Account For the Future Cost of Energy in Long-Term Energy Planning
Third of a four-part Green Building Report on long-term energy planning.
Energy planning is incomplete without taking into account the projected future cost of energy. If recent history is any guide, the volatility of natural gas and electricity pricing based upon supply and demand pressures will continue. The recognition of continuing robust natural gas supply has to be weighed against the rising demand for natural gas as an electric generation fuel and as a growing trade export commodity. Constraints within utility service territories to meet summer and winter peak demand and how such peaks are charged back to utility customers create both new risks and new opportunities for electricity cost management that can become an important component of multi-year energy planning.
Nor should utility incentives be overlooked for integration into energy planning when evaluating the current and future cost of energy. Often incentives are funded through utility system benefit tariffs and remain in place for several years. Incentive programs should be studied to understand how system benefit charges translate into project and service incentives that can help underwrite the cost of future projects. Utilities regularly review incentive plan designs, add new incentives, and eliminate existing programs, focusing their emphasis on trends expected to impact energy delivery in the future. Proper energy planning for the long term should take advantage of harvesting no less than the value of what has been contributed to incentive pools to date as a cost component of monthly utility charges, and what will be contributed into the future.
Understanding emerging technologies and their impact upon an organization’s buildings is an important element of long-term planning. Emerging technologies in windows and building envelope, HVAC systems, lighting, sensors and controls, and integration of buildings to the local electric grid, or creating new forms of grids, are altering the landscape of how buildings are being built and operated. The U.S. Department of Energy Research and Development Roadmap for Emerging Heating, Ventilation, and Air-Conditioning published in late 2014 offers insight into emerging technologies that, for HVAC alone, are targeting 12 and 24 percent primary energy savings by 2020 and 2030, respectively. Buildings are not static entities, and evaluating how new technologies can help meet a building’s energy goals is a worthy addition to the long-term planning process.
It also helps to acknowledge in the planning process how energy performance will be reported over a multi-year timeframe. If energy is worthy of being part of an organization’s long-term plan, then energy planning must include the means of measuring and reporting on progress achieved along the way. Is there agreement on the energy-use baseline from which future progress will be measured? How will future energy savings be reported after normalizing for weather and changes in space use? Is there a method in place for tracking the persistence of energy saving initiatives and demonstrating return on investment? Is there a coherent “energy scorecard” to report on energy performance up and down the organization? This form of reporting helps keep the plan relevant and dynamic in front of its intended audience.
Clearly, energy planning has a place in the long-term planning process for an organization that owns and operates real property assets. Recognizing that costs associated with energy go beyond just energy consumed, to all operational areas influenced by energy-consuming systems, adds importance and relevance to energy in a broad context. When evaluated in this larger context, the breadth and depth of what’s referred to as the energy investment will be viewed as having a key place in the long-term planning process, contributing to helping achieve an organization’s human resource, cost management, and sustainability goals.
Jerry Y. Burin is vice president and partner in Sieben Energy Associates. Since 1990 Chicago-based Sieben Energy Associates has been helping its local, regional, and national clients reduce their operating costs and meet their sustainability goals through the more efficient use of energy and the thoughtful management of their energy investment.
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