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Toronto roundtable tackles emerging energy market challenges

Understand the basics
“Management must manage,” noted Mike McGee, president of Energy Profiles, and the first of five panelists.    

“If any of you have ever said, ‘what percentage increase should I apply to my utility budget for next year,’ I would suggest you are not managing,” he says.
   
While energy management can be complex, McGee insists, you don’t necessarily need a consultant.
   
“What you do need are systems, and that can start with an Excel spreadsheet, it doesn’t need to be more complex than that,” he notes. This needs to be combined with proper reporting practices, good market knowledge, and good regulatory knowledge.
   
The essential energy management plan, however, starts with a simple equation: cost = usage (kWh) x price.
   
Dealing with usage, you first have to monitor it. “At a bare minimum, start with that first,” he says. “You have your utility bills. Are they at least recording the usage as well as the dollars? If you do nothing more than monitor that, you’re more than 60% of the way there.”
   
From there, McGee encouraged managers to drill down to the actual load profile by the hour. “This presents a great picture of how your building looks and feels and operates. It gives you the tools to see what is happening and determine how to fix it.”
   
If submetering is required in the property, that can also offer important data, to answer questions like ‘what are tenant loads relative to base loads, how much is my chiller operating,’ etc. It also makes it possible to charge for exceptional usage.
   
McGee notes that the building automation system itself provides status monitoring. “You can get real-time data streamed to your Blackberry, but don’t do that until you start with the basics. Get that utility data in a useful, current format.”
   
Once that information is in hand, it is then worthwhile considering whether the system is as efficient as it should be. For instance, is lighting upgraded to optimal levels? Are the chillers old and inefficient? Can heating or cooling be delivered more effectively. Is daylight being used to greatest effect?
   
McGee went on to pose other questions that facilities managers should consider. For instance:
•    Are you receiving all of the regulated rebates and adjustments you are entitled to?
•    Should you contract for gas or hydro to hedge against uncertainty?  

As McGee notes, it’s important to understand the market and the regulatory environment in which you operate, as well as your own budgets, to make these decisions.

Value and cash flow – speaking the owner’s language
Keith Major, senior vice-president of property management for Bentall Real Estate Services, was the second panelist to speak. His first suggestion for anyone hoping to improve their energy management practices was to go out and get an energy audit.
   
“You can’t do anything unless you’ve got an audit and understand what your building’s consuming and where the opportunities are,” he notes.
   
Major suggests hiring someone to do the audit for you. “In-house, your people are always distracted by other things – questions from tenants, owners,” he says. A focused resource will complete the work much more quickly.
   
With this information, it’s possible to present an owner with an effective energy management plan.
   
“I don’t think you can ever stand in front of an owner and convince them to do an energy retrofit unless you’ve got information in your back pocket (that states) how your building is consuming utilities, when they’re consuming utilities, what your metrics are and how you compare to other buildings,” he stresses.
   
Major noted that real estate trades on two things – value and cash flow. If you can’t provide value and/or cash flow when you’re talking about doing an energy retrofit with an owner, you’re not going to get very far. “After that, you can start thinking about your return on investment (ROI), whether it has a green impact, etc.,” he notes.
   
Major believes that talking to owners about retrofits has been relatively easy over the past couple of years – many are interested in greening their portfolios, and are interested in understanding their overall footprint in terms of total CO₂ produced, as well as kilowatt hours consumed.
   
“You have to translated that information into a pretty macro number that owners can understand from a portfolio perspective because nearly all pension funds and publicly traded companies produce triple bottom line reports,” explains Major. “One of the components of that is understanding overall output, so unless you can provide that, I think you’re missing a piece of what they’re looking for in their overall program.”
   
But Major also believes the market, at least in Ontario, may be softening a little, which will make encouraging retrofits a little more challenging. “The owner is going to say ‘the value of my building just shrunk by 5 per cent in the last year. How are you going to get me back part of the 5 per cent loss?’”

Peak shaving, money saving
Paul Green, director of market development for Enbridge Gas Distribution Inc., and Jack Simpson, vice-president of generation for Toronto Hydro Energy Services, followed with their perspectives on power supply challenges in the years to come.
   
Green noted that natural gas prices have actually declined and flattened over the past year. “Production increases in other parts of North America and supplies of liquefied natural gas (LNG) coming from offshore are expected to offset reductions in production in western Canada,” he says. Gas storage levels for the 2007 heating season, meanwhile, are at a record high.
   
Green believes natural gas will play an increasing role in building management.
   
“I think there’s an opportunity for large consumers to consider onsite electricity generation,” he notes. He pointed out that CSA 282 for standby power generation using natural gas has been approved into the fire code. While this provides an opportunity to use natural gas as emergency back-up power, it’s also potentially beneficial as a peak reducer of electric load.
   
Green also encouraged energy audits as a useful first step to considering retrofit potentials. Enbridge offers audit incentives in the communities it serves, as well as incentives for estimated gas savings. For information on the company’s retrofit and new build incentive programs, visit www.enbridge.com.
   
Jack Simpson outlined some of the power supply and distribution challenges Toronto faces. While a substantial amount of new generation is slated for development in the coming years, “there’s a very aged transmission and distribution infrastructure,” he says. “There’s an increasing reliance on natural gas as a fuel source, and you also have a new dynamic, which is renewable energy. Renewable energy I would characterize as an intermittent power source. When the wind blows you get wind energy. When it doesn’t, you don’t.”
   
Simpson noted that changing weather patterns have made predicting use a challenge as well. For instance, he pointed out that in October 2007, a month in a shoulder season during which a great deal of maintenance work is usually done, demand was higher than normal. He noted that this maintenance window has been shrinking for several years.
   
And while generation prices have held steady in the recent past, Simpson notes that the wholesale price of electricity has risen. He predicts that wholesale and transmission costs are likely to rise 15 per cent over the next five years. Meantime, infrastructure investments will also rise, which will likely mean rate increases at utility companies as well.
   
In other words, the last 10-15 years has been a good period for pricing, and it’s about to catch up with us. “We are going to see perhaps a 20-25 per cent price increase,” Simpson suggests.
   
Simpson believes the key to managing this challenge is to think about retrofits, and also when during the day you use your power. “You want to be able to reduce energy load at peak times,” he stresses. Upgrading back-up generators can be key. Combined heat and emergency power he considers worthwhile for new build as well, or where there’s a comprehensive upgrade underway.

The last word at the session went to Grant Hume, vice-president of sales at Direct Energy. Hume suggested that facilities managers look at the current state of their properties and then consider what the desired state is.
   
“How do you think your energy management strategy should come together?” he asks. “You gain value by taking a slightly longer term view of operations. And who you choose as a strategic energy partner is important.”
   
Hume stressed that communicating your requirements is key. It’s important to have the same values and a common vision that you share with your strategic energy partner. Then, with vigilance, it’s possible to see that vision come to fruition.