Electric Rebate Programs
When developing efficiency upgrades or designing facility expansions, it is crucial to understand and utilize rebate and incentive programs offered by your local utility providers. Participation in utility energy-efficiency programs, can be a source of funding for projects, significantly reduce energy costs, provide a quick return on investment, and highlight your organization’s commitment to sustainable growth.
This article addresses electric utility incentives which, where available, are typically much more generous than gas utility incentives. There are two types of electric utility providers: public (municipal) providers, which are often owned or managed by the people they serve, and private providers, which are owned by investors. Although most municipal utilities do not provide utility incentives, or if so, relatively small incentives, many investor owned utilities provide substantial incentives for installation of efficient equipment and systems in new construction and for retrofitting existing equipment and systems to be more efficient. Investor owned utilities are regulated by the state or states they serve and increasingly, states are passing legislation to mandate energy efficiency programs.
For example, in Massachusetts, investor owned utilities such as NSTAR and National Grid are regulated by the Department of Telecommunications and Energy (DTE). The DTE requires the utilities to have efficiency programs where the utility charges their customers a nominal fee for each kilowatt hour (kWh) consumed (typically on the order of two mills - 2/1000 of a dollar). This results in a fund of millions of dollars at each utility. The utilities are then charged by the DTE to create and administer programs that will use the proceeds collected to incentivize the implementation of energy efficiency solutions at customer facilities.
A common question that is asked is “Why would utilities promote energy efficiency – it reduces sales of their product - electricity or post deregulation where utilities no longer own generation, use of the wires to deliver electricity to customers.” The answer is that utilities are required to have programs by the regulatory agencies and if they do a good job of administering the programs, the utilities are allowed to make a return on their efforts.
Types of Energy Efficiency Programs
The most common utility incentive program consists of a series of prescriptive measures where a fixed amount of money will be paid to a customer for installing a specific efficiency upgrade. A common example is a lighting program that provides a prescriptive amount of money for replacing an inefficient lighting technology such as a 400w metal halide fixture with a high efficiency fluorescent fixture. These programs are popular in part because they are relatively easy for customers and contractors to implement. Most utilities that have efficiency programs such as ComEd in Illinois, Baltimore Gas & Electric in Maryland, NSTAR in Massachusetts, and National Grid in the Northeast, offer these type of programs.
For more aggressive cost savings, a custom measures program where offered, may be the best choice. Although these programs are more complex and typically require an engineering analysis to document the costs and project savings, they are typically structured to provide higher incentives and utilities often pay for as much as 50% of the analysis service. Custom measures are measures where the amount of savings and the installed cost is more site specific. An example would be installation of a heat exchanger and controls that would allow a chiller to be shut off in colder weather (“free cooling”). The savings is a function of the winter load, the required temperature of the chilled water, the efficiency of the chiller, etc.
Many utilities have comprehensive programs that reward holistic treatment of the facility for efficiency with significantly higher incentives. The concept is that more cost effective energy efficiency can be achieved at a facility if it is addressed on a facility-wide basis at one time rather than piece meal over several years. This is the most complex type of program and requires engineering analysis, metering, and in many cases computer modeling of the existing facility systems to determine baseline energy use and then remodeling with each efficiency upgrade to determine interactivity between the upgrades.
Carney Hospital, a community hospital in Massachusetts, is benefiting from a recently completed comprehensive measures program with its energy provider, NSTAR. Carney Hospital updated lighting and building control systems, installed a new chiller, and upgraded the HVAC system to save $500,000 in annual energy costs. Although the project cost around $2 million, NSTAR’s comprehensive incentive refunded $600,000 to Carney. Carney Hospital has seen an immediate reduction in energy usage and will enjoy a simple payback on the projects of less than three years.
Why should Facility Managers Use These Programs?
There are many reasons, other than the obvious cost savings, for facilities managers to pursue utilities’ incentive programs.
One reason is that the more expensive a project is, the harder it is to get approved. The presence of substantial rebates on new chiller plants, air-conditioning systems, etc., can reduce a project cost by a significant amount– potentially reducing the number of executives who must review and approve the upgrade plan and design.
Another reason to pursue these programs is that reducing energy consumption cost effectively, improves the sustainability quotient of the facility.
A final reason to consider energy-efficiency modifications is that reducing recurring energy costs makes budgeting easier and organizations more financially resilient to revenue reductions during economic crises.
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