CarbonetiX

Where are the extra charges on your electricity bills going… inefficiently?

Victoria’s electricity consumption has dropped and in real terms peak demand has been stagnant over the last four years (see https://carbonetix.com.au/gallery/a-surprising-analysis-of-victorian-electricity-consumption-demand/). Yet over this time electricity prices have increased.

One local government client cut its energy consumption by 34% between 2006 and 2011 at one of its larger sites, yet the amount it paid for electricity increased by 7%. Its average tariff went from 8.6 cents to 13.9 cents/kWh.

At the same time the average spot price for electricity on the wholesale market dropped from 3.4 cents/kWh to 2.9 cents/kWh. Renewable scheme energy charges (SRET, LRET) went from 0.09 cents/kWh to an estimated 1.3 cents/kWh.

The price increase and the components of this price increase are shown in the graph below. The sum of retailer and distribution charges has risen by 87%, and now comprises over 2/3rds of the charges.

Where price increases subsidise energy efficiency in buildings or more sustainable forms of energy generation I am in favour of such price increases, as this hastens our transition to a low carbon economy.

Higher prices can also be a driver for consumers to reduce their energy use, saving electricity. And when implementing an Energy Performance Contract higher prices mean that larger savings can be achieved within a given payback.

However the price increase added to electrons between the generator and the power point is extraordinarily high. The main argument for this is that the distribution businesses have needed to invest in more assets to cope with increasing peak demand. But weather-adjusted peak demand appears to be stagnant. So any investment has been into assets that may not be used, and may never be used as we now appear to be on a trend of decreased consumption and flat and potentially decreasing peak demand.

The Australian Energy Regulator needs to address this, and review the need for planned investments in network infrastructure. The billions that are being ploughed needlessly and inefficiently into network infrastructure that is unlikely to be used could instead significantly hasten our transition to a low carbon future.

In the meantime, what can be done about the high prices? Reducing energy use will reduce your electricity costs.

To reduce energy use mid to large sized energy users could consider implementing an Energy Performance Contract (EPC). You can typically expect to achieve guaranteed savings of 30% to 50% on a seven year payback. Smaller energy users could have an energy audit or energy assessment undertaken then take action on the audit, and also get very good savings. A valuable precursor to either of these actions would be to develop an energy management plan in order to get the corporate commitment necessary to make the investment needed to achieve substantial savings through energy efficiency.

A $20m lesson in energy efficiency from the City of Toronto

Background

The City of Toronto has spent around $20m retrofitting 89 buildings, and according to newspaper The Globe and Mail no one knows if the program produced “any real savings”. Particularly criticised in the audit of the program were the Building Automation Systems (BAS) installed in the arenas (particularly ice skating rinks), which “malfunctioned badly.”

The National Post provides more clarity than the Globe and Mail, however, and quotes the projects auditor’s report as saying that “it is not possible to determine whether or not the amount of the energy savings realized were adequate to finance the original capital costs as required by the program.”

This is bad news for the City of Toronto, both because of the bad publicity and because of the uncertainty around the savings.

Bad publicity

The Globe and Mail report, which was picked up by the Environmental Leader, tells the story a very different way to the National Post. It insinuates that there were no real savings and that the $20m was wasted. The National Post indicates that there were some savings, but is uncertain as to whether it was enough to cover the financing costs for the program.

The truth is that the energy efficiency works did achieve some savings, but it remains unclear as to whether the amount saved will be enough to pay capital and financing costs. The project had apparently expected a positive financial return (payback) after 10 years.

Savings

Without knowing the full details of what went wrong it appears to me that several reasons exist as to why the savings may not have been achieved:

Failure for the contractor to work well with the facility managers at the sites.

