Education

Understanding Energy Performance Contracting

Understanding Energy Performance Contracting

An investment in sustainability can take many shapes, but one unavoidable fact about today’s high-performance technologies is that they usually cost money to implementand most of the time, it’s all up front. But if you’ve been ruling out a sustainable solution for purely financial reasons, we’d like to introduce you to a concept you really ought to know about: Energy Performance Contracting.

It might just change your mind about sustainability. And it might just save you a whole lot of money, too.

Energy Performance Contracting, to borrow the Energy.gov’s phrasing, is a “budget-neutral” method for reducing energy and water consumption while increasing efficiency in your building. In other words, Energy Performance Contracting helps your building use less energy while creating zero negative effects on your bottom line.Understanding Energy Performance Contracting

“Normally offered by Energy Service Companies (ESCOs), this innovative financing technique allows building users to achieve energy savings without up front capital expenses,” notes HUD.gov. “The costs of the energy improvements are borne by the performance contractor and paid back out of the energy savings.”

You get the benefits, while somebody else shoulders the financial burden. Not bad, huh?

“Energy performance contracting isn’t the best choice for everyone. But it can be a major tool for many budget constricted companies or governments,” says Daniel Tait, CEO of Energy Alabama. “At the end of the day, don’t let upfront cost stop a project when you have a tool like energy performance contracting.”

 

So, Where To Start?

The process is surprisingly simple, as outlined here at EnergyStar.gov. First, you competitively select an Energy Service Company (ESCO). This part is completely up to you. Of course, we’re happy to help!

Once you’ve selected your contractor, the ESCO will develop and then execute an all-inclusive energy-saving plan for your facility. The project should include an introductory energy audit as well as some kind of Monitoring and Verification (M&V) process that ensures continued savings. Besides energy efficiency, the ESCO might also focus on water conservation and distributed generation, among other components.

With the plan in place, you’ll work with the ESCO to set up long-term financing through a third party. This could be an operating lease, municipal lease or something else entirely. The idea is that the improvements cost you nothing in capital expenditures up front.

(Lease-purchase agreements are probably the most common method for financing an Energy Performance Contracting project. If you want to know more, that link has plenty more information.)

 

Reaping the Rewards

Finally, the ESCO should offer you a guarantee that your project will pay for itself through the savings generated by that all-inclusive energy-saving plan we mentioned above.

It’s as easy as that. Boost efficiency. Save money. Reap the rewards.

So, what kinds of buildings are ideal for Energy Performance Contracting? Government facilities ara a good choice, since governments generally own their buildings long-term. This makes a 10- to 20-year financing term attractive. But really, any large building could be a good candidate. Hospitals, schools, corporate headquartersthese are just a few of the facilities that could benefit from Energy Performance Contracting.

For more information, or to learn how to get started, contact Energy Alabama CEO Daniel Tait by email at dtait@alcse.org.

Energy efficiency

Energy Alabama Picks: 4 Great Energy Efficiency Products

Energy efficiency is something we think about a lot here at Energy Alabama. Accelerating the transition to sustainable energy is our ultimate goal, but there’s plenty of groundwork to do in the meantime. Part of that groundwork is helping people make their homes and businesses more efficient.

There are plenty of ways to increase efficiency, and some of them are easier (and less expensive) than you might think. With that in mind, we’ve come up with this list of four great energy efficiency products that will help make your home more sustainable and comfortable.

Have another suggestion? Be sure to leave it in the comments.

 

4 Great Energy Efficiency Products

1. Ecobee3 Smart ThermostatEnergy Efficiency

Installing a programmable thermostat is a great way to save energy. And saving energy is a great way to downsize your utility bill. You win. Your wallet wins. Everyone’s happy.

The idea behind a programmable thermostat is that the temperature inside your house doesn’t always need to be the same. During the heat of the day, for instance, you might want to bump it up a notch or two—especially if you’re not at home. And at night, you might prefer a different setting than at noon. With a programmable thermostat, you can take care of that in advance.

