The M Files

Distinguishing between the Energy Siblings: Use and Cost

by on Feb.06, 2013, under Construction Services & Building Design, Energy Services, Mechanical Contracting

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I have an older sister. When my friends meet her for the first time they smile in amusement at our similarities. That always makes me scratch my head, because all I see are differences. Just like many siblings, we’re related in blood, appearance, and mannerisms, yet pretty distinct as individuals.

The same is true with energy use and energy cost. They’re sort of like siblings—inextricably related, yet distinct. Outsiders to the energy family generally only perceive the similarities, and might ask how the two could be distinct. Even I used to think that when it comes to energy; the less you consume the lower your bills. Isn’t that true?

The truth is actually, “No.” Or, spoken like a true engineer, “It depends.”

Proof is contained in the two charts below. In them we graphically illustrate energy and cost results from 46 buildings recently completed under McClure Company energy services contracts. The first chart illustrates Energy Use Intensity (EUI)* before (blue) and after (red) project completion. Don’t worry about reading the numbers from the chart. Just notice that the red bars have a nice descending slope to the right. The smaller the bar, the more energy efficient the building, and the less BTUs of energy it consumes. The buildings are sorted by energy efficiency with those to the left of the chart using more energy than the buildings to the right of the chart.

Energy Use Intensity (EUI)

The second chart illustrates energy costs in terms of the dollars spent on energy per square foot of building in a year. We call that metric Energy Cost Index (ECI). Again the chart shows ECI before the project (blue) and after the project (red). Note the apparent random order of those bars—no descending curve.

Energy Cost Index (ECI)

What might be surprising is that the buildings in the second chart (ECI) are sorted in precisely the same order as in the first (EUI). The post-project energy costs appear to be unrelated to energy use.

How can this be?

It all boils down to the relative cost of fuel (see the third chart for the relative cost of fuel in dollars per million BTU). A highly energy efficient building burning a relatively expensive fuel might cost more to operate than a moderately efficient building burning a relatively cheap fuel. Let me share two clarifying examples.

Cost of Fuel

The first involves converting an existing building from oil heating to geothermal heat pump heating and cooling. Geothermal heat pumps make efficient use of electricity for heating. In this building, we were able to reduce the EUI from 81.6 before the project to 44.7 after the project, representing a dramatic 45% improvement in energy efficiency. Their energy cost savings were also dramatic, reducing their bills from $2.04 to $1.37 per square foot annually—a 33% cost savings.

So, a 45% reduction in raw energy use only translated to a 33% savings in cost. Why? Because, as expensive as fuel oil is, it is still less expensive per BTU than electricity (see the chart). While both energy use and cost savings were excellent and the customer is very pleased, energy cost savings didn’t track exactly with energy use savings.

The second example illustrates a polar opposite scenario.

Another client previously burned about 550,000 gallons of fuel oil every year. We negotiated an agreement with the natural gas supplier to extend a line to their facility, allowing them to switch from burning oil to natural gas. The project resulted in an almost negligible improvement in energy efficiency (EUI), yet the client’s energy bills dropped by more than 50%—representing $1,100,000 per year!

The distinction between saving energy versus cost is often overlooked but of critical importance. When our clients say, “We want to save energy,” we’ve learned that what they really mean is that they want to reduce their energy bills and, sure, be more energy efficient while they’re at it. Understanding the economics of energy is as important as the engineering.

Should building owners simply be searching for the lowest cost fuel? Well, it depends. Stay tuned for another example.

*EUI units are BTU or thousands of BTU per square foot of building area per year. I’ve written previously about how EUI should become part of the building industry vernacular.

**Basis of cost of fuel chart: Electricity = $0.11/kWh, Oil = $3.00/gallon, Natural Gas = $0.85/therm, Coal = $160/ton, Wood Chips = $35/ton.

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The Energy Stars at East Lycoming – #1

by on Dec.18, 2012, under Construction Services & Building Design, Energy Services, Mechanical Contracting

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Aerial view of the East Lycoming School District main campus.

This summer the East Lycoming School District awarded McClure Company the 13th amendment to our on-going energy services contract. Starting with our initial contract back in 2002, East Lycoming has recognized the value of upgrading their facilities through Guaranteed Energy Savings contracts. The upgrades have largely funded themselves through guaranteed energy savings, renewable energy grants, Pennsylvania Act 129 utility rebates, and a power purchase agreement (PPA). These financial tools have significantly reduced the amount of cash or borrowed capital that would have been required had the school district employed traditional construction contracts to complete the projects.

Hybrid willow biomass fuel crop at Hughesville High School.

The portfolio of projects, blended with smart energy management practices by the school’s administrative team, has made a lasting impact on the operational costs of their facilities. Their energy bills only added up to $0.88 per square foot over the past calendar year. That’s excellent, especially considering that their 283,000 square feet are spread across four buildings that were originally built between 1925 and 1972. They are outperforming most brand-new “green” buildings built to higher energy code standards.

The U.S. Environmental Protection Agency (EPA) will likely soon recognize East Lycoming for outstanding energy performance in their facilities. I just completed reviewing their submission for the EPA Energy Star program, and all four of their buildings rank among the best energy performers in the nation.