The Globe and Mail article leads with a facility manager at one of the sites saying “he warned early on that the estimated savings were ‘incredibly ambitious.’” Henry Ford said “if you think you can, or you think you can’t, you’re right.” Energy efficiency is not something that can be totally outsourced, and facility managers play a very important role in saving energy. By failing to effectively engage with and get the facility managers on side, it appears that the contractor made a significant mistake. In this case it appears that at least one facility manager didn’t believe the savings were possible.

A mistaken belief – all too common – that the BAS systems installed would save energy.

A BAS doesn’t save energy. What saves energy is the appropriate programming of the BAS, then good use of the BAS once it has been properly commissioned. It seems as though the BAS systems may have been poorly specified and possibly inadequately commissioned, with inadequate training. A BAS is complex, and to be effective in saving energy a good investment has to be made in properly configuring it and in training operators how to use it. By not effectively engaging with the facility managers the BAS systems were possibly doomed from the start. Particularly if the new BAS systems made it harder for the facility managers to maintain comfortable conditions in the facilities.

Failure to extend the contract for the full payback period.

It appears that the projects were completed in 2007 under an energy performance contract (EPC). Possibly what happened was that the formal monitoring and verification (M&V) of energy savings under the EPC went for a year afterwards. Then, with the contract finished and the contractor no longer around, the facility managers then turned off the BAS systems (that they had never liked and potentially made life harder for them), and the savings evaporated. Had the contract been extended to run and provide full monitoring and verification for the full term of the payback, then this may not have happened. But this would have added further costs which the city may have been keen to avoid.

Poor monitoring systems, and failure to institutionalise energy efficiency into annual performance requirements.

Possibly the City of Toronto failed to adequately monitor the savings on an ongoing basis, and it may not have incorporated energy efficiency as a KPI in its management systems. Had it done so, the problems may have been picked up a lot earlier.

Lessons for Australian local governments

This story contains some important lessons for Australian local governments who are pursuing energy efficiency works. These lessons are:

Have a strong framework for energy efficiency, with a corporate energy management plan that is reviewed annually, including measurement against targets and allocation of responsibility

Understand that there needs to be a strong corporate commitment across the organisation to energy efficiency. If the facility managers aren’t on board you have a problem

Put in place robust measurement systems

Understand that energy efficiency is an on-going investment

Be careful as to how the real results of your programs may be distorted in the media.

CarbonetiX chosen for Detailed Feasibility Study of GWMWater EPC

GWMWater has selected CarbonetiX to proceed with its Greener Governments Building Program (GGBP).

CarbonetiX are a registered Energy Service Provider through the Department of Treasury and Finance and were selected by GWMWater to undertake a Detailed Facility Study (DFS) of a large number of their buildings with a view to

The ‘Greener Government Buildings Program’ (GGBP) is a Victorian State Government initiative whereby the government procures energy efficiency services for state government departments and agencies via an Energy Performance Contracts (EPCs).

All Greener Government Buildings projects are required to follow an Energy Performance Contracting process (EPC) whereby Energy Services Providers identify and install cost-effective water and energy efficiency solutions and provide a guarantee on project savings.

CarbonetiX recently tendered for and has been selected by GWMWater to proceed with the GGBP program, starting with a detailed facilities study. Over the coming weeks, our engineers will be investigating and quantifying energy efficiency solutions for a large number of GWMWater sites.

At the completion of this process, GWMWater will evaluate our findings and make a decision as whether to instruct our engineers to pursue the plan and manage the energy efficiency capital works. CarbonetiX would like to personally congratulate GWMWater for pursuing this project, which will drastically cut their greenhouse gas emissions.

DETAILED REPORT: A surprising analysis of Victorian Electricity Consumption & Demand

Bruce Rowse investigates Victoria’s electrical energy consumption and demand data. This is an extremely in-depth article from the CarbonetiX director. Bruce’s independent research finds there is a need at the political level to recognise a new energy paradigm and take on the vested interests that have unreasonably increased electricity charges. He identifies a need to claw back the unjustified price increases already in

Monthly Archives: July 2012