PowerCAST

‘Tis the Season to be Budgeting

With the economic outlook still uncertain, it’s more important than ever to get budgets right for 2011.  If you’re not budgeting for energy management, then you are likely to be missing out on significant opportunities.  Why is this?  And what should you do about it?

Let’s look at the big picture first. For years, organizations have been successfully using technology to wring savings from core processes, such as manufacturing, supply chain, finance and sales.  Ancillary processes like HR and expenses have also seen significant benefits from technology investment.  In fact, the average organization is spending 3-5% of revenue on IT.

Most organizations have not applied the same level of attention to energy.  For example, in an organization squeezed down to a 5% operating margin, each dollar of energy savings is equivalent to twenty dollars of revenue.  What would the organization have to do to get that extra revenue?

Forecasts for 2011 predict that energy prices will increase by ~3%.  It’s time to get the same savings from energy that organizations have seen in all other aspects of their operations. And if you are engaged in managing your carbon footprint, you have an opportunity to combine carbon and energy reductions with the same technology investment.

So what should you do as you prepare your 2011 budget?

1. Consider what savings you can get.  Many commercial, institutional, and industrial organizations can get 10%-20% savings on annual spend with some focused attention.  To get persistent savings, we have seen customers invest about half of this, or 5% of spend, in technology, with cash flow and payback that makes the business case for energy investment very compelling.
2. Make sure you put the expense in the right bucket. There’s every reason to expect capital budgets to remain tight in 2011. If you manage energy with web-based services (also known as Software-as-a-Service, or SaaS), you’ll pay on a monthly or quarterly basis, typically from an operational budget. Last year, many of our customers got their budgets approved by adopting this approach.
3. Figure out if you need to make energy (and carbon) management an IT expense or not.  Each organization has different policies on how to account for SaaS applications.  IT budgets have a long to-do list.  Operational managers have often been more successful if they can keep energy management in the ops budget.
4. Look for innovative ways to finance your energy efficiency investments.  If you are an EnerNOC demand response customer, for example, you may be able to apply demand response payments directly to other EnerNOC applications, keeping that investment out of the budget equation altogether. Many utilities also offer great incentives for energy efficiency (for example, EnerNOC has announced a deal with PG&E in California. Similar programs are available in other regions as well).

In preparing the budget, you’re looking for opportunities to add value to your organization in 2011.  A budget item is not a PO, of course, so you’ll have a chance during the year to pick the right technology for your needs.  Here at EnerNOC, we’re fully convinced that we have the right solution for you in our growing portfolio of applications.

If you would like to schedule a meeting to discuss budgeting options and energy management planning opportunities in 2011, please don’t hesitate to reach out to us.

We wish you all the best for this budgeting season!

Spotlight On: Rick Paradis, Senior Energy Services Analyst

Data-driven energy efficiency can be an integral part of lowering an organization’s operational costs. We talked to Rick Paradis, EnerNOC’s Senior Energy Services Analyst and an overall superstar of the SiteSMART™ team, who shed some light on the importance of operating facilities at their maximum level of efficiency. With over 30 years in the energy services industry, Rick is an expert on what best practices can be adopted to make for a more energy efficient workplace.

EnerNOC: How would you describe your position?
RP: I am the Senior Energy Services Analyst on the SiteSMART team, and I provide support for all of the analyst team members on everything from identifying energy efficiency opportunities (what we call “hunting”) to developing the energy efficiency baselines (what your actual or current usage is compared against). I’m essentially a jack of all trades within our group.

What is the most rewarding aspect of your job?
I always enjoy when the customer “gets it” – when they understand that we succeed only when they succeed, and that it’s a collaborative effort to reduce energy. It’s the reason why I got into the business to begin with.

What is the most important reason for a company to make energy efficiency a priority?
Managing your core operations in the most cost-effective way possible is just good business sense. And it’s something you can easily impact with technology and consulting services. Whether you’re in an office building or an industrial plant, energy efficiency will make a difference to the bottom line. And as with any good business practice, the best question you can ask is: are we doing this as cost-effectively as we can? And if not how do we get there?

How do EnerNOC’s commercial and industrial customers use SiteSMART to drive energy efficiency savings?
Right now, we’re helping them leverage what they already own. From their existing building management system, we can download the data into our platform and then analyze and evaluate how the systems are actually running, versus how they should be running. We’re not changing out the chiller plant, we’re not adding more equipment, we’re saying, “let’s make sure you’re getting the most bang for the buck out of what you already have.” In cost-constrained times when you don’t necessarily have the money to put a new chiller plant in, using SiteSMART to optimize what you have is extremely cost-effective, and ultimately the best kind of business practice.

What’s unique about SiteSMART versus other energy efficiency applications out there?
A few things differentiate SiteSMART. First and foremost, it’s the power of the data it provides. SiteSMART collects data from the building management system that’s trended down to the 5-minute interval. A lot of times for analytical purposes we have to roll it up to the hour level, but we can go to a lower granularity if we really need to see what’s happening, say, in that early morning as your organization gets up and running. Secondly, we’ve built automatic tools to do a lot of the searching for you, so you don’t need to rely on an army of people looking through the data. The SiteSMART application simply does the hunting for you, and then you verify the outliers. Third, SiteSMART also integrates extremely well with DemandSMART. If you’re using EnerNOC’s DemandSMART for demand response, now you get to see your building management system on the same platform.