The ecobee3 WiFi thermostat takes all of that a step further. With its remote sensor and compatibility with Amazon’s Alexa and Apple’s Siri, the ecobee3 is a fearsomely powerful thermostat. Thanks to some of its really cool built-in technology, it the ecobee3 instinctively knows when to change the temperature in your house—without you having to do anything. Several variables are at play, including the weather outside. And when someone enters a room, ecobee3 reacts to keep the room at max comfy levels.

Ecobee3’s marketers claim it saves homeowners 23% annually on their energy bills. So, do you want one yet?

Where to buy: $249 at Amazon

 

2. Smart Strip SCG-3M Energy Saving Surge Protector

Every homeowner needs a surge protector. Or two or three. If you’re an energy-conscious homeowner, you need a surge protector like the Smart Strip SCG-3M.

Our modern world runs on electricity, but every now and then, a voltage spike can occur. And when a voltage spike happens, any and all of your electronic gadgets are at risk of being fried to a crisp. That’s when a surge protector comes in handy. A surge protector limits the risk to your plugged-in devices either by blocking the spike or diverting it to ground.

The Smart Strip SCG-3M Energy Saving Surge Protector does all of that, but also saves energy in the process. In addition to two always-on outlets, the SCG-3M features four outlets that automatically turn off when not in use. Plus, it has a right-angle plug that hugs the wall. What’s not to like?

Where to buy: $25.99 at Amazon

 

3. LED Light BulbsEnergy efficiency

Great Value ENERGY STAR rated is the best bang for the buck. Make sure they are the ENERGY STAR rated ones. Walmart sells some that aren’t.

LED bulbs are the future. They last longer and use less electricity than traditional incandescent bulbs. And if you look in the right places, you can find good deals on them too.

For our money, Walmart’s Great Value brand offers the best bang for the buck. Just make sure they’re the ENERGY STAR-rated models because Walmart sells some that aren’t. This 60-watt equivalent bulb uses only 10 watts and has an estimated lifespan of 25,000 hours. And with 80% savings on energy costs, those 20,000 hours won’t set you back too much.

Where to buy: $3.22 at Walmart

 

4. Niagara Sava Spa Showerhead

Saving energy isn’t the only game in energy efficiency. Using water intelligently with a low-flow showerhead is important, too. Not to mention the savings from reduced heating of water.

The Niagara Sava Spa Showerhead does that while delivering 1.5 gallons per minute. A patented pressure compensator ensures consistent flow no matter what the water pressure is like in your house. That means you’re saving water—and more money on your utility bill.

Where to buy: $9.90 at Amazon

Distributed Generation benefits

Distributed Generation: What Are the Benefits?

Distributed Generation: What Are the Benefits?

Increased efficiency. Reduced rates. Improved reliability. Diminished emissions. If all of that sounds good to you, then you ought to know about the benefits of distributed generation.

A few weeks back, we covered microgrids and why they’re important in the context of the larger, main grid. As you might recall, microgrids are defined not by their size, but rather by their function—crucially, their ability to break off from the main grid and operate autonomously. Got it? Well, if that makes sense, think of distributed generation as a network of systems just like that.

That’s oversimplifying it a little, but the overall concept holds true. Distributed generation is when electricity comes from many small energy sources. Generally, these sources are local and renewable. They’re all connected to the larger grid but can also function separately.

If all this sounds unfamiliar, that’s because it’s not the “normal” way of doing things. But it does have its advantages.

The traditional model

In the traditional transmission and distribution (T&D) grid, large sources provide power to huge numbers of residential, commercial, and industrial customers. Some of those customers live close to the centralized power plants. Other live far away—sometimes very, very far.

In contrast, a distributed generation (DG) system has smaller, decentralized sources that generate electricity much closer to the people who use it. There are lots of producers, and even though they produce less individually, they’re all connected to the grid. Together, they can be quite effective.

