While the country is still charging ahead with energy de-regulation, it seems at times dubious if it has been really conducive to solving any problems that we know of, particularly in an area like NYC, where the Transportation & Distribution portion of your power bill is 60-70% of the bill, and set to increase faster than inflation as far as the eye can see. Deregulation probably garnered lots of political donations, safe to say. Be that as it may, at least some of the innovations that have resulted from deregulation are helpful, in particular green power, and perhaps in some cases fixed rate pricing options.
The larger accounts have mostly moved to independents, but smaller accounts, and residences in particular have barely switched, largely because there is little real incentive, and to the extent an ESCO can make a difference, it is well within the margin of error. It is easy enough to understand, large accounts consuming perhaps millions of kWh per year can make a real difference in their bottom line with a better price, but an average household does not have that option. A 1 cent price swing on the average household account of 900 kwH/mo is $9/month, but if the total all-in rate is ca 25 cents per kwH, that is still only a 4% price swing on a $225 bill. In short, this is not a life-style changing event, and hence it is not worthy of attention. In NYC a penny on the rate of such an average household is the equivalent of four subway fares.
People are made to believe they can save money by switching, but the difference, if any, is lost in the shuffle, and can never be proven, or worse the market moved up significantly, and then the new company gets the blame, when often it had nothing to do with it. Even if the macro-economic effect is true that competition brings the rates, down, it would mean we're going down in the aggregate, and unless you are a large user, it makes no sense to spend time finding lower prices. And in some cases companies indeed took advantage of people, and misled them. One of the frequent misrepresentations was that their sales people made customers believe that they were from ConEdison. This is no longer permitted. So the reps are finding new ways of misrepresenting themselves, as I experience with some frequency with reps from various energy companies that call door to door in my building.
In many respects however, the independent energy providers (ESCOs) have been their own worst enemies, by often times marketing things they cannot deliver, and/or either allowing, or even encouraging their reps to lie. One prominent example is fixed rate pricing. Fixed rates are about risk management, not about beating the market, but most reps will make customers believe that they are going to beat the market, or 'save' money with a fixed rate. Nope. If you are more afraid of the market going up than of overpaying a little, a fixed rate may be warranted. Having the fixed rate option is arguably an improvement, but it is often sold in the wrong way. And failure to set the right expectations leads to unhappy customers.
Another tricky area is the issue of 'saving' money in general. Here also the ESCOs cannot deliver. Sometimes they will, sometimes they won't. Here in NY, ConEdison bills on a daily basis, after the fact. It is a pure pass along to them. If the rate is 6 cents, they charge you that, and if it's 15, they charge you that, including whatever the markup is they take. You can never be sure in advance, because you cannot buy a monthly, quarterly or yearly rate from ConEdison. So it's like with the strawberries at the supermarket, that were priced at $3.49/lb this week, but last week there was a special at $1.49/lb. It won't help me when I go to the cash register and try to buy strawberries at last week's price.
So, if last month ConEdison billed 8 cents per kwH for the month as a whole, and I was on an ESCO pricing that is a one month variable rate at 10 cents, I was above ConEdison's daily market rates, but it's a moot point, for there was no place to ever buy that rate. By the same token if my company has locked me in at 10 cents/kwH for the month and there is a plant outage or a heat wave, ConEd customers may end up paying 15 cents per kwH, while I'm still only paying 10 cents, because it was bought in advance. Over time the variability of a one month variable rate should be less than with daily pricing, or I may have an option to procure fixed rates and lock in my pricing for a year or even multiple years. Just like the strawberries, electricity does not keep too well. So it probably does not pay to buy 10 lbs when they are $1.49/lb. You'll merely end up throwing out a lot more strawberries, and as far as electricity is concerned, batteries are very expensive.
To apply that argument to power, particularly in the ConEdison area, we might observe that only in retrospect can we judge if last year ConEd's rates were lower than with our favorite ESCO. But if with the ESCO we are buying monthly, quarterly, or yearly pricing, the natural tendency will be for those prices to be flatter over time, whereas with ConEd's pass-through daily pricing a few events that cause rate spikes could drive our costs with ConEdison up unexpectedly at any time. So, just because last year I did not have an accident with my car, and I arguably could have saved myself the collision insurance, does not mean that this year I can do without. Over time the day rates might show greater variability, and some form of monthly or quarterly, or yearly rates might be preferable to most people. Knowing in advance what you'll be paying has some value here.
In general, if we are saving money with deregulation it is not because we can all go out and negotiate market beating rates. That remains for the big boys with the millions of kWh. Perhaps the overall price levels come down because of deregulation, at least that was the economic theory. But when history gets written, and proper research done, it may well be that deregulation worked only for a few large players and made no difference whatsoever for the average consumer. Reducing consumption and energy efficiency are much more important.
