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By John M. Studebaker, Ph.D.
Published in the October 2010 issue of Today’s Facility Manager
Currently, the majority of energy purchases (primarily electricity) are a relatively simple matter; facility managers (fms) pay their monthly billing amount due from the serving utility and potentially from the commodity provider. But based upon events currently taking place, energy purchasing and the base components of energy are in for a big change.
In the near future, energy purchases will become more user dependent based on cost as well as type of energy used. But today, as illustrated in the chart below, the major fuels used to generate electricity are carbon based (CB): coal, oil, propane, fuel oil, etc.
There are currently many federal, state, and local pending rules, regulations, or mandates relating to the reduction of carbon based fuel usages for electricity generation. Exactly how all of this will ultimately be resolved is unknown, but it will be a different energy world very quickly.
Consequently, all commercial and industrial energy users need to be aware of the new alternative and sustainable energy processes. This knowledge will allow proactive (ahead of the curve) rather than reactive (behind the curve) strategies.
Alternative And Sustainable Processes
By definition, alternative energy replaces undesired, negative consequence energy that has historically been carbon based. Sustainable energy can be used now without impacting the needs of future generations.
Both of these processes propose to reduce the reliance on fossil based fuel sources. They can be harnessed with minimal long-term effect on the environment and can be sustained indefinitely without additional resources.
Alternative and sustainable processes impact many items commonly used in day to day facility operations. Purchasing professionals must consider and evaluate the “green” or “non-green” characteristics of these operations, such as materials used, products purchased, and utility usages.
The alternative/sustainable characteristics of processes (such as facility operations and the impact of associated products) must be considered. Other items that must be considered are community relationships, interdependence, and positive/negative factors.
Green buildings incorporate processes that are environmentally responsible and resource efficient throughout their entire life cycle. [For more on life cycle concepts, see “Beyond Initial Price” by Shelia Sheridan.] The items considered in green construction and renovations include project site, energy efficiency, material and water usage, and interior environment, operation, and maintenance costs
Green buildings are certified through a process called LEED (Leadership in Energy and Environmental Design). There are four LEED certification levels:
The LEED certification process is administered by the United States Green Building Council (USGBC). This process includes the evaluation of seven separate items:
• Site sustainability;
• Indoor environment;
• Water efficiency;
• Design innovation; and
• Regional priorities.
The individual maximum points for each of these seven items range from four to 35 points each (with a maximum total points of 110 for all seven items).
There are fees associated with the LEED certification of green buildings. These fees range from $2,200 to $22,500 for new construction and from $750 to $7,500 for existing construction. Additional fees to expedite the certification process range from $5,000 to $10,000 for both new and existing construction. All certification fees are rebated, with the exception of expedited fees, if the project is certified Platinum (80+ points).
Typical additional project costs to attain LEED certification range from 1% to 5%+ of total project cost. Since additional, initial costs are required when using LEED certification processes, the following various reduction incentives are available:
• Tax credits, exemptions, or reductions;
• Reduced permitting fees;
• Expedited permitting processes;
• Free technical assistance; and
• Low interest loans.
The use of alternative and/or sustainable energy not only includes cost factors, but it also incorporates less quantifiable characteristics like public perception of the company and its products and/or services as related to the reduction of environmental pollutants. Gone are the days when quality, availability, and price would be the only considerations for fms to make prior to purchasing a product or service.
Green power is energy from natural alternative and/or sustainable sources. The typical sources include biogas, biomass, geothermal, low impact hydroelectric, solar, and wind.
Green power is the one of the easiest of the alternative/sustainable processes to implement. It is simply purchased; no equipment infrastructure or long-term paybacks are required.
Typically, green power is purchased from the serving electric utility or from third-party providers. Since the actual electrons that are purchased cannot be specifically identified, fms should always specify “Certified” or “Verified” green power.
Green power costs (in addition to the normal utility kWh charges) range from 1¢ to 3¢ per kWh. The benefits of supplementing normal utility purchased electricity with green power is that carbon dioxide (CO2) emissions are reduced to the extent that green power is used.
Also, non-quantifiable benefits of the purchase of green power are:
- Serving as an example to others of a commitment to reducing pollution;
- Creating a positive public usage for a company and its products/services; and
- Demonstrating civic leadership by example for the reduction of pollution.
Carbon-Based Energy Replacements
There are many types of alternative energy being considered as a replacement for carbon-based energy. Solar and wind are the two most popular options.
Solar power. Solar cells generate electricity when positive (+) electrically charged particles in sunlight strike the solar cell and are absorbed by it. The negative (-) electrically charged particles are dislodged from their atoms and flow out of the solar cell, producing direct current (DC) electricity.
Solar cell types include amorphous, silicon, monocrystalline silicon, multiple function, polycrystalline silicon, and thin film. The efficiencies of these types of solar cells ranged from 8% to 30%.
Solar panel (groups of individual solar cells) capacities range from one to 300 watts at 12 to 40 volts DC. Current density is measured in the areas of 35 milliamperes per square centimeter.
Solar cell costs range from $2,000 to $5,000 per kW; additional installation costs range from $1,000 to $3,000 per kW. Typical solar cell ongoing operational costs range from 10¢ to 30¢ per kWh.
Solar power in use in the U.S. today is relatively small; it makes up less than 1% of total electricity generation. On the positive side, the percentage is growing each year.
Wind power. Wind power is the process of converting air movement into a useful form of energy through the use of wind turbines (or windmills) to generate electricity.
Wind turbines are available in two configurations: horizontal (parallel to the horizon) and vertical (at a 90° angle to the horizon). Due to variations in wind velocity, the average generation cycle is 30% to 35% of total available time.
Wind turbines are not small installations! They are large, heavy units. A typical one to 1.5 MW (1,000 to 1,500 kW) installation would be as follows:
Wind turbines for commercial applications range in size from just under 100kW to over 3MW (3,000kW). The cost of wind turbines varies from less than $1,000 per kW to more than $2,500 per kW.
Currently, there is a Federal Production Tax Credit (PTC) of 2.1¢ per kWh that is applicable through December 31, 2012. Also, there may be potential state and/or local credits available depending upon where the project is located.
Today, wind power in the U.S. is less than 2.5% but it is expected to increase greatly in the next five to 10 years.
Getting Ready For An Alternative Future
So how do fms prepare for the future in energy procurement? This checklist should help assist with the process.
- Start with current energy costs and make certain they are as cost-effective as possible.
- Understand the availability of alternative and sustainable opportunities.
- Determine how to incorporate alternative and sustainable opportunities into current processes.
- Install alternative and sustainable strategies on a scheduled basis that allows a comfort level to be established for the different processes as they are completed.
Change in energy procurement is quickly approaching. Fms will either be driven by the change or will drive the change to their advantage, based on proactive actions.
The future of energy will change; fortunately, this change can ultimately benefit the user who takes a strategic, intelligent approach that factors in all of the available options.
Studebaker is president of Studebaker Energy Consulting, LLC, a Winchester, KY- based national energy/utility consulting corporation active in all areas of energy cost reduction processes. Studebaker has a Ph.D. in Industrial Engineering and teaches energy cost reduction strategies for many universities including Alabama, Clemson, Cornell, and Harvard.