Technology vendors tend to focus on selling "solutions" in which their respective technologies play the starring role. At times this may be an obvious ploy, but often enough it is done in good faith, but can be disastrous nevertheless, because it focuses on the strengths of the technology in isolation, and not its relevance to a building energy infrastructure.
Owners who buy such would-be solutions without properly reviewing the technology in context as an integral part of a long term energy infrastructure, rather than in a stand alone fashion, will pay dearly for such carelessness. At times it may even turn out that certain technologies are complementary from an the standpoint of energy engineering economics, when in the competitive sales process, where vendors all operate in their own silos, they are presented as competitive solutions in a way which is very misleading, unless owners have competent engineering and planning staff at their disposal. Existing incentives often make sloppy analysis worse by distorting the picture even more. Once technology commitments are made in the wrong order, it can be very expensive to undo them.
A proper financial discipline in this regard will view all such investments in the context of a strategic shift towards long term energy independence, which will be driven by the economics of energy as an asset, not a liability, and from the standpoint of producing energy, rather than consuming energy - which can only be mitigated somewhat by "energy efficiency." Moreover the building needs to be appreciated as a whole, and individual functions which are subsystems of that whole should never be analyzed in isolation, at the risk of serious capital destruction, if perceived problems of subsystems are solved without addressing the whole system as and integral energy and economic system.
A good example is very easy to find in today's market place. An apparent tradeoff decision may seem to exist between a "High Efficiency" (preferably "Energy Star" rated) hot water heater (gas or electric, depending on local rates), and either a geothermal or solar thermal hot water system. Vendors present their "solution" based on the payback periods, and their jubilant claims are enhanced further by the various incentives that are available, and predictably owners come to the wrong decisions. If a good solar or geothermal system has a 30 year life expectancy (and a 20 year warranty), during that same period, the hotwater heater may need to be replaced two or three times, and it comes with a constant and still substantial series of energy bills, all driven predominantly by the cost of fossil fuel (and delivery costs), which are rising relentlessly.
Based on payback alone the High Efficiency fossil fuel based method is likely to win. In NY, the typical situation is an old system in an apartment building which is based on a coil in a steam boiler, which is only 50% efficient as a hot water heater, and the modern high efficiency gas-fired water heaters are 95% efficient. Easy solution. However, remember, this still assumes a constant series of gas bills, and two or three replacements over the 30 year lifespan of the alternative system based on renewable energy. A geothermal system may offer 200% in system efficiency by comparison, and a solar thermal sytems may offer near infinite efficiency because the only fossil fuel bills it brings along on a recurrent basis is a little backup heat for the periods when there is no solar energy to harvest. And in both systems the harvesting problem of peak-load energy may be offset with water storage.
In short, when properly analyzed as an intramarginal investment in the building the $150K Solar or Geothermal system may end up being a better investment than the $15K high efficiency gas heater, while the payback period of the gas heater would definitely be shorter, when seen in isolation, but it comes with still recurrent and comparatively substantial energy subscription costs as well as two or three replacements over time. And the return on the more expensive system may be greater than on the cheaper fossil-fuel based solution. There may be other knock-on integration effects which further increase the value of the geothermal or solar solutions, where recurrent energy costs may be less than half or even only 10% of the gas fired alternative. It all becomes easy to understand when you see two identical buildings side by side, each with 100 apartments, and one spends $1,000 per apartment per year for Domestic Hot Water (DHW), based on the old coil in steam boiler, and the other $100, or $200 based on a renewable solution, while the third chose the lower capital investment of a simple high efficiency gas fired heater, but still ends up with bills of $500 per apartment per year. Energy independence in economic terms is thus a make or buy decision, or, to put it differently it boils down to buying free cash flow. The real issue is the resulting real estate value of the building, which is not what's on the mind of the equipment vendors. They would rather bamboozle the owners with magical payback numbers. So I keep reminding owners that they're in the real estate business, not in the hot water business, for that is where the deception starts.
Sunday, May 2, 2010
The Geothermal DHW Dimension
One of the most strategic renewable energy components in residential living, and even more so in multi-family buildings is no doubt geothermal hot water (DHW). The reason is simple, everyone needs hot water for domestic purposes, and simple hot water tanks allow the water (and thus the heat) to be stored for later use, with minimal loss, and energy storage is the holy grail for the smart grid. Solar thermal is a superior solution for that reason also, because it is capable of far higher energy density than PV, but also because the storage problem is solved more easily in the form of DHW than it is with PV and batteries.