An agonizing fact of life is that because the utilities have a fairly unwieldy infrastructure, and it takes three months to switch, so just like cannot buy flood insurance at the time of the flood, when you think it would be smart to switch to a fixed rate, it is already too late. This is not day-trading where you can get in and out, and take your profit whenever you want. In short, don't bother switching providers to save money, unless your current provider is a bad apple, and they are really taking advantage of you.
The last innovation of the ESCO's is Green Power, and that for the most part is straight forward, except most ESCO's don't have a clue how to market it, but it could be a worthwhile consumer movement, if it ever gets going.
Economics of entropy and energy retrofits. Engineering and economic constraints for increasing property values, and minimizing environmental impact. Planning for value-add from sustainability.
Friday, January 13, 2012
Tuesday, December 6, 2011
Green Power Explained
There are no green electrons, nor can we change the supply sources at will, but we can purchase green power to varying degrees, by incorporating Renewable Energy Credits (RECs) into our electricity mix, or by generating your own clean electricity. The point of the exercise is that for consumers Green Power is a way of voting with your dollars, and signaling a preference for clean energy technologies. In short: RECs are a financial mechanism to support clean power, and credits are awarded to producers of clean renewable energy, and by buying those certificates, the consumer can stimulate development of such resources. RECs can be built into the rates by your provider or purchased independently. In the links section there are a whole range of information sources on Green Power and RECs.
If you look at the Corporate Top 50 Green Power purchasers, you see that Intel buys 88% Green Power, with a mix of on-site generation and recs from Sterling Planet and others. Starbucks buys 52% Green Power, Whole Foods 100%, and Lockheed Martin 15% , Wal-Mart 8%, etc. So it is pretty much a matter of how much you want to do in this area as a matter of corporate policy.
What it means for your rates. 100% Green Power typically adds some 2 cents per kwH to your rates. The typical household uses an average of 900 kwH/mo, so on average to "go green" should cost you ca $18/mo on your rates if you happen to be such an "average" household.
With my own household, I was with one supplier for a few years, and with the benefit of hindsight, I paid ranging from 0.5 cents to 4.00 cents per kwH extra for my 100% Green Power, so over time it averaged out ca 2%. Green power is a conscious choice to make a difference. Green power is about empowerment, about choice, about making a difference. It is a lifestyle choice, not an energy purchasing decision, and that is why most ESCOs fail in the mission of marketing Green Power.
If you look at the Corporate Top 50 Green Power purchasers, you see that Intel buys 88% Green Power, with a mix of on-site generation and recs from Sterling Planet and others. Starbucks buys 52% Green Power, Whole Foods 100%, and Lockheed Martin 15% , Wal-Mart 8%, etc. So it is pretty much a matter of how much you want to do in this area as a matter of corporate policy.
What it means for your rates. 100% Green Power typically adds some 2 cents per kwH to your rates. The typical household uses an average of 900 kwH/mo, so on average to "go green" should cost you ca $18/mo on your rates if you happen to be such an "average" household.
With my own household, I was with one supplier for a few years, and with the benefit of hindsight, I paid ranging from 0.5 cents to 4.00 cents per kwH extra for my 100% Green Power, so over time it averaged out ca 2%. Green power is a conscious choice to make a difference. Green power is about empowerment, about choice, about making a difference. It is a lifestyle choice, not an energy purchasing decision, and that is why most ESCOs fail in the mission of marketing Green Power.
Friday, December 2, 2011
On the Marketing of Green Power
The power industry by and large has failed to understand the potential of Green Power. Years ago, when I was attempting to design a Green Power marketing program for an ESCO (Accent Energy), I was arguing with the founders of that company that Green Power was different, and ultimately would require a separate company to market it.
Essentially, my analysis of the situation was that the mindset of the power industry was about price competition, and Green Power broke the mold, because to the power people it was power for 2 cents more, and that made no sense to them. Seen in that light the market place for Green Power was limited to some fringe cases, and was not worth worrying about. The power people therefore were incapable of understanding it, and I pointed out to them that selling Green Power rather meant promoting empowerment, and energy independence, not selling power.
Power is a negative, and people feel dis-empowered, because they have to pay that bill anyway, never mind whose name is on the bill. Moreover, they don't understand de-regulation, and it is somewhere between hard and impossible to verify the various claims, and many ESCOs have proven to be somewhat less than ethical in their dealings.
One of the major features of differentiation in the power market place has been often misunderstood and sold the wrong way: fixed rates. People think they are buying fixed rates in the illusion that they're going to beat the market, which is not so. Now, if you are responsible for a budget, and you'd like to fix one element of your cost, and you can rationalize that the cost is historically reasonable, well... perhaps you should consider the fixed price option. If you think you're going to beat the energy market, you probably should buy a lottery ticket instead. And, you are paying extra for the pleasure of having fixed rates.
