by a renewable resource. Buying RECs ensures that renewable electricity is being generated on your behalf and delivered to the power grid.

Many clients choose this route as a more affordable alternative to owning the asset outright.

Owning a Renewable Asset

Examples of renewable assets include:

  • A solar array on a rooftop or plot of land
  • A wind turbine
  • A geothermal system in the floor of a building

Investing in a green asset for your facility requires the right amount of space, capital, and the right situation.

If you’re interested in owning a renewable asset, a Power Purchase Agreement (PPA) is one of your financing options. A PPA is a contract between a developer and an electricity consumer. These agreements typically last between 10 and 25 years.

“How do I know that the energy I’m getting to my facility is really green?”

I get this question from clients all the time. And the short answer is: unless you own the asset tied to your facility, you won’t know.

The grid contains both green energy and “brown” (non-renewable) energy. If you purchase RECs, you do ensure that green energy gets to the grid. But you won’t know for sure what part of the mix coming from the grid to your facility is truly green.

Is there green gas?

While most green energy talk revolves around power generation, green or renewable natural gas (RNG) does exist.

Green gas comes from biodegradable materials (think of a landfill) that emits a usable biogas. This biogas is purified and turned into biomethane. Biomethane can then be injected into gas pipelines for end user consumption.

One reason RNG isn’t as prevalent as renewable electricity is because most of the U.S. currently lacks the infrastructure to clean and transport the gas. Once more pipelines and refineries are developed, we will see an increased use of RNG.

Green energy can be in your future.

Is going green part of your plan in the next 30 years?

If renewable sources are going to fuel half of our electricity, more facilities will need to invest in renewable assets. Some countries, corporations, and individuals have already set sustainability goals. As new technologies surrounding green energy continue to evolve, these goals will be easier to achieve.

Cheers to a greener future!