The EPA national energy performance rating is a benchmarking tool that helps energy managers assess how efficiently their buildings use energy, relative to similar buildings nationwide. The rating system’s 1–100 scale allows everyone to quickly understand how a building is performing—a rating of 50 indicates average energy performance, while a rating of 75 or better is indicative of Energy Star performance. Here’s how East Lycoming stacks up:

  • The Hughesville Junior/Senior High School, originally built in 1955 scores 80/100.
  • The Ferrell Elementary School, originally built in 1925 scores 82/100.
  • The Ashkar Elementary School, originally built in 1972 scores 88/100.
  • The Renn Elementary School, originally built in 1962 scores 99/100.

To reach the top-of-class score of 99, Renn Elementary School is sipping energy at about 29% the rate of an average elementary school. These projects demonstrate that our existing building stock can be cost effectively retrofit to high standards of energy efficiency and indoor environmental quality. Much credit is due to the administrative team at East Lycoming schools for understanding the business case behind the projects, and for deliberately executing their plan over the past decade.

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Ironman Triathlon “Race for Hope” – #2

by on Nov.19, 2012, under Ironman

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The past seven posts have highlighted a number of projects that consumed our summer. Now I’d like to share a personal project that tied directly to McClure Company’s business philosophy.

In July, I set a new personal best time at the Ironman Triathlon in Lake Placid, New York. My third Ironman finish, the race consisted of a 2.4-mile open-water swim in Mirror Lake, a 112-mile bike ride through the Adirondack region, and a 26.2-mile marathon run. The weather conditions were great for spectators but tough on the athletes, with significant winds on the bike and a hot sun on the run.

My good day can be attributed to knowing that I was racing for a reason—to raise funds for the Bridge of Hope Lancaster & Chester Counties.

McClure Company played a huge role in the success of my Ironman goal. As the leading sponsor, they helped me raise $11,075 to support the Bridge of Hope mission of ending homelessness for mothers and their children. In three Ironman events, we’ve been able to raise more than $42,000 for this life-changing, highly successful organization.

Less tangible, but equally essential, McClure Company gave me the flexibility to train for the Ironman. Chip Brown, our president of over 10 years, often states his desire for McClure employees to live “robust” lives. He knows that employees with healthy minds can perform at higher levels and serve their communities with greater devotion. I’m grateful to Chip and all of my McClure colleagues for encouraging me to tweak my personal schedule during the peak eight weeks of training.

I’m also grateful to several corporate sponsors for supporting our “Race for Hope” fundraising drive. Thanks especially to the following businesses:

Stay tuned for reason #2 to take a blogging sabbatical!

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Energy Services Contract Amendments – #3

by on Nov.09, 2012, under Construction Services & Building Design, Energy Services, Mechanical Contracting

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This summer, six of our past energy services clients decided to peel back the next layer of their onion to invest in new phases of energy efficiency projects. Their motives had similarities. First, they all saw positive financial returns on previous energy efficiency investments. They also recognize the value of true sole-source-of-responsibility contracts, rather than traditional non-collaborative, contentious, slowly developing, change-order-ridden contracts that seek to pit design and various construction trades against one another.

This photo is from one of those projects, and it reinforces my point about contentious traditional contracts. If you think the building looks too new for an energy efficiency upgrade, you’d be right. On the day the photo was taken, we changed the locations of rooftop HVAC units that were initially installed only a few years ago. A dispute between the original project’s engineer and the mechanical contractor caused the contractor to place the units improperly. They bought the right units, but put them in the wrong places, serving the wrong areas of the building. Our client was caught in the middle of a contract dispute. Rather than just fix the problem, the affected parties unleashed their attorneys.

Recently, after years of living with induced operational problems and after wasting thousands of dollars on legal fees, the client decided to cut their losses. They paid for the necessary HVAC repairs through guaranteed savings. Chalk this one up as a win for performance-based rather than low-price based contracting. The cliché applies: “You get what you pay for.”

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Northampton County Energy Services Project – #4

by on Nov.08, 2012, under Construction Services & Building Design, Energy Services, Mechanical Contracting

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The “behemoth” oil boiler.

 

The “puny” natural gas boiler.

If a picture is worth a thousand words, how many are two worth? When it comes to energy savings, these two pictures tell a tale that will help Northampton County, Pennsylvania, reduce their annual energy bills by about $1.2 million. Speechless? It’s true.

The first photo is us removing one of their old, behemoth oil-fired boilers. The second photo is us sliding a relatively puny—but efficient—natural gas boiler back in its place. You can literally see the energy efficiency differences in these machines by comparing them side-by-side. Did I mention that this measure alone will save the county almost $1.2 million annually?!

The boiler replacement measure was one of several that were under construction this summer. In total, this two-phase project is guaranteed to reduce Northampton County’s annual energy expenditures by $1.7 million. I do a double take every time I review the engineering numbers on this one! It’s pretty satisfying to be associated with a project that will have such an enduring positive impact.

The Northampton project was also the main subject of Anne Deeter Gallaher’s guest post in early October. Thanks again to Anne for her kind words!

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