Risk Management

Energy Upgrades Bring Cool Savings

Companies may not know that on top of the lower costs that energy-conservation projects generate, utilities often will pay for a hefty portion of t...
David McCannAugust 25, 2010

United Electric Controls makes temperature sensors for a variety of commercial needs, yet until now it hasn’t had much wherewithal to regulate the climate at its own 100,000 square-foot headquarters in suburban Boston.

Maddeningly, the company’s manufacturing machinery, which throws off a lot of heat, is located on the building’s sunny side. Keeping that area sufficiently cool in the warmer months has meant that offices were often uncomfortably cold.

The cure was part of a comprehensive, just-completed energy-conservation upgrade that involved retrofitting United’s external air-chiller unit, converting the air-delivery system from constant volume to variable volume, installing new lighting, and other smaller changes. As a bonus to reducing energy costs by more than 50%, saving $150,000 a year, the company got a 40% discount on the work performed.

The two-month project cost $810,000, but United’s electricity supplier, NStar, kicked in $336,000, which was passed on to Bluestone Energy Services, the engineering firm that handled the upgrades. United expects to recoup its $473,000 out-of-pocket cost in three years. “For us, that’s huge,” says finance vice president Brian Hallahan.

NStar’s funding wasn’t generosity. Like at least 34 other states, Massachusetts requires publicly held utilities to include a small charge on customers’ bills that goes into a fund used for energy-conservation projects. The money is allocated for both so-called prescriptive upgrades, where companies are awarded certain fixed amounts for simple work like replacing lighting fixtures; and more-complicated projects involving data centers, chiller plants, or heating, ventilation, and air-conditioning systems. For the latter, called custom projects, utilities usually require that an engineer be involved to help the company through the application process.

Energy upgrades

The first step is to perform an analysis of what can be done, for which the utility usually will share the cost. Then a formal application is made to the utility, detailing what the work will entail and the expected energy savings. Money generally is distributed to projects with strong cost-benefit ratios, says Bluestone president Peter Fairbanks.

Nationwide, billions of dollars are available annually for both electric- and gas-conservation projects, and the total is rising steeply each year because of government-mandated increases in consumer contributions. For example, Commonwealth Edison, the Illinois utility known as ComEd, had a fund of about $8 million in 2008, the first year of the state’s program, after which it rose to $16 million in 2009 and $25 million this year.

Programs that have been around longer, such as those in New England, which began in the 1990s, typically have much higher funding levels. According to the Massachusetts budget for 2010, NStar will have $73 million available for commercial and industrial projects this year, $124 million in 2011, and $153 million in 2012.

An October 2009 report by Berkeley National Laboratory forecast that the total annual amount of funds derived from utility consumers for energy conservation, which was $3.1 billion in 2008, will grow to as much as $12.4 billion by 2020. Much of that increase will come from six states that did not adopt such programs until the past couple of years: Illinois, Maryland, Michigan, North Carolina, Ohio, and Pennsylvania.

Some companies may be unaware of the opportunity. Hallahan says United Electric Controls was only vaguely aware of the NStar program until Bluestone approached the company with an upgrade proposal. “You may have heard about such rebates in general, but not what they are specifically, how to get them, or how much money you can get,” he says. “It’s not that well publicized.”

Utilities are required to communicate to customers the existence of such programs, but they may opt to do so more loudly now, given the funding increases. In exchange for spending a certain percentage of available funds annually, they can take a portion of the kitty as profit.

Meanwhile, data centers provide particular opportunities for energy savings, says Fairbanks. Most such areas, except those built recently, have raised floors, with space underneath into which air conditioners pump cool air. The air rises out of holes in tiles strategically placed under servers, but some of it floats away. That interferes with the efficiency of the air conditioners, which do not operate optimally unless incoming air is a certain amount hotter than the cooled air they’re sending under the floor. In that case, more air conditioners must be used.

Bluestone puts in so-called cold-aisle containment walls to keep cool air where it’s intended to go. Another technique is to install variable-speed fans under the floor that respond to temperature sensors on the server racks, thus providing precisely the amount of cool air required for a particular space.

Those measures recently were employed for the 2,500 square-foot data center of another Bluestone client, biotechnology firm Biogen Idec. The total cost was $180,000, including $53,000 of incentives provided by NStar that went to Bluestone. Biogen should recoup its investment in two years, the engineering firm says.