Unfortunately, manufacturers have a habit of living in silos circumscribed by their respective technologies, all the while pretending that their technologies are the solution to the exclusion of others. This creates the impression that e.g. geothermal DHW and Solar Thermal DHW are competitive solutions, when in fact they are potentially complementary, because of the extremely different behavioral characteristics of the technologies. Particularly, from the standpoint of designing energy generating systems, geothermal energy is base load capacity, i.e. within some limitations it can produce whenever you turn on the switch, whereas Solar and Wind power are peak load generating capacity, which are dependent on the weather, and thus may or may not produce when you turn on the switch. Therefore, solutions that are routinely presented as mutually exclusive, often are complementary instead.
As a result of the technology-centric approach, the field has been plagued by false tries, and in one extreme case a leading manufacturer of geothermal heat pumps, who is promoting their technology for the DHW application, in fact promotes a financial model for the application which leads to inherently wrong systems design. The problem here seems to be that the manufacturers should worry about what happens within their systems, and specifying the proper warranty specs, which become in effect minimum design standards, but NOT design specifications which should be engineered appropriate to the building not to the equipment. Building-centric design is the key. The answers are not the same for all buildings and all markets.
The unfortunate example alluded to here can be found at: Faulty Cost/Benefit Analysis for Earthlinked DHW Systems Designs which is a model apparently intended for design of geothermal DHW systems, but which cannot reliably predict the economic viability of such systems, and moreover makes the design error that generating DHW is the purpose of such systems, when in fact the storage of energy is much more important from the standpoint of designing renewable energy systems. The central problem of dealing with peakloads is how do I store the energy, and thanks to the constant demand for DHW in residential facilities, water storage allows us to harvest economical, renewable peak load power, or even off-peak power from the grid.
In a hybrid system, where the geothermal heatpump preheats the water typically to ca 100F, there is a backup source of heat, to take the water from 100F to the typical storage temperature of 140F (ASHRAE 12), and/or to serve as backup in case of failure. Therefore, preheating the water with geothermal heatpumps only makes sense as long as the cost per delivered BTU of the electricity which drives the heatpumps is lower than the cost per deliverd BTU of the fuel for the backup heating, these days most often Natural Gas. Therefore should the backup fuel be cheaper, it makes no sense to run the heatpump. Particularly when the cost of the two fuels move at different rates, this situation bears watching. Specifically gas is seasonally low in the summer when electricity is seaonally high, and the reverse happens in winter, when electricity is seasonally low, and gas seasonally high.
The model above uses an average for the two input costs, gas and electric in our example, wich is only usable in cases where the prices of the two fuels are far enough apart that the cost per delivered BTU cannot ever cross over, however, when the prices are in a narrow band, and do cross over seasonally, this model will give false indications of the savings that can be obtained by such a system, and if a false positive is used to design a system, the result will be a system which roughly saves money 9 months out of the year, and dis-saves money 3 months out of the year, and if the summer peak is bad enough, it could wipe out the savings of the other nine months. In short, such systems will fail, if they are rigidly based on such evidently false assumptions. Be that as it may, I've seen systems fail for these reasons, and get sold with entirely wrong predictions of their economic value, and in this case the manufacturer's patently faulty financial model is the cause of it.
Unfortunately, manufacturers have a habit of living in silos circumscribed by their respective technologies, all the while pretending that their technologies are the solution to the exclusion of others. This creates the impression that e.g. geothermal DHW and Solar Thermal DHW are competitive solutions, when in fact they are potentially complementary, because of the extremely different behavioral characteristics of the technologies. Particularly, from the standpoint of designing energy generating systems, geothermal energy is base load capacity, i.e. within some limitations it can produce whenever you turn on the switch, whereas Solar and Wind power are peak load generating capacity, which are dependent on the weather, and thus may or may not produce when you turn on the switch. Therefore, solutions that are routinely presented as mutually exclusive, often are complementary instead.
As a result of the technology-centric approach, the field has been plagued by false tries, and in one extreme case a leading manufacturer of geothermal heat pumps, who is promoting their technology for the DHW application, in fact promotes a financial model for the application which leads to inherently wrong systems design. The problem here seems to be that the manufacturers should worry about what happens within their systems, and specifying the proper warranty specs, which become in effect minimum design standards, but NOT design specifications which should be engineered appropriate to the building not to the equipment. Building-centric design is the key. The answers are not the same for all buildings and all markets.
The unfortunate example alluded to here can be found at: Faulty Cost/Benefit Analysis for Earthlinked DHW Systems Designs which is a model apparently intended for design of geothermal DHW systems, but which cannot reliably predict the economic viability of such systems, and moreover makes the design error that generating DHW is the purpose of such systems, when in fact the storage of energy is much more important from the standpoint of designing renewable energy systems. The central problem of dealing with peakloads is how do I store the energy, and thanks to the constant demand for DHW in residential facilities, water storage allows us to harvest economical, renewable peak load power, or even off-peak power from the grid.