Several technologies form the backbone of a DG system. Some of the most prominent are solar, wind, and hydro. Another is cogeneration, which is the production of electricity from what is essentially the leftover energy from other forms of generation. Yet another is an energy storage system, which stays connected to the grid and holds energy until it’s needed.

So what are the benefits of distributed generation? In 2007, the U.S. Department of Energy released a report outlining some of DG’s advantages. Here’s what they came up with (h/t Energy.gov):

  • Increased electric system reliability
  • An emergency supply of power
  • Reduction of peak power requirements
  • Offsets to investments in generation, transmission, or distribution facilities that would otherwise be recovered through rates
  • Provision of ancillary services, including reactive power
  • Improvements in power quality
  • Reductions in land-use effects and rights-of-way acquisition costs
  • Reduction in vulnerability to terrorism and improvements in infrastructure resilience

Those are all really important concepts, but let’s focus on that first one.

Increased reliability, better performance

One way to think about the benefits of distributed energy is to visualize your cell phone’s network. Imagine for a moment that your carrier had only a few towers in just a few spots around the country. The towers would be massive and powerful, but you wouldn’t have the same reliability and coverage that you have now. The reasons should be obvious. With a network of smaller, more evenly placed towers, cell-phone carriers are able to provide the best service possible to their customers.

Distributed generation is no different. When centralized power plants transmit energy over long distances, some of that energy is lost. With distributed generation, the generators are closer to those who use the energy. Thus there’s less waste. Increased efficiency. In the old model, a loss in service at any point of the grid means everyone suffers. In the new model, that’s less likely to happen.

DG can also serve as a backup to the grid, acting as an emergency source for public services in the case of a natural disaster. Here in North Alabama, that kind of service could be invaluable after a tornado. And by producing energy locally, DG systems can reduce demand at peak times in specific areas and alleviate congestion on the main grid.

Finally, because distributed energy tends to come from renewable sources, it’s good for the environment. Using more renewables means lowering emissions. And lowering emissions makes the world a more enjoyable place for all of us.

Donate Energy Alabama

Why the Renewable Energy Market Could Be Set to Explode

The market for small-scale renewable energy production might be set to take off, and that could be big news for local utility companies here in Alabama and all across America. And it all stems from a single federal ruling issued in June following a dispute between energy cooperatives in Colorado.

To see the big picture here, we’ll need some background. To begin with, let’s meet the two main players in this story.

Tri-State Generation and Transmission Association, Inc. is pretty much exactly what it sounds like—a generation and transmission (G&T) cooperative. G&Ts produce electricity by means of their own infrastructure and then sell it on to their member organizations. This G&T is based in Denver, and one of those member organizations is Delta-Montrose Electric Authority. DMEA is a member-owned and locally controlled rural electrical cooperative along Colorado’s Western Slope.

FERC's decision in favor of Delta-Montrose could mean the renewable energy market is ready to explode.

Montrose, Colo., boasts an abundance of natural beauty.

Over the past couple of years, Tri-State and DMEA have been involved in a dispute over how and where DMEA sources some of its electricity. The current long-term contract between the two organizations stipulates that DMEA must derive 95 percent of its power from Tri-State. Per the contract, DMEA can self-generate up to 5 percent of its annual electricity usage, but no more than that.

In 2015, DMEA asked the Federal Energy Regulatory Commission (FERC) if it could go beyond that 5 percent mark by entering power-purchase agreements with small, independent producers. It cited the Public Utility Regulatory Policies Act (PURPA) of 1978, which requires utilities to buy power from small, renewable sources called Qualifying Facilities (or QFs, which are defined here). FERC agreed, ruling that PURPA’s requirements superseded Tri-State’s contracts with its customers.

Tri-State responded with a petition to FERC. The Denver-based co-op called for a new fee that would effectively penalize DMEA (and any of its other members) if it purchased power from a QF instead directly from Tri-State. The idea was that Tri-State needed to recoup some lost revenue following DMEA’s decision to source greater than 5 percent of its electricity from QFs. Tri-State, after all, has always depended on income from its member organizations to pay for costly investments in the infrastructure needed for large-scale generation. The same is true for just about any G&T.

