Getting A Handle On Energy Costs continued
Power factor level (kVA vs. kW). Are there any "power
factor" penalty charges on the bill? If so, can they
be reduced by utilizing power factor improvement equipment?
The net savings potential for the power factor is 5% to
15% annually, with a three to 12 month payback.
Power factor corrections do not reduce customer peak demand (kW) levels, but do reduce utility delivered real power (kVA).
Figure 1 can be used to conduct a sample billing analysis. Refer to demand charge, total kW, and total kVa components:
- Bill data calculates to a minimum billing power factor of 90%: (250 kW ÷ 278 kVA = 90%).
- 90% minimum results in a demand billing for kW: (278 kVA x 90% = 250 kW).
- Billing 250 kW compared to actual kW (167) results in a penalty of 83 kW at a cost of $9.5299 per kW.
- Total bill penalty is: 83 kW x $9.5299 = $790.98 (16% of total electricity cost is $4,881.14).
What can facility managers do? Determine if power factor is used in calculating electricity cost; calculate power factor penalty costs; and install power factor correction capacitors if payback is satisfactory.
In analyzing natural gas billing, there is another set of factors to examine: tariff schedule appropriateness; usage variability; firm vs. interruptible service; and non-serving utility provided natural gas commodity.
Tariff schedule appropriateness. Considering specific usage characteristics, is the most cost effective tariff schedule being utilized?
Usage variability. Determine if natural gas usage is characterized by any of the following conditions: highly variable; little or none in the summer; bulk of usage in the winter; or other highly variable conditions.
Can a more uniform usage for natural gas be developed? Can an alternative on-site fuel supply (fuel oil, propane air, etc.) be installed that would reduce the variability of usage?
Firm vs. interruptible. If the current tariff schedule rate is firm (non-interruptible), could an interruptible rate be utilized if an alternative on-site fuel supply were installed? Could usage be split into firm and interruptible to reduce costs?
Non-serving utility provided natural gas commodity. Determine if there are tariff schedules available that allow customers to purchase their own natural gas commodity. If so, arrange for an independent marketer to develop a quotation on providing the natural gas commodity at a cost less than the serving utility.
The Role Of Deregulation
As it applies to electricity and natural gas, deregulation is the removal of the commodity portion from the serving utility retail rate so that the retail customer can arrange for the commodity to be provided through an independent third party.
Energy deregulation affects only the commodity portion of the serving utility retail rate. In electricity, the commodity portion of this rate is typically 20% to 50% of total electricity cost. For natural gas, the commodity portion of the rate is typically 50% to 70% of total natural gas cost.
Reduction Of Energy Costs
To review, there are several aspects to understand in planning energy cost reductions. These are: electricity and natural gas usage data (how energy is consumed at the facility); status of energy deregulation; facility energy usage characteristics (How is the energy used?); and commodity cost/usage data (How much energy is used? What is the unit cost?).
The next step is to examine the larger concepts. These include: an effective energy strategy (What is the plan for energy use?); internal organization factors (Who is responsible for what?); and commodity and energy service contracts and their long-term implications.
A Successful Energy Strategy
In creating a reduction strategy, the following should be evaluated: usage characteristics (hours/day, days/week, and usage variables such as high/low usage periods); deregulated commodity purchasing; tariff schedule rate alternatives; combined billing/metering if more than one meter used; on-site backup/peaking generation options; thermal storage systems; and energy efficient equipment.
For natural gas, consider: usage characteristics (usage variables by day, month, season, etc.; firm; interruptible; peak; non-peak); deregulated commodity purchasing; tariff schedule rate alternatives; combined billing/metering if more than one meter utilized; class of service variables (firm, interruptible, peaking).
The Action Plan
Assess the situation. Know the energy budget. Determine what cost reduction activities are being investigated and implemented. Expected reduction rate is between 3% to 8% of energy costs, generally without any implementation expenses.
Preparation for future energy changes should also be conducted. Considerations include: deregulation developments in the state; rate structure revisions (controlled by the serving utility); and changes in facility operational characteristics.
The facility manager must know the current energy purchasing strategies. For electricity, factors include: rate applicability; demand; power factor; voltage level; and usage. For natural gas, considerations include: rate applicability; firm or interruptible service; and curtailable options.
Usage characteristics for each energy type must also be known. For electricity, these are: load factor; load usage; and on-site backup. Natural gas factors are: load characteristics; on-site backup; and bypass (direct connection to an interstate pipeline).
The Sooner The Better
Evaluating energy costs is a valuable use of time and resources. Many organizations are reacting to, rather than planning for, energy costs. To accomplish energy cost reduction programs, facility managers need the right information in the right format.
There are energy cost reduction opportunities in every organization. With the current energy cost instability, now is the time to get started with these strategies. Energy cost reduction requires time and expertise, but delaying the process reduces savings and increases losses.
Studebaker is president of Studebaker Energy Consulting, LLC, an independent energy consulting company located in Lexington, KY. International in scope, Studebaker Energy assists all types of organizations in reducing utility costs. For more information, visit www.studebakerenergy.com.
Have you found cost savings by analyzing your utility bills? Share your successes or challenges by sending an e-mail to avazquez@groupc.com.
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