Building Operating Management

Energy Procurement Choices Affect Energy Efficiency Paybacks

Facility managers often lack the luxury of planning out every aspect of a program to cut energy costs. Reality often intervenes, requiring some options be pursued before others. A chiller that's on its last legs, for example, may be have to be replaced, but doing so may consume available plant upgrade capital for several years.

The energy procurement process may offer help with such demands. Some energy suppliers will bankroll upgrades based on the savings generated by buying from them. Suppose, for example, the utility rate was $.10 per kWh and a non-utility supplier was offering $.09. Instead of taking the $.01/kWh savings directly, the customer would pay the $.10 to the supplier, who would then use the $.01/kWh to buy and install the upgrade specified by the customer.

This process may bypass the competition for capital that often sidelines energy upgrades. Where energy bills are deductible or may be reimbursed by others (e.g., governments or tenants), this process may also have additional financial benefits. In some states, such on-bill financing may be used to pay for energy upgrades through utility bills. Once again, careful planning of procurement ahead of efficiency implementation may offer benefits.

Lindsay Audin, CEM, LEED AP, CEP, is president of EnergyWiz, an energy consulting firm based in Croton, N.Y. He is a contributing editor for Building Operating Management. He can be reached at

Sneaky Synergies

>>> Interactions between energy purchasing and efficiency options may be subtle. It pays to understand them before planning new energy systems.

A thermal storage system was installed that shifted a lab's electric peak to night hours when utility demand and energy charges were lowest. Not grasping the benefit of that technology, the purchasing department was about to cut a deal for fixed price power that could have inadvertently eliminated some of that benefit. The mistake was avoided when the facility's energy consultant showed that instead shifting to an indexed rate based on real-time pricing could enhance (rather than reduce) the benefit of the storage system.

>>> Some utility tariffs contain provisions that may switch (or raise) one's rate if certain types of energy devices are installed. The district steam utility in one large city changes a customer's rate if a combined heat and power system is installed because the utility sees it as a competing source of thermal energy.

Many utilities have special rates for the power needed to supplement combined heat and power — but not all energy contractors fully understand such tariffs. In one case, a large (~6 MW) combined heat and power system was about to be installed when an independent analysis found that a major rate component was missing from the contractor's cost-benefit model. Once included, the payback period jumped by several years, putting the kibosh on the deal.

— Lindsay Audin

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  posted on 12/7/2011   Article Use Policy