But in a decision released in mid-June, FERC denied Tri-State’s petition. In its June 2016 Commission Meeting Summaries, FERC noted: “Tri-State’s petition would effectively undo Delta-Montrose’s statutory obligation to purchase from QFs and correspondingly limit QFs from selling power to Delta-Montrose at negotiated rates.”

 

Great, so what does it all mean?

So DMEA won, FERC lost and life will go on as normal. But what does any of this mean for anyone in Alabama?

According to Kevin Brehm and Dr. Joseph Goodman at the Rocky Mountain Institute, it could mean quite a bit. Most significantly, the nationwide market for locally produced, small-scale renewable electricity could be ready to blow up.

FERC's decision could have far-reaching implications for the renewable energy market.

FERC’s decision could have far-reaching implications for the renewable energy marketplace.

“The FERC ruling effectively removes a policy barrier that has substantially constrained solar build-out,” they wrote in a June blog post. “This means that the co-op and muni community-scale solar markets could be even larger than previously predicted.”

FERC’s ruling won’t be the only contributing factor in a market explosion, if one does happen. The costs associated with renewable energy have dropped considerably in recent years, and that trend will only continue. (As Anna Hirtenstein notes at Bloomberg.com.) Lower costs, of course, make it easier for more people to build more solar. But along with that general reduction in costs, this recent ruling has made renewables even more enticing. In effect, FERC has opened the door for co-ops to purchase as much renewable energy as they need from QFs.

 

The economy of scale

That’s potentially huge for small-scale renewable generators all across the country. How huge? Brehm and Goodman estimate that declining prices could lead to the emergence of a 400 gigawatt (GW) market.

Think about that for a second. According to Alyson Kenward at ClimateCentral.org, the Indian Point Energy Center, a nuclear plant in New York, provides power to about 1.4 million homes with its dual 1-GW reactors. That’s from 2 GW. We’re talking about a market collectively totaling 400 GW.

DMEA CEO Jasen Bronec has hailed the ruling, saying it would help DMEA “diversify” its power supply. Distributed energy is important, but it’s impossible to ignore the financial implications of FERC’s decision. “(The ruling) could also lead to serious local economic development,” Bronec said, “as renewable facilities locate to the area to take advantage of our abundant renewable resources in Delta and Montrose counties.”

It doesn’t have to be just Delta and Montrose counties, though. While FERC’s ruling applied only to a single corner of Colorado, its implications stretch from coast to coast.

How to Go Solar in North Alabama

Be like her. Go solar!

Ever thought about going solar at your home or business? I often walk outside on a really sunny day and think to myself, “Man, I wish I had solar panels installed already.” So here’s the thing: It really isn’t that hard and the economics are better than they’ve ever been before. Today, let’s learn how to go solar in North Alabama.

In this post we’ll explain all the steps you need to take to install solar at home or where you work. Even though your contractor will probably be the one completing some of these items, it’s always good to know what should be happening.

This post may be a little lengthy but we wanted to make sure you have all the information you would need to make solar a success at your home or business.

The Process

  1. Determine property feasibility
  2. Determine your objectives
  3. Confirm utility participation in Green Power Providers
  4. Understand pricing
  5. Determine how to pay for your system
  6. Get analysis from Energy Alabama
  7. Submit Customer Reservation Request (CRR) to TVA
  8. Submit Participation Agreement Request (PAR) to TVA
  9. Get your application(s) approved by TVA and your local utility company
  10. Buy and install your solar power system
  11. Complete system tests and submit results to TVA
  12. Get money!

Determine Feasibility

This is pretty simple. Ask yourself these four questions. If the answers are yes to all of them, you’re probably a good candidate for solar in North Alabama.

1. Is the property free and clear of trees and other items that would obstruct the sun?

2. Does the property have a south-facing roof space or open area(s) where a solar system could be installed on the ground?