All in all the ESCOs don't know what to do with themselves to differentiate their product. And in the direct sales model this inevitably leads to reps who will tell any lies necessary to get the deal, and in spite of codes of ethics that try to rein in the abuses, the results are a joke. In the last few months I've had more reps from power companies at my door than I can shake a stick at and almost all of them lie, although they've now been trained to not say they represent ConEdison, for then they could get fired. But they all violate the spirit of the law. From my time in the industry it was always clear that the system is rife with abuse, and that invariably the reps who lie the most make the most money. It is time to break the mold...
Fundamentally the justifications for de-regulated energy markets are not valid. Price competition is no solution to the nations energy problems. Instead it roots us in the illusion that we can beat the system, when in reality we can't. Here in NYC it is particularly evident. The real issue is transportation, for the T&D portion of your bill is 65%, and going up ahead of inflation as far as the eye can see. The real answer therefore is renewable energy generation at the building level, for these are investments that gain in value over time and therefore are conducive to appreciating real estate values. Their value goes up with every energy price hike, and with every rate increase for ConEdison.
Economically also, the utilities will have a long term economic interest in encouraging growing diversification of markets, because it is a proven fact that the overall system often becomes more reliable when the grid serves as a backup, as we have seen in energy intensive buildings like data centers, where reliability counts. Today's renewable technology is enabling this model for large groups of buildings, and it is part of the solution on a lot of levels. By the same token economic competitiveness, public safety and national security all gain from greater energy independence.
Especially in the urban environment the economics of energy are now solidly favoring the local production model in a growing number of cases. From the standpoint of economic modeling with T&D at 65% of the bill, and energy at only 35% of the bill, a 10% better energy rate is a 3.5% difference in the bill, and the arguments of de-regulation soon become laughable. Energy efficiency, demand management, and renewable production are where it's at because they gain on the T&D problem. As long as the incentive systems are done right, it should end up with both better utilization of the grid, and with greater energy diversification.
Thus, if we take the average household consumption of 900 kwH, at typical rates in NYC, of ca. 25 cents/kwH, of $225, a savings of 3.5% is ca $7.88 per month, or about 3 subway fares at current rates. Thus besides generating campaign contributions for the politicians that voted for it, financially it is not very meaningful. However if Green Power is an innovation that rides the back of de-regulation, it may be worth it after all. Watch the ratings of the largest corporate users of Green Power here:
http://www.epa.gov/greenpower/toplists/top50.htm
Essentially, my analysis of the situation was that the mindset of the power industry was about price competition, and Green Power broke the mold, because to the power people it was power for 2 cents more, and that made no sense to them. Seen in that light the market place for Green Power was limited to some fringe cases, and was not worth worrying about. The power people therefore were incapable of understanding it, and I pointed out to them that selling Green Power rather meant promoting empowerment, and energy independence, not selling power.
Power is a negative, and people feel dis-empowered, because they have to pay that bill anyway, never mind whose name is on the bill. Moreover, they don't understand de-regulation, and it is somewhere between hard and impossible to verify the various claims, and many ESCOs have proven to be somewhat less than ethical in their dealings.
One of the major features of differentiation in the power market place has been often misunderstood and sold the wrong way: fixed rates. People think they are buying fixed rates in the illusion that they're going to beat the market, which is not so. Now, if you are responsible for a budget, and you'd like to fix one element of your cost, and you can rationalize that the cost is historically reasonable, well... perhaps you should consider the fixed price option. If you think you're going to beat the energy market, you probably should buy a lottery ticket instead. And, you are paying extra for the pleasure of having fixed rates.
All in all the ESCOs don't know what to do with themselves to differentiate their product. And in the direct sales model this inevitably leads to reps who will tell any lies necessary to get the deal, and in spite of codes of ethics that try to rein in the abuses, the results are a joke. In the last few months I've had more reps from power companies at my door than I can shake a stick at and almost all of them lie, although they've now been trained to not say they represent ConEdison, for then they could get fired. But they all violate the spirit of the law. From my time in the industry it was always clear that the system is rife with abuse, and that invariably the reps who lie the most make the most money. It is time to break the mold...
Fundamentally the justifications for de-regulated energy markets are not valid. Price competition is no solution to the nations energy problems. Instead it roots us in the illusion that we can beat the system, when in reality we can't. Here in NYC it is particularly evident. The real issue is transportation, for the T&D portion of your bill is 65%, and going up ahead of inflation as far as the eye can see. The real answer therefore is renewable energy generation at the building level, for these are investments that gain in value over time and therefore are conducive to appreciating real estate values. Their value goes up with every energy price hike, and with every rate increase for ConEdison.
Economically also, the utilities will have a long term economic interest in encouraging growing diversification of markets, because it is a proven fact that the overall system often becomes more reliable when the grid serves as a backup, as we have seen in energy intensive buildings like data centers, where reliability counts. Today's renewable technology is enabling this model for large groups of buildings, and it is part of the solution on a lot of levels. By the same token economic competitiveness, public safety and national security all gain from greater energy independence.
