By Anne Cosgrove
Published in the July 2008 issue of Today’s Facility Manager
With the issues surrounding energy becoming increasingly unpredictable, more facility managers (fms) are beginning to face the topic head on. Surely, many fms have an energy management plan in place and have been proactive in optimizing their energy procurement and consumption. But with energy prices on a relentless rise, coupled with the much discussed negative effects on the natural environment, it’s easy to imagine that even more fms are kicking into high gear when finding ways to save energy.
How then should fms who need to create a plan begin the journey? The first step can include an organization-wide assessment of how energy is procured. It is crucial to identify the best procurement strategies as the starting point for a plan that will be most beneficial to the organization’s particular needs.
Jennifer Kearney, managing director and co-founder of Gotham-360 LLC, an energy management consulting firm based in New York, NY, states, Identifying the best way to procure energy is one important aspect. This is because the current volatility in energy prices can mean that the same type and amount of energy purchased one week can be offered at a much higher price as little as seven days later.
Kearney’s firm works with fms in a variety of facility types to help those professionals create and sustain a plan that enables them to reduce energy costs, and procurement is often her focus at the start. Often, organizations will put out an RFP [request for proposal] and enter into a 12 month contract, she explains. Then, 30 or 60 days before the contract expires, they will put out another RFP. That makes the organization ‘hostage’ to the market, since when the RFP goes out, it must buy energy at whatever rate the market is at during that time.
Energy management firms can help fms enter into energy procurement contracts at the low end of the price scale. This is because the firms are tracking the markets every day, something most fms do not have the time to do. In this scenario, however, the client usually needs to enter into a long-term contract (e.g. three to five years) with the energy provider.
We conduct an energy audit for clients and look at the way they are purchasing energy, says Kearney. We will then identify opportunities to leverage the marketplace based on the particular risk profile of the client. For instance, some organizations have some flexibility in their budgets, but hospitals are often working with slim margins. They tend to be the clients who want to leverage the market for the best price, but they need to know what they are going to pay. They don’t have much tolerance for going over budget or for taking risks.
Energy consumption is the next piece of the management puzzle. Once the organization knows what it will be paying for energy, it can further control costs by reducing consumption. A bulk of this activity involves strategies that many fms are familiar with-replacing inefficient HVAC equipment with newer, less energy-hungry models, for example.
But another way to reduce costs is through demand response programs, which are increasing in availability throughout the U.S. Under this type of plan, a utility company offers a customer a reduced rate on energy usage in exchange for the customer cutting its consumption during times of the day known to be high demand periods.
Kearney cites one scenario: Peak time for most facilities’ energy use is between noon and four in the afternoon. As a result, that is when prices will be at their highest. If fms have operational flexibility in the way that they can air condition their buildings, they can ramp down electric consumption and use steam, for instance, during those peak hours. We have clients reaping millions of dollars in savings with that approach. That’s coming around to the other side-looking at both procurement and consumption.
However, not all organizations can function in that way, as Kearney acknowledges. If we have a client who does not have the operational flexibility to manage peak demand in that manner, we procure energy in such a way that does not leave the customer exposed to hourly rates, she says. It is a complex endeavor, and that is one reason why an organization pursuing a formal energy management plan should work with an expert who will focus only on the energy aspect of an operation. Energy management used to be a part-time job for many fms, but it can’t be that way anymore. It has become too important and too expensive.
Narrowing the lens to focus on renewable energy sources, fms who are ready to look at these options for some or all of their consumption can find assistance from their utility companies or firms like Gotham-360 in identifying opportunities.
And, whether looking to purchase this type of power from an off-site provider or evaluating the possibility of locating on-site generation, fms may find an increasing number of financial incentives by pursuing this path. Kearney notes, As the [energy] grid becomes more congested, governments and utilities are increasingly putting out more incentives to help end users create projects that will reduce their consumption from the grid.
So for those fms lacking an established roadmap for their organization’s energy use, the time is now to begin setting goals, identifying challenges and opportunities, and procuring energy in the most cost-effective way available for their particular situation.
With no end in sight to rising prices and volatile conditions, an energy management plan is fast becoming a necessity.
Research for this article included an interview with Kearney of Gotham-360 LLC (www.gotham360.com).