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New Energy Services Gain Ground
Electricity shortages in California along with exorbitant heating costs in other parts of the country have combined to make the last few years among the most turbulent on record for the energy industry. This volatility has led facility executives to re-examine their energy options. One place to look: energy service companies (ESCOs), which have expanded their scope of services.
Moving beyond funding for basic energy upgrades and quick paybacks, ESCOs are seeking longer-term projects and long-standing relationships with energy customers. Underlying their success is a greater, growing demand for turnkey services and outsourcing, particularly among commercial customers.
“It’s a simple case of companies wanting to focus on their core business,” says Michael Scorrano, director of product services for New York-based ConEdison Solutions. “And they’re looking for a strategic partner who can do the work for them.”
For most ESCOs, traditional equipment upgrades such as lamp/ballast replacements and new chillers remain a core component of their business. However, many ESCOs are expanding their image and role beyond that of quick-fix experts and providers of one-shot projects.
One route is for ESCOs to take a larger role in capital investment by building energy infrastructure plants for customers — or buying existing plants — and then overseeing operations. For the facility executive, this approach minimizes operational risk and frees up capital.
“Customers can lock in their future operating costs, which is especially appealing to those experiencing wild swings because of commodity increases,” says Erbin Keith, senior vice president of operations and commercial structuring for Sempra Energy Solutions, an unregulated subsidiary of the San Diego-based utility Sempra Energy. “It makes it easier for the customer to budget one, three, 10 years down the line.”
While maintenance service has been one growth area in the last few years, much interest also has emerged regarding backup generation. One of the main reasons for this was the media attention resulting from California’s recent electricity shortage.
“Most people don’t think of energy service unless the lights go out,” says Dan Johnson, corporate manager of commercial/industrial service and sales for the energy-service arm of Florida Power and Light Company (FPL). “With California in the news, customers started paying more attention. They wanted to conserve energy, but more important, they didn’t want to be without service.”
In Florida, where Hurricane Andrew left customers without power for several weeks, onsite generation is becoming a critical component of many customers’ emergency operation plans. According to Johnson, while most activity is occurring in the governmental sector, other market sectors such as hotels and educational institutions are beginning to take an interest. In fact, Johnson says that FPL is considering creating a rate to spur even more activity in onsite generation.
Another growth area is on the diagnostic side of energy service through power monitoring and correcting power-quality concerns. For the last year and a half, FPL has been doing a lot of work with thermal scanning, using infrared cameras to identify potential problems in electrical equipment, says John Haney, general manager of development and construction for FPL. Customers were experiencing internal power-quality problems; eventually the problems would diminish and then disappear but with no real fix taking place.
Another approach that ESCOs are taking to energy management is through metering, monitoring and the development of Web-based analysis tools. For example, ConEdison Solutions has developed a Web-based billing optimizer that, according to vice president of sales and marketing Roger Grimes, removes the challenge of manually processing utility bills, handles bill payments, resolves errors and provides a detailed energy-use summary.
“Things are so different today than they were eight years ago,” Grimes says. “Today, we can provide up-to-the-minute metering and determine how much energy you’re using. We can sub-meter to determine where energy is going, how much to individual pieces of equipment. We can isolate laboratories, offices — you name it.”
“By and large the [building operations] staff we work with seem to know what needs to be done to upgrade their buildings,” adds Scorrano. “Part of the solution they’re choosing is to outsource the work to companies that can facilitate the job and save them money.”
Outlook Remains Strong
Where the California events sparked interest in efficiency projects, the tragedy of Sept. 11 has slowed down efforts — but only temporarily, according to FPL’s Haney. “Security is the priority right now, with everyone putting security plans in place,” he says. “One thing they need to realize, though, is that by doing more efficiency work, they’re freeing up the cash needed to implement other programs such as security.”