Especially in the urban environment the economics of energy are now solidly favoring the local production model in a growing number of cases. From the standpoint of economic modeling with T&D at 65% of the bill, and energy at only 35% of the bill, a 10% better energy rate is a 3.5% difference in the bill, and the arguments of de-regulation soon become laughable. Energy efficiency, demand management, and renewable production are where it's at because they gain on the T&D problem. As long as the incentive systems are done right, it should end up with both better utilization of the grid, and with greater energy diversification.
Thus, if we take the average household consumption of 900 kwH, at typical rates in NYC, of ca. 25 cents/kwH, of $225, a savings of 3.5% is ca $7.88 per month, or about 3 subway fares at current rates. Thus besides generating campaign contributions for the politicians that voted for it, financially it is not very meaningful. However if Green Power is an innovation that rides the back of de-regulation, it may be worth it after all. Watch the ratings of the largest corporate users of Green Power here:
http://www.epa.gov/greenpower/toplists/top50.htm
Monday, August 15, 2011
When Energy Efficiency is a Trap
Massive new programs for energy efficiency are being deployed all around, and however wonderful they are, when they are applied in the right places, it remains equally true that under certain circumstances, they can be disastrously wrong.
As pointed out throughout this site, there is a huge class of buildings in New York, in the form of the City's old-line apartment buildings which because of their size and proportions make excellent targets for deploying renewable energy, yet they are caught up in the energy efficiency craze, and in the process destroying their renewable energy potential with tax payer subsidies.
The key insight is that the two investment strategies energy independence and energy efficiency of existing infrastructure are mutually exclusive, and progressively so. In other words if your building at the outset had a reasonable potential do switch to a largely renewable infrastructure, then every investment you make unthinkingly in energy efficiency of your fossil-fuel based infrastructure makes it harder financially to switch to the renewable energy strategy.
Successive investments in energy efficiency do not cumulatively add up to energy independence, on the contrary, they act to postpone energy independence indefinitely, and perpetuate your building, as a consumer of fossil fuels, albeit an ever more efficient one, and from that point of view they are customer acquisition programs for the fossil fuel based economy. In short, if there is an alternative, to unthinkingly commit more and more money to becoming simply more efficient in consuming fossil fuel based energy, is a bit like a junkie learning to 'manage' his habit.
The current spate of programs that are geared to achieving an 15% reduction in energy usage across the board, becomes a self fulfilling prophecy, as in the process there are thousands of buildings that would have been capable of 60-80% reduction of fossil fuel based energy usage, but they will never make that change, because of a whole system of incentives and programs that encourage them to make small incremental changes in usage, in lieu of radical re-engineering their energy systems and achieving deep energy change.
As pointed out throughout this site, there is a huge class of buildings in New York, in the form of the City's old-line apartment buildings which because of their size and proportions make excellent targets for deploying renewable energy, yet they are caught up in the energy efficiency craze, and in the process destroying their renewable energy potential with tax payer subsidies.
The key insight is that the two investment strategies energy independence and energy efficiency of existing infrastructure are mutually exclusive, and progressively so. In other words if your building at the outset had a reasonable potential do switch to a largely renewable infrastructure, then every investment you make unthinkingly in energy efficiency of your fossil-fuel based infrastructure makes it harder financially to switch to the renewable energy strategy.
Successive investments in energy efficiency do not cumulatively add up to energy independence, on the contrary, they act to postpone energy independence indefinitely, and perpetuate your building, as a consumer of fossil fuels, albeit an ever more efficient one, and from that point of view they are customer acquisition programs for the fossil fuel based economy. In short, if there is an alternative, to unthinkingly commit more and more money to becoming simply more efficient in consuming fossil fuel based energy, is a bit like a junkie learning to 'manage' his habit.
The current spate of programs that are geared to achieving an 15% reduction in energy usage across the board, becomes a self fulfilling prophecy, as in the process there are thousands of buildings that would have been capable of 60-80% reduction of fossil fuel based energy usage, but they will never make that change, because of a whole system of incentives and programs that encourage them to make small incremental changes in usage, in lieu of radical re-engineering their energy systems and achieving deep energy change.
Sunday, August 14, 2011
How to Stop Government Sponsored Capital Destruction
The indiscriminate push for energy efficiency over energy independence based on Renewable Energy results in a growing number of cases in missed opportunities for developing renewable infrastructure, which could have a wide range of beneficial effects in the long run, not least of which is the greater profitability of buildings, and their long term economic viability, and thus also building preservation.
We declared July 4th, 2011 Energy Independence day, by publishing our report DaBx PlaNYC2020 as a partial alternative to the PlaNYC2030 which the City has proposed, and we offered our report to the Mayor. Aside from that I felt that it was appropriate to also write to the Secretary of Energy, since ultimately many of the relevant policies originate at the federal level.