3. Does the property have a relatively new roof that is expected to last for at least another 25-30 years?

4. Do I expect to own the property for at least another 8 years?

Determine Objectives

If your property is feasible, now you need to figure out what exactly you want to do. Your objectives will be limited by your property, your personal desires, and your budget. The two biggest things you need to determine are:

  1. Do you want to go off the grid or connect to the grid?
  2. Either way, how far do you want to go? Do you want to take your whole home off the grid or just a small room for emergency backup? Do you want to offset 50% of your usage or maybe all of it?

Here are some things to consider to help you make your decision.

  1. Do you have lots of roof space or open area? If you’re trying to go completely off the grid or offset all your usage, you’ll probably need a decent amount of space to go solar.
  2. Have you already invested in energy conservation and efficiency? Solar is much cheaper than it used to be but nothing can compete with just using less energy. Also, the more efficient you are, the less solar you need to buy. Most homes can’t go completely off the grid or offset 100% of their usage without reducing their usage first.

Green Power Providers

If you’re trying to go solar in North Alabama on a home AND you want to connect to the grid, you’ll need to participate in the Green Power Providers program from the Tennessee Valley Authority (TVA). This program gives structure to how you connect to the grid and sell your electricity.

More on that later. For now, you’ll need to confirm that your local power company participates in the program.

If they don’t participate, it isn’t the end of the world! Perhaps they’ve never had anyone ask. We’ve seen utilities join the program just because someone asked them to. Ask to speak the to the general manager and respectfully ask them about participating in the program.

Before you do this, you’ll want to continue the process so you can talk more intelligently to them about exactly what you want to do on your home such as how your return on investment is affected by their lack of participation and the local economic impact of your solar installation.

Understanding Pricing

There are a lot of moving parts to understand. Let’s break them down.

Residential solar in North Alabama is selling for about $3.00 per watt before tax incentives. For example, the average home in North Alabama installs 5 kilowatts (kW) of grid-connected solar. This would cost about $15,000 before tax incentives.

A homeowner can expect a 30% federal tax credit if you have the taxable income to take the credit against. If you’re able to use the 30% federal tax credit, this would bring the total cost down to $10,500.

We recommend that you consult a tax professional before making this decision.

Additional incentives, such as accelerated depreciation, are available to businesses and can shave 2-3 years off the payback time. Also, businesses can expect lower costs per watt since they typically install larger systems and can take advantage of an economy of scale that homes cannot.

Now on to budgeting!Going solar in North Alabama

As you’ve seen, solar in North Alabama does cost a good bit of money, and you may not have that kind of cash sitting around. Today we’ll talk about financing home systems. (Financing business systems and innovative financing mechanisms will be the subject of future posts.)

Basically you have two and a half options to pay for home solar in North Alabama.

  1. Pay cash.
  2. Use traditional financing. This can take many forms, but the idea is the same. The cheapest form of financing is likely to be a home equity loan, but you can also get unsecured loans for the system. But if you do this, you’ll still likely need to put some money down.

Well, there is one more option… But that’s another post for another day. Long story short, you CAN add it to your mortgage at the time of purchase of a new, or a new to you, home. On 30 year mortgages, this is cash flow positive… you make money starting in month one! We’ll explain more later.

Last note on budgeting: If you decide to go with battery storage, even for a small system, you should know what kind of pricing to expect. Most battery storage systems add about 60-70% additional cost. So if your solar system is expected to cost $10,000 and you want to add battery backup, you should expect to add $6000-7000 to the total project cost.

This extra cost isn’t without benefit though. With an extra investment you’ll be able to completely disconnect from the grid and rely wholly on yourself. Of course battery technology continues to fall in price. Dramatically. This will only become a better and better decision over time.

Getting a Preliminary Analysis

So you know that your property is feasible, and you know what you want to do and have a good idea of how to fund the project. Now it’s time to really get started. And here’s where we come in.