Changes on the real estate side of business also bode well for ESCOs, says Sempra’s Keith. Where traditional triple-net leases often have been a barrier to efficiency upgrades because utility costs get passed on to the tenants, new leases are being written today with provisions that allow building owners to make improvements and pay for the upgrades from the energy savings.
“Energy volatility even can become a marketing advantage for building owners and developers — if they’ve upgraded their systems and made efficiency a priority,” he adds.
Different Needs, Different Strategies
The energy marketplace offers facility executives myriad options for improving performance.
Three prominent projects offer a sense of the range of choices available.
Energy Monitoring. More than just another pretty façade, the Empire State Building is a charter member of the Environmental Protection Agency’s Energy Star Building Label program. It has received numerous awards for its energy-efficiency retrofit efforts, including lighting and window upgrades.
Today, the building’s facility management team is working closely with an ESCO to develop a computer-based monitoring and modeling system that determines the optimum operating mix of the facility’s equipment, including four electric chillers and three steam units. The system takes into account factors such as outside temperature, fluctuating energy rates and occupancy levels. At present, the ESCO, ConEdison Solutions, sends operating instructions by phone or modem to the facility’s 24-hour watch engineer, who then makes the equipment adjustments manually. Eventually, however, the facility team may look at adding remote capabilities as well as Web-based operation.
“It really provides a good picture of what is going on in the plant at any given moment,” says H. Joseph Salama, director of operations for the Empire State Building. “We’re told what to operate when and for how long; all the decisions are made for us.”
Outsourcing the Central Plant. Just tallying the numbers associated with the Venetian resort, hotel and casino in Las Vegas and the neighboring Sands Expo Convention Center can be an overwhelming task — never mind operating the facilities. Consisting currently of 3,065 rooms, the hotel will house more than 7,000 rooms when all phases of construction are completed. Together the facilities occupy 63 acres in the heart of the Strip. They also require the use of seven centrifugal chillers producing a combined 14,000 tons of cooling.
To handle this challenge, management turned to an ESCO, which owns and operates the facility’s central plant. In addition to the seven chillers, the plant features one 1,500-ton chiller for backup and peak-demand days. It also features five 800-horsepower steam boilers that produce 134,000 pounds per hour of high-pressure steam for the circulating hot-water system. To help them complete their job efficiently and cost effectively, ESCO Sempra Energy Solutions’ 47 team members use customized, interactive maintenance software that links 10,000 pieces of equipment and allows operation from 11 separate points. The plant also houses enough emergency-power equipment to produce 10.8 megawatts of electricity.
Energy Efficient Central Plant. Once plagued by aging, inefficient equipment in the buildings of its Criminal Justice complex, the facilities team of Sarasota County, Fla., now is reaping nearly 60 percent in energy savings over its initial operating rate in addition to lowering power-plant emissions and generally improving equipment performance. Prior to construction of a 10-story, 121,000-square-foot judicial center in 1997, Sarasota County personnel turned to Florida Power and Light Company (FPL) to help them boost operations. As part of a full-blown feasibility study, FPL determined that the five existing buildings were operating at 50 percent greater capacity than needed and at a much higher operating cost than necessary. In addition to downsizing equipment, the utility recommended building a modern central energy plant with high-efficiency equipment that could handle future loads.
Through creation of the new plant, 45 separate cooling units were replaced with three 700-ton centrifugal chillers with variable frequency drives (VFDs). In addition, three 50-horsepower secondary chilled-water pumps with VFDs were added, as well as large chilled-water piping and a new energy management system. New electrical equipment provided improved operation as well as consolidated all service and metering to a single, primary meter.
Despite the increased load from the new center, energy charges did not increase, says facility maintenance manager Gary Patton. Renovations to two buildings in 1999 and 2000 likewise increased cooling loads without negative effects on the operating budget. And in early 2002, a new 95,000-square-foot jail is to be completed. "The more we add, the more savings we get," Patton says.
Kathryn M. Rospond is a freelance writer who frequently covers the HVAC industry.