Whenever Energy Efficiency is pursued first, without examining the Energy Independence/Renewable Energy alternative first, some unfortunate outcomes result which are to the detriment of real estate values in the long run. In essence it is particularly the city's older apartment buildings which often offer the right economies of scale for the alternative, and there are very likely plenty of investors to be found who are interested in serious Green investments that produce long term steady income, so even if current owners are not interested, different investors could come into the market.
In order to get attention for the policy changes that are needed, we wrote to the Secretary of Energy:
quote
August 13, 2011
We declared July 4th, 2011 Energy Independence day, by publishing our report DaBx PlaNYC2020 as a partial alternative to the PlaNYC2030 which the City has proposed, and we offered our report to the Mayor. Aside from that I felt that it was appropriate to also write to the Secretary of Energy, since ultimately many of the relevant policies originate at the federal level.
Whenever Energy Efficiency is pursued first, without examining the Energy Independence/Renewable Energy alternative first, some unfortunate outcomes result which are to the detriment of real estate values in the long run. In essence it is particularly the city's older apartment buildings which often offer the right economies of scale for the alternative, and there are very likely plenty of investors to be found who are interested in serious Green investments that produce long term steady income, so even if current owners are not interested, different investors could come into the market.
In order to get attention for the policy changes that are needed, we wrote to the Secretary of Energy:
quote
U.S.
Dept. of Energy
Attn. Dr. Steven Chu,
Secretary of Energy
1000 Independence Avenue SW
Washington, DC 20585
Attn. Dr. Steven Chu,
Secretary of Energy
1000 Independence Avenue SW
Washington, DC 20585
Dear
Mr. Chu
Re:
DaBx PlaNYC2020 – A Paradigm Change
Attached
we are sending you a copy of our alternative plan for energy
independence in multi-family housing in NY, which was published on
July 4th, 2011 – Energy Independence Day, as I like to
think of it.
We
have provided the plan to NYC, and to Mayor Bloomberg specifically as
a partial alternative to the PlanYC2030, which is now in its second
generation. We are hopeful eventually to find both existing building
owners and investors who see the opportunity. This is an area rife
with opportunity for private/public partnership, and there are plenty
of funds that would be interested in financing buildings that
implement renewable energy, and reduce fossil fuel use in all forms
by 60-80% as we think is possible.
In
the meantime however, as a nation we are suffering a terrible case of
group think, and it is driving us all, and this class of buildings in
particular, straight off the cliff into the next energy crisis, not
to mention that it's aggravating a long list of infrastructural risks
and liabilities which could be solved by going the renewable energy
route directly instead.
The
point is this: there is a very large group of buildings in NY – the
same no doubt applies for many other cities – which offer the right
economies of scale for a holistic, integrated approach to renewable
energy, where it can be economical today, not twenty years from now,
and which will result in a massive improvement in the economics of
those buildings, and the economic competitiveness of the cities. With
that we will see asset values rise, and Freddie Mac and Fanny Mae,
and FHA should all become supportive, once they understand the value
adding capability of this radical investment strategy.
All
the building blocks to the methodologies we propose are available
today, and the only significant obstacles are government policies
that prevent it from happening, some minor regulatory hurdles that
could be improved, and the fact that all current official guidance,
programs, incentives, seem to be based on the pat assumption that
renewable energy is not (yet) economical, and thus it is never given
serious thought, causing an indefinite postponement instead.
The
whole situation is a classic example of a paradigm shift, the major
problem is that by and large the unexamined assumptions that cause
the present conundrum are based on evaluations of renewable energy in
a fossil fuel driven context. Contrary to that, what is needed to
make renewables pay is a strategy of complete re-engineering and
rethinking the energy infrastructure of existing buildings, and since
in NY there is already a program on the books for eliminating high
viscosity fuels, there is a tremendous opportunity to do that extra
step and do renewable energy now, not later.
Given
that there is a group of buildings where renewable energy would be
economical now, present practices, which are only becoming more and
more entrenched, amount to nothing else but massive case of capital
destruction with taxpayer money, or if you would, a government
sponsored customer retention program for the oil and utility
industry, at the expense of real estate values. Often it boils down to short term fixes financed with long term money, insuring that
buildings will be under water again at the merest sign of the next
energy crisis. Taken together, current policies also create an energy
monoculture around natural gas, and a huge and growing threat to
national security.
Our
alternative plan, which we've published under a Creative
Commons-Attribution-NonCommercial-ShareAlike 3.0 Unported License in
furtherance of public discourse, proposes essentially that once the
engineering integration is understood, renewable energy projects
which individually might not be attractive investments, could
generate compound returns, and thus taken together could be highly
attractive, and result in rapidly increasing building values. Simply
put, the same building that might be 30% more efficient with today's
best practices in energy efficiency, could reduce fossil fuel use by
75%, and be off the grid for common areas, as well as supplying car
charging station, or some of their tenants. Current energy efficiency
programs are fighting the last war, when the winning insight was that
a dollar spent on demand reduction was worth more than a dollar spent
on increasing supply.
