Industrial briefing state and utility partnerships - nicol

John Nicol, P.E.Industrial Program Manager

Rayburn House Office Building

Washington, D.C.

September 22, 2010

Successful Engagement of

Manufacturers Through

a State-wide Program

Speaker’s Experience

Managing energy efficiency promotion programs since 1988

At eight different utility-run programs

Started programs for Ameren Illinois Utilities in 2008 and the state of Hawaii in 2009

Managed the Wisconsin State-wide Industrial Sector program since 2001

Wisconsin’s Unique Approach

“Focus on Energy”

Funded by Wisconsin’s electric and gas rate-payers

State-wide program since 2001

Unique targeting of the industrial sector

Wisconsin’s Focus on Energy

Residential program

Business programs

•Schools and government

•Commercial

•Agricultural

• Industrial

Barriers to Industrial Energy Efficiency

1. Project identification ability

2. Ambiguous project information

3. Technical risk

4. Savings risk

5. Low return on investment

6. Limited capital

7. Limited staff resources

8. No upper management commitment

9. Company culture

Industrial Market Challenge

Most efficiency programs do not directly target industrial customers because:– Facilities and process are much more complex

– Need strong expertise for credibility

– Need additional program infrastructure to effectively impact industrial processes

– Still have enough savings potential in other markets sectors

Industrial programs are much more cost-effective than other sectors

Wisconsin Industrial Opportunity

More than 12,500 industrial facilities – 36 percent of energy used in Wisconsin– Similar to percentage of U.S. energy use

Key energy-intensive markets or “clusters”– Pulp and paper– Food processing– Metalcasting– Plastics– Printing

Clusters account for 65 percent of industrial energy use and 23 percent of the state’s total energy use

Over 2,000

industrial facilities

have done projects

with program

support since 2001

Program Tools - Labor

Fact sheets/case studies

Training and education

Cluster best practice guidebooks

Technical assistance/cluster experts

Energy plan training

Energy team assistance

Program Tools – Incentive Money

Feasibility study incentives

Equipment tune-ups

Special emerging technology support

Staffing grants

Project incentives (primary tool)

Project Incentives

To overcome barrier of a too low return on investment

Strive for “tipping point” for project decision Typical incentives at $0.05/kWh + $150/kW,

or $0.50/therm Greater than 1.5-year payback and less than

four-year payback Up to 30 percent of project costs Incentive cap at $250,000 per project Results in about a 0.5- to 1.0-year payback

reduction for the company

/ = per kWh = kilowatt hour kW = kilowatt

Staffing Grants

To overcome “limited staffing” barrier

Demonstrate benefits of additional staff for

energy management

Up to $100,000 to pay for energy manager

Competitive request for proposal

Very significant savings resulted and very

cost-effective

Emerging Technology Support

To overcome perceived higher risk

Vetting of:– Technical claims

– Market potential

– Business health

Investment portfolio ($5 million)

– Equity in company selling technology or

– Project loans or capital lease for customers

Provides strong value to industry

Focus on Energy’s Model for Collaboration

Work with all key stakeholders to

understand their missions relative to

efficiency

Develop program elements to leverage

stakeholder mission and services

Provide leadership for energy efficiency

promotion across all stakeholders

Collaboration With Stakeholders

Industrial companies

– Meet with them to develop the program to meet their needs

Trade allies

– Develop programs to support their sales of energy-efficient equipment and services

Utilities – gas and electric

– Team with utilities to reach out to their customers

Collaboration With Stakeholders

Associations – clusters– Team with trade associations to reach out to their

membership

Wisconsin Manufacturing Extension Partnership (WMEP)– Coordinate with WMEP to add efficiency with lean

manufacturing

Environmental Protection Agency (EPA) and Wisconsin Department of Natural Resources – Use EPA tools

Department of Energy

Collaboration with Stakeholders

Department of Energy (DOE) (MOU 2008)– ARRA funding for large projects ($14 million)

– Technical trainings on DOE tools

– Save Energy Now Assessments• 50 percent cost match

– Save Energy Now Leaders (13)• Cooperative technical support

– Superior Energy Performance – Pilot• Testing new U.S. and Institute of International Organization

for Standardization (ISO) standards

MOU = memorandum of understanding

Wisconsin Industrial Program

Program impact since July 1, 2001

– Electric savings = 484,053 megawatt hours per year

– Electric demand reduction = 75 megawatts

– Gas savings = 37 million therms per year

– $820 million of lifetime energy savings

– $188 million of avoided new power plant ($2,500 per kilowatt)

– $120 million of total program costs

Therefore, very good benefit-to-cost ratio

Program Lessons Learned

Listen to needs of industry sector to build program credibility

Provide solid technical and business support

Use program tools to teach customers to “fish” on their own

There are many projects waiting to happen in industry that just need to be “tipped” with an incentive

Program Lessons Learned

Even most large companies do not have a pro-active energy management plan or energy teams

Advantages of larger state-wide program over utility territory programs include:

– Bigger impact on equipment vendors

– Leverage multiple company facilities

– Work with state-wide associations

Programmatic Gaps

Incentives for project costs more than $2 million– Program project incentive caps at $250,000

Effective loan or leasing program

Combined heat and power support– Large projects

– Unaligned motivation for utilities

Combined Heat and Power (CHP)

Produces both power and usable heat

Typical power generation is 35 percent efficient while CHP is 60 percent to 70 percent

One of the largest industrial efficiency opportunities

Is distributed within the electric grid, so reduces transmission requirements

Regulatory Barriers

Environmental compliance

– Real and perceived

– Reduced emissions from reduced energy not usually counted in environmental impacts

Accounting issues for capital

– Financing ability is big issue

– Capital leases

– Operating leases

Multiple Efficiency Benefits

Business survival– Typical industrial businesses can save more

than 20 percent of energy costs through increased efficiency

Environmental benefits– Increasing efficiency is one of the most cost-

effective solutions

Reducing future utility rate increases – Energy efficiency programs cost less than $500

per kilowatt (kW) while it costs more than $2,500 per kW for new power plants

Conclusions

Potential to reduce industrial energy use by 20 percent to 50 percent with national program

Many in the industrial market could benefit from technical support and incentives

Need to overcome the disconnect between the energy operating budget and the capital budget

Need to develop policy and rates that appropriately support distributed generation and combined heat and power (CHP)

Conclusions

Properly structured industrial programs can be

very cost-effective to reduce energy costs for

industrial companies and utility rate payers

There are many good potential projects in

manufacturing facilities that just need to be

“tipped”

This type of cost-effective program targeted at

industry could be applied nationally and

provide a greater impact on the market

Contact Information

John Nicol, P.E.Industrial Program Director

RW Beck

5609 Medical Circle, #201

Madison, WI 53719

608-277-2941

[email protected]

RW Beck is a Science Applications International Corporation (SAIC) company