Tell me about a couple of projects that you’re especially proud of and why.
The first energy efficiency project that we had, back when I started in 2007, was with Western Connecticut State University. Not only did we save them more money than we originally anticipated, but the project with WCSU was considered innovative enough and substantial enough to win a top efficiency program award from the Boston Chapter of the Association of Energy Engineers. It was also the first time that both commissioning and demand response received awards. Together, both types of projects were being recognized as the future in energy management. It was nice to have the engineering community (which I am also a part of) look at what we’re doing and say, “that’s what we should all be doing.”

What has been your most favorite moment at EnerNOC so far?
My youngest son, Eric, works at EnerNOC too, so having him essentially follow in my footsteps, if you will, has been great. He’s in the United Kingdom right now working with the STOR program [EnerNOC’s UK demand response program]. So it’s really nice to be able to see your son carry on your legacy working in the same field.

How do you like to spend your free time when you’re not in the office?
I like to hike, whether it’s on day hikes or camping overnight. I also spend as much time as I can with my three sons doing sports or recreational activities that involve getting out of the house and moving around. Energy efficiency is also a priority in my own life. I drive a hybrid Ford Escape which is not only great for our hiking trips, but it saves us a lot of money on gas!

Customer Spotlight: Lockport Township High School

Lockport Township High School is one of the largest secondary schools in the Chicago, Illinois area, with nearly 4,000 students and almost 750,000 square-feet of educational buildings. For the last decade, innovative facilities personnel at the school have been working to make the school as efficient, cost-effective, and green as possible— while earning awards and inspiring other schools. The man behind this effort is Bill Thompson, director of facilities management. “We have to be good stewards of all our resources,” he says. “We want to operate efficiently and keep our students healthy.” The school’s commitment to efficiency is strong and longstanding. “Electricity is our second largest expense after personnel, and we use about 5 million kilowatt-hours of electricity a year,” he says. “As a taxpayer-supported institution, we feel an obligation to reduce our costs as much as we can.” Via careful energy procurement, conservation, and other energy efficiency efforts, the school has continually reduced its consumption—and saved more than $1.3 million in the past decade.

The addition of demand response (DR) with EnerNOC in 2009 was a natural fit with the school’s commitment to managing energy more efficiently, according to Thompson. And EnerNOC was the clear choice for a demand response partner. Thompson worked closely with EnerNOC to create a clear energy reduction plan that highlights the steps that the school needs to take to reduce energy use temporarily. During demand response events, Thompson makes minor adjustments to the air handling, temperature, and lighting in the school’s auditorium and field house—while leaving most of the school unaffected.  “The changes we make during demand response events don’t really affect our students or staff,” says Thompson. “So we’re able to participate in DR without much impact on the school. Making minor, temporary changes to these non-core facilities makes real sense.” By making temporary adjustments in its field house and auditorium, Lockport Township High School is able to cut its energy use in half, from 1,200 kW to 600 kW. These temporary reductions earn the school approximately $19,000 in annual payments from EnerNOC—funds that help pay for new energy-reducing efforts.

Lockport Township High School’s decision to implement EnerNOC DR is as much about commitment to its students and mission as it is about payments. “It’s our duty as caretakers of our facilities to provide a safe, clean, healthy environment for our students and staff,” says Thompson. “I truly believe that we can each make a difference in our schools, one that has a measurable outcome that creates a positive impact for our students and staff.” Thompson speaks at conferences and other events, where he highlights the school’s Energy Conservation Program and DR with EnerNOC. “Traditionally, schools might initially be scared of demand response, since they don’t want to do anything to interrupt education,” he says. “But when you look at DR with EnerNOC, you realize that it’s a really good fit for high schools. The timing is right. And you can reduce without affecting students. We’ve proven it. And I think more and more high schools are getting on board.”

Read the full Lockport Township High School Case Study.

Record Cooling Demand Bites into Natural Gas Reserves

Energy markets continue to hover near lows as we enter a seasonal dip in natural gas prices.  Natural gas and crude oil prices have both fallen in recent weeks, as we near the end of the summer cooling season and have not seen any significant storm activity in the Gulf of Mexico. Although tropical weather has not had an effect on gas supply, a very hot summer has cut into natural gas inventories that were at record highs in mid-June.

In 2009, the 12-month gas strip bottomed out on 9/9 at a similar price as this year, around $4.75/dth before beginning a $1.40/dth climb through early October and peaking at $6.17/dth. Inventories at this time last year, however, were near 5-year highs and are currently 167 bcf below 2009 levels. Though tropical storm activity has been well below forecasts, we remain in the heart of hurricane season for the next few months, adding to the risk of rising prices.

For now, prices continue to be dampened by a poor global economy offsetting the increased demand of the strong cooling load this summer.  Markets continue to be favorable for end-users that are floating with the market to look at buying forward supply contracts. Short-term markets appear to be nearing the bottom, and in the long-term, there is much more upside than down to energy prices.

Contact EnerNOC’s SupplySMART™ team for more information about securing more favorable energy contracts.