To
make it even clearer, because there is no second act in energy
efficiency investments, due to arithmetically diminishing returns to
a limit that is well above 50% of usage, the currently dominant
regime of energy efficiency to the detriment of energy independence
also will lead to slum formation on a large scale, as it will
massively erode the economic viability of buildings within the next
20 years. Following our design strategies, many old buildings could
reduce fossil fuel usage by 60-80%, and be commercially viable for
the next 50 years.
Because
the two investment strategies – energy efficiency vs. energy
independence - are mutually exclusive, the current practice of
plunging into energy efficiency investments without thorough
examination of the energy independence alternative, condemns
buildings to what may be a sub-optimal strategy, if they would have
been capable of significantly utilizing renewable energy.
Meanwhile,
this country's infrastructure crisis is such that e.g. here in NY the
Transportation and Delivery portion of energy bills is already 65%,
and rising ahead of inflation indefinitely, and the renewable
strategies we are advocating could speed the way towards the smart
grid, not to mention accommodate electrical cars without causing
congestion on the grid. Thus transportation and delivery cost are the
real issue in the renewable energy strategies on the demand side
which we are proposing.
Lastly,
we emphasize that our multi-dimensional strategy recommendation
(looking again at NYC, our home market) includes strong beneficial
impacts in a wide range of related areas that are frequently
overlooked:
- Clean Air: short route for NYC to meet Clean Air Act standards
- National Security: reduction of dependence on foreign oil, diversification of energy inputs: these buildings will stay lit in the next blackout
- Transition to the smart grid: these strategies provide an accelerated transition to a smart grid, by evolving micro-grids that will be semi-independent.
- Public Safety: Buildings staying lit in a blackout, survivable in case of failure of the gas grid, and can provide unlimited backup for cell towers.
- Public Health: Better indoor air quality in the Asthma capital of the world, a.k.a. the South Bronx.
- Defense: The emerging Natural Gas monoculture is a huge new liability, diversification should have high priority.
- Economic competitiveness: Thousands of old apartment buildings could be upgraded into some of the most Green and energy efficient modes of city living. The outer boroughs would benefit most. In the near term it means jobs.
Because
of the importance of these issues at this critical junction in our
nation's energy policy and future, I am sending you this letter as an
open letter, which will be published on my blog at
http://nycgreenapple.blogspot.com,
as well as copies being sent to a number of relevant officials and
business people.
Yours
sincerely,
Rogier
Fentener van Vlissingen
unquote
Tuesday, July 19, 2011
Deep Energy Change at Steinway & Sons in Long Island City
The other day it was my pleasure to get a tour of the Steinway facility in Long Island City, and see their Energy Plant, in particular their solar thermal installation including a 100 ton absorption chiller, and which is smoothly integrated into their overall system with natural gas as a backup, and with an underlying development track of process improvement and rationalization of the energy infrastructure of the plant, which goes directly into improvements in their temperature (68F) and humidity control (50%RH), and increased systems reliability, and a payoff that includes measurable improvement in their operations. The tour was led by Mr. Bill Rigos, who was the project lead for Steinway, and who clearly took hands on responsibility for the project, including overseeing the development of a very customized system of controls that integrates essentially all of the relevant data from various sources, and makes easy control of their system a reality.
To me, what I saw was a demonstration of the kind of "deep energy change" the City needs more of. The financial people might tend to see a project with a ca 7.5 year payback, which in investment terms is not overly exciting, but, were the total scope to be modeled, including the greater measure of energy independence, and systems redundancy/reliability, as well as the various aspects of process improvements in the factory, the actual capital improvement to the business is staggering, since it not only saves energy but is directly responsible for process improvements, and reduced production loss ratios which are a direct consequence of a more controllable climate system. In other words, the secret is always in seeing the integral effects on overall operations and these types of intra-marginal investments add tremendous value to the economy.
These types of projects stand in shrill contrast to much of what is going on under the name of energy efficiency, which is often times actually a massive government subsidized form of capital destruction, that can be summed up as: make'm more efficient and switch 'em to gas, or, as a friendly engineer who is in the energy efficiency racket referred to their projects in upgrading multi-family buildings: "screwing in new lightbulbs." Central to the argument which we advance on this site the first generation of energy efficiency projects are always easy, have short paybacks, except they ignore the fact that there is NO follow-on, because they are an investment track with diminishing returns over time.