In a hybrid system, where the geothermal heatpump preheats the water typically to ca 100F, there is a backup source of heat, to take the water from 100F to the typical storage temperature of 140F (ASHRAE 12), and/or to serve as backup in case of failure. Therefore, preheating the water with geothermal heatpumps only makes sense as long as the cost per delivered BTU of the electricity which drives the heatpumps is lower than the cost per deliverd BTU of the fuel for the backup heating, these days most often Natural Gas. Therefore should the backup fuel be cheaper, it makes no sense to run the heatpump. Particularly when the cost of the two fuels move at different rates, this situation bears watching. Specifically gas is seasonally low in the summer when electricity is seaonally high, and the reverse happens in winter, when electricity is seasonally low, and gas seasonally high.
The model above uses an average for the two input costs, gas and electric in our example, wich is only usable in cases where the prices of the two fuels are far enough apart that the cost per delivered BTU cannot ever cross over, however, when the prices are in a narrow band, and do cross over seasonally, this model will give false indications of the savings that can be obtained by such a system, and if a false positive is used to design a system, the result will be a system which roughly saves money 9 months out of the year, and dis-saves money 3 months out of the year, and if the summer peak is bad enough, it could wipe out the savings of the other nine months. In short, such systems will fail, if they are rigidly based on such evidently false assumptions. Be that as it may, I've seen systems fail for these reasons, and get sold with entirely wrong predictions of their economic value, and in this case the manufacturer's patently faulty financial model is the cause of it.
Saturday, May 1, 2010
Throwing out the Batteries with the Bath Water
For the last few decades, there has been a gradual shift in understanding that the end of the fossil fuel era is at hand, and not necessarily because we run out - although there are of course vested interests who would like to sell us every last drop of oil, and every last lump of coal, not to mention whatever gas remains. The paradigm shift however, is about understanding that the fossil fuel era is at an end because of diminishing returns. In short the unintended consequences like CO2 emissions and other problems are the manifestations of that shift. The cost of the commodities themselves is going up because of increasing scarcity, and the cost of the various nefarious side effects are weighing more heavily all the time as well.
The other side of the shift is the increased creativity in the development of alternatives, both in terms of the technologies and in the complete frame of reference in which we operate with energy. However this process is nowhere near complete, and in the transition sometimes ridiculous misalignments come into play. One example of this is the storage of Domestic Hot Water which I have been writing about on this site. We are only just starting to understand that renewable energy means that that buildings can generate some or all of their own energy, and that the most typical renewable sources, wind and solar, are both of the peak load variety, i.e. they produce power when the weather is favorable, not necessarily when we turn on the switch. Therefore energy storage is an absolutely crucial design element in harnessing these sources. This issue has been part of the smart grid conversation for years, and we continuously hear how expensive batteries are.
Meanwhile the buyers of tank-less hot water heaters (unless as a backup heat source), are throwing out the batteries with the bathwater, or, to be more precise, by eliminating storage of Domestic Hot Water (DHW), they are eliminating the cheapest form of energy storage available in residential living, and one that is of crucial importance if we ever want to make our buildings energy independent with renewable energy. The focus in this case is on eliminating the BTU loss from hot water storage, never mind the fact that with modern insulation, these losses are negligible, and yes some space is being reclaimed. This however ignores the fact that hot water is the most natural energy storage solution, which we get practically "for free," if we realize that with various renewable technologies it is cost justifiable as part of the hot water provisioning for the premises.
This particular issue is quite absurd in its consequences. There are super efficient tank-less hot water heaters, with Energy Star labels, and they are marvelous, if heating hot water were the problem, except it is not, and therefore tank-less hot water heaters are not the solution. Rather, they are the problem. The absurdity becomes complete when we realize that there are tax incentives for tank-less hot water heaters, which means that the US government thus provides a subsidy for the postponement of our renewable energy economy by another twenty years or so, and building owners are torpedoing their best options for making their buildings energy independent. In short the very concept of the super efficient tank-less hot water heater, is of value primarily if the only option for a residential building is in consuming energy, and economizing by consuming less of it. This is the utility model, and the utility companies, gas and electric, as well as the oil companies represent this economic model, and the traditional incentives are all geared to energy efficiency more so than to energy independence.
The new model however is that energy is becoming a technology business, and buildings can increasingly generate their own energy locally, at the building level. As a result the economic value of DHW storage is now as an energy store, which enables the use of peak-load generating technologies like wind and solar. This solves the storage problem only in the form of heat, which is the largest energy demand in residential construction. In as far as the demand is for electricity, some form of battery is unavoidable if you want to rely on peak power, and come either partially or wholly off the grid.
As I have seen demonstrated over and over, the plumbers of the world do not understand that Hot Water is now going to be a freebie, and a happy by-product of this shift in energy infrastructure, in which buildings increasingly produce their own energy. This shift is particularly dramatic in existing residential construction, but that is exactly where the greatest economic opportunity is. Accordingly, if the government wants to achieve energy independence, the incentive programs, from tax incentives to special finance programs (such as the Multi-family Performance Program from NYSERDA was one), need to take the new realities into account.