If you’re in North Alabama, we can provide a free preliminary analysis for you. The point of this analysis is to let you know exactly how much energy you can produce on your property, how much it is expected to cost based on current market pricing, and an estimated return on investment.

Is Solar Right for You?

Schedule Your Analysis

After the Preliminary Analysis – Dealing with TVA

Once you’ve seen the results and are happy, you’re ready to move on. The next step is reserving your spot in TVA’s Green Power Providers (or convincing your local utility to join if they’re not already participating). Concurrent with that you’ll begin working on the engineering drawings of your system.

*Note: If you are installing an off-grid or behind-the-meter system, you do not need TVA’s approval. You are only required to get their approval when energy will be sent to the grid.

First you’ll file what is called a capacity reservation request (CRR) with TVA. This essentially reserves your spot in line while your application is reviewed and your engineering drawings are finished. We should note that while this reserves a spot in line, there really isn’t a line. At least right now… CRRs are usually approved in just a few business days.

We can help you find a company to build your solar power system drawings, or you can work with a North American Board of Certified Energy Professionals (NABCEP) company on your own. You’ll need a NABCEP professional in order to connect to the grid. At this point in the process you should expect to pay a professional. Engineering drawings typically cost between 10-15% of your total project cost. If your project is expected to cost $15,000, you should expect drawings to cost $1,500 to $2,250.Going solar in North Alabama

Once your CRR is approved by TVA, they will send you a contract called a Participation Agreement Request (PAR). This contract details the terms of what TVA will pay you for the electricity you generate. PARs are usually approved quickly as well but you should expect about one to two weeks depending on their workload.

As of June 15, 2016, TVA pays retail rate for 20 years. Currently, retail rate for much of North Alabama is about $.10/kWh. If in 5 years the retail rate you pay is $.12/kWh, TVA will then be paying you $.12/kWh. This will go on for the 20 year length of the contract.

TVA gives a great rundown of how their portion of the process works.

Once you fill out and sign the PAR, it goes to the local power company (someone like Huntsville Utilities, Joe Wheeler EMC, or Athens Utilities) to be approved. After the local power company approves the application, TVA will review and approve the application.

During the CRR and PAR process, someone can act on your behalf, such as the solar company you are working with. Of course you are kept in the loop, but you don’t have to get involved in every small item unless you really want to. This helps keep the project moving.

Ready to Install

When TVA notifies you that the PAR has been approved, you are able to purchase and install your system. You have 180 days from the date of notification to finish the installation of your system.

TVA requires a NABCEP certified installer and a licensed electrician to complete the install. Even if it weren’t required, you want it! That’s the only way to know you have a company that knows what they’re doing.

Note: Some municipalities, like Huntsville, may require you to pull a building permit. Make sure to check with your local government prior to beginning construction!

The solar company you are working with will also receive the PAR approval notification. Upon completion of the installation, the local power company will test the system to make sure it is operating safely. The local power company will notify TVA when the testing has been satisfactorily completed.

Almost done… Receiving your credits

Well, the hard work is done, but you still have one more major item to complete. Every local power company is different, but most will credit the amount of your generation on your bill.

You will have two meters. One for consumption (your existing meter) and one for generation. If you consume 1000 kWh in a month and produce 800 kWh of solar that month, you will owe the utility company for 200 kWh of energy. If you produce 1000 kWh and consume 800 kWh, they will owe you for 200 kWh of energy.Going solar in North Alabama

Some utilities will credit your bill and carry over your credit whereas some will pay you out monthly or regularly. You’ll need to verify this with your local power company.

The key point here is to verify that you are receiving your credits and that they are accurate. Almost all solar systems also come with remote monitoring, not to mention you have a second meter. Remember, many local power companies have not dealt with very many solar projects, and as such, may not have all their internal processes in place. It is your responsibility for making sure you are appropriately credited!

All done! Enjoy your clean, renewable solar energy system! 🙂

Have more questions? Feel free to contact me via email at dtait@alcse.org