I could only say that it was a special privilege to see such a shining example of profound systems thinking, and an enduring deep commitment in the person of Bill Rigos himself, in such a venerable New York institution. Literally a shining example for the City, showing an alternative to the natural gas mono-culture that is engulfing us all, which is simply the next energy crisis in the making. At least here and there we are seeing example of looking at energy as we properly should, as a make or buy decision, in which renewable energy becomes the driver and subscription energy the backup. These are the breakthroughs we need to evolve to a sustainable economy and a measure of energy independence which can grow over time. Renewable energy plant is becoming a capital asset of buildings and companies, and valuations of businesses and buildings will undergo radical change in the years to come. Many who are dancing to the pied piper of energy efficiency will come to realize they foolishly invested in becoming more entrenched in fossil fuels and subscription energy, and are likely to find themselves cornere in a dead end street at the next energy crisis, which is presently being created by the current vogue of superficial energy change, which wrongly prioritizes energy efficiency before a proper assessment of the fundamental make or buy decisions about energy plant and the life-cycle consequences of those decisions.
The superficial story of the energy savings at Steinway will be validated over and over again by the immeasurable process improvements to their unique and incredibly valuable industrial process. The evaluation of these kinds of intra-marginal improvements remains notoriously difficult, but it is the difference between business-like investments in energy plant as a strategic asset of a business, compared to the herd-like and thoughtless pursuit of energy efficiency of existing plant, which is more a customer retention program for the utilities and energy companies, and at best an operational savings, that does not deserve the name of an investment.
As an example of the value of Solar Thermal technology in general this application is also valuable, for too often people are charmed by Solar PV because of the incentives, and because electricity is more sexy than heat. What is forgotten is that a lot of the energy you need in buildings is heat anyway, so as long as Solar Thermal produces about five times the amount of energy for the same square area compared to PV, there is little reason to look into PV if you could be using Solar Thermal instead in our densely populated area with high real estate prices.
Revision/Update: Here is a report on the same installation from Greentech Media from 2013: https://www.greenbiz.com/news/2013/02/22/black-and-gold-go-green-steinway-sons-journey-sustainability
To me, what I saw was a demonstration of the kind of "deep energy change" the City needs more of. The financial people might tend to see a project with a ca 7.5 year payback, which in investment terms is not overly exciting, but, were the total scope to be modeled, including the greater measure of energy independence, and systems redundancy/reliability, as well as the various aspects of process improvements in the factory, the actual capital improvement to the business is staggering, since it not only saves energy but is directly responsible for process improvements, and reduced production loss ratios which are a direct consequence of a more controllable climate system. In other words, the secret is always in seeing the integral effects on overall operations and these types of intra-marginal investments add tremendous value to the economy.
These types of projects stand in shrill contrast to much of what is going on under the name of energy efficiency, which is often times actually a massive government subsidized form of capital destruction, that can be summed up as: make'm more efficient and switch 'em to gas, or, as a friendly engineer who is in the energy efficiency racket referred to their projects in upgrading multi-family buildings: "screwing in new lightbulbs." Central to the argument which we advance on this site the first generation of energy efficiency projects are always easy, have short paybacks, except they ignore the fact that there is NO follow-on, because they are an investment track with diminishing returns over time.
I could only say that it was a special privilege to see such a shining example of profound systems thinking, and an enduring deep commitment in the person of Bill Rigos himself, in such a venerable New York institution. Literally a shining example for the City, showing an alternative to the natural gas mono-culture that is engulfing us all, which is simply the next energy crisis in the making. At least here and there we are seeing example of looking at energy as we properly should, as a make or buy decision, in which renewable energy becomes the driver and subscription energy the backup. These are the breakthroughs we need to evolve to a sustainable economy and a measure of energy independence which can grow over time. Renewable energy plant is becoming a capital asset of buildings and companies, and valuations of businesses and buildings will undergo radical change in the years to come. Many who are dancing to the pied piper of energy efficiency will come to realize they foolishly invested in becoming more entrenched in fossil fuels and subscription energy, and are likely to find themselves cornere in a dead end street at the next energy crisis, which is presently being created by the current vogue of superficial energy change, which wrongly prioritizes energy efficiency before a proper assessment of the fundamental make or buy decisions about energy plant and the life-cycle consequences of those decisions.
The superficial story of the energy savings at Steinway will be validated over and over again by the immeasurable process improvements to their unique and incredibly valuable industrial process. The evaluation of these kinds of intra-marginal improvements remains notoriously difficult, but it is the difference between business-like investments in energy plant as a strategic asset of a business, compared to the herd-like and thoughtless pursuit of energy efficiency of existing plant, which is more a customer retention program for the utilities and energy companies, and at best an operational savings, that does not deserve the name of an investment.
As an example of the value of Solar Thermal technology in general this application is also valuable, for too often people are charmed by Solar PV because of the incentives, and because electricity is more sexy than heat. What is forgotten is that a lot of the energy you need in buildings is heat anyway, so as long as Solar Thermal produces about five times the amount of energy for the same square area compared to PV, there is little reason to look into PV if you could be using Solar Thermal instead in our densely populated area with high real estate prices.