The mere accumulation of energy efficiency, which seems the only option in the utility model, is also the best guarantee that we stay in the fossil fuel economy forever, and therefore would be disastrous. Yet almost all incentive programs, with the best intentions, make this totally self-defeating assumptions. Energy independence does not happen unless you plan for it. The renewable energy economy and the utility model are two radically different economic constructs, and "energy efficiency" as a goal remains the child of the utility model, and will prevent us from ever getting to energy independence and a renewable economy. As a dear friend pointed out recently: "You cannot cross the Grand Canyon in two easy steps." We are now at the point that we need to wean the baby from the breast of the utility companies and the oil companies, and the baby will cry at first, but to become independent, it is absolutely necessary. And there is money to be made from this energy conversion, once it is properly understood as a business opportunity.
The other side of the shift is the increased creativity in the development of alternatives, both in terms of the technologies and in the complete frame of reference in which we operate with energy. However this process is nowhere near complete, and in the transition sometimes ridiculous misalignments come into play. One example of this is the storage of Domestic Hot Water which I have been writing about on this site. We are only just starting to understand that renewable energy means that that buildings can generate some or all of their own energy, and that the most typical renewable sources, wind and solar, are both of the peak load variety, i.e. they produce power when the weather is favorable, not necessarily when we turn on the switch. Therefore energy storage is an absolutely crucial design element in harnessing these sources. This issue has been part of the smart grid conversation for years, and we continuously hear how expensive batteries are.
Meanwhile the buyers of tank-less hot water heaters (unless as a backup heat source), are throwing out the batteries with the bathwater, or, to be more precise, by eliminating storage of Domestic Hot Water (DHW), they are eliminating the cheapest form of energy storage available in residential living, and one that is of crucial importance if we ever want to make our buildings energy independent with renewable energy. The focus in this case is on eliminating the BTU loss from hot water storage, never mind the fact that with modern insulation, these losses are negligible, and yes some space is being reclaimed. This however ignores the fact that hot water is the most natural energy storage solution, which we get practically "for free," if we realize that with various renewable technologies it is cost justifiable as part of the hot water provisioning for the premises.
This particular issue is quite absurd in its consequences. There are super efficient tank-less hot water heaters, with Energy Star labels, and they are marvelous, if heating hot water were the problem, except it is not, and therefore tank-less hot water heaters are not the solution. Rather, they are the problem. The absurdity becomes complete when we realize that there are tax incentives for tank-less hot water heaters, which means that the US government thus provides a subsidy for the postponement of our renewable energy economy by another twenty years or so, and building owners are torpedoing their best options for making their buildings energy independent. In short the very concept of the super efficient tank-less hot water heater, is of value primarily if the only option for a residential building is in consuming energy, and economizing by consuming less of it. This is the utility model, and the utility companies, gas and electric, as well as the oil companies represent this economic model, and the traditional incentives are all geared to energy efficiency more so than to energy independence.
The new model however is that energy is becoming a technology business, and buildings can increasingly generate their own energy locally, at the building level. As a result the economic value of DHW storage is now as an energy store, which enables the use of peak-load generating technologies like wind and solar. This solves the storage problem only in the form of heat, which is the largest energy demand in residential construction. In as far as the demand is for electricity, some form of battery is unavoidable if you want to rely on peak power, and come either partially or wholly off the grid.
As I have seen demonstrated over and over, the plumbers of the world do not understand that Hot Water is now going to be a freebie, and a happy by-product of this shift in energy infrastructure, in which buildings increasingly produce their own energy. This shift is particularly dramatic in existing residential construction, but that is exactly where the greatest economic opportunity is. Accordingly, if the government wants to achieve energy independence, the incentive programs, from tax incentives to special finance programs (such as the Multi-family Performance Program from NYSERDA was one), need to take the new realities into account.
The mere accumulation of energy efficiency, which seems the only option in the utility model, is also the best guarantee that we stay in the fossil fuel economy forever, and therefore would be disastrous. Yet almost all incentive programs, with the best intentions, make this totally self-defeating assumptions. Energy independence does not happen unless you plan for it. The renewable energy economy and the utility model are two radically different economic constructs, and "energy efficiency" as a goal remains the child of the utility model, and will prevent us from ever getting to energy independence and a renewable economy. As a dear friend pointed out recently: "You cannot cross the Grand Canyon in two easy steps." We are now at the point that we need to wean the baby from the breast of the utility companies and the oil companies, and the baby will cry at first, but to become independent, it is absolutely necessary. And there is money to be made from this energy conversion, once it is properly understood as a business opportunity.
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