Wednesday, June 29, 2011
DaBx PlaNYC2020 Draft
Finally I have brought together the whole integrated vision for a renewable infrastructure, as an alternative, but also complimentary approach to the city's PlaNYC2030.
It is the city's old line apartment buildings, those grand old buildings of 5-6 stories that made the glory days of the Grand Concourse etc, which are the richest target of opportunity for what the city apparently calls Deep Energy Change - a radical shift to a renewable base of energy production. It is these grand old buildings which are there in their hundreds and thousands, that potentially are the proverbial low hanging fruit for an energy revolution that will accomplish deep energy change.
These buildings offer the right scale, large enough but not too large (as skyscrapers would be), to be able to make them substantially energy independent with today's technology. Simply put with the combination of a modicum of grounds around the building, usually plenty of available space in the basement, a flat roof, and few shading problems, usually all or most of the available conditions are in place to accomplish a substantially feasible program of conversion to renewable technologies today.
The prevailing framework of policies and incentives focuses on energy efficiency before energy independence perversely provides the indefinite postponement of energy independence with government subsidies. It promotes shallow energy change and in the process effectively prevents deep energy change from ever happening. For a building owner, if they are not planning for energy independence now, and develop long term plans to get there, they will never get there. Failing to plan definitely is planning to fail. To the extent that owners are following the current framework of energy efficiency oriented upgrades, they are digging their own graves, in the form of a collective next energy cirisis, moreover, this is often financed with long term money, ensuring that buildings will be under water again in the next energy crisis when it comes. Thus the present model is building the slums of tomorrow, and practicing capital destruction.
Any owners who have done nothing, and are still operating with the old steam boiler and hot water from a coil in the boiler, are actually potentially in better shape than the ones who have followed the prevailing energy efficiency regime, because every dollar they invested in making a fossil fuel infrastructure more efficient, becomes an obstacle for the economic justification of a switch to the energy independence program.
Very evidently, the administration is talking about "deep energy change," without much clarity that the current policy framework is an effective deterrent for its accomplishments. We can only hope that the administration can find ways to encourage a shift. There are a number of ways in which law makers and regulators can effectively make these changes possible, and even speed up adoption.
We are publishing the report in two forms, for $99 as an open-ended subscription to the report and all major revisions, and $25 for one time copies.
The subscription version can be found here: http://www.dabxdemandsidesolutions.com/Services.html
and one time copies can be ordered here: http://www.scribd.com/doc/58761637/DaBx-PlaNYC2020-Draft
It is the city's old line apartment buildings, those grand old buildings of 5-6 stories that made the glory days of the Grand Concourse etc, which are the richest target of opportunity for what the city apparently calls Deep Energy Change - a radical shift to a renewable base of energy production. It is these grand old buildings which are there in their hundreds and thousands, that potentially are the proverbial low hanging fruit for an energy revolution that will accomplish deep energy change.
These buildings offer the right scale, large enough but not too large (as skyscrapers would be), to be able to make them substantially energy independent with today's technology. Simply put with the combination of a modicum of grounds around the building, usually plenty of available space in the basement, a flat roof, and few shading problems, usually all or most of the available conditions are in place to accomplish a substantially feasible program of conversion to renewable technologies today.
The prevailing framework of policies and incentives focuses on energy efficiency before energy independence perversely provides the indefinite postponement of energy independence with government subsidies. It promotes shallow energy change and in the process effectively prevents deep energy change from ever happening. For a building owner, if they are not planning for energy independence now, and develop long term plans to get there, they will never get there. Failing to plan definitely is planning to fail. To the extent that owners are following the current framework of energy efficiency oriented upgrades, they are digging their own graves, in the form of a collective next energy cirisis, moreover, this is often financed with long term money, ensuring that buildings will be under water again in the next energy crisis when it comes. Thus the present model is building the slums of tomorrow, and practicing capital destruction.
Any owners who have done nothing, and are still operating with the old steam boiler and hot water from a coil in the boiler, are actually potentially in better shape than the ones who have followed the prevailing energy efficiency regime, because every dollar they invested in making a fossil fuel infrastructure more efficient, becomes an obstacle for the economic justification of a switch to the energy independence program.
Very evidently, the administration is talking about "deep energy change," without much clarity that the current policy framework is an effective deterrent for its accomplishments. We can only hope that the administration can find ways to encourage a shift. There are a number of ways in which law makers and regulators can effectively make these changes possible, and even speed up adoption.
We are publishing the report in two forms, for $99 as an open-ended subscription to the report and all major revisions, and $25 for one time copies.
The subscription version can be found here: http://www.dabxdemandsidesolutions.com/Services.html
and one time copies can be ordered here: http://www.scribd.com/doc/58761637/DaBx-PlaNYC2020-Draft
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