March-April 2011

Such Great Heights

Energy management systems boost efficiency and distributed energy to new highs, thanks to the financial benefits that bring fast return on investments, government support, and an enhanced relationship to the smart grid.

With millions of buildings and billions of dollars to save from efficiency, the rapid growth of energy management systems (EMS) and demand response services are providing a spectacular boost to the distributed energy industry in the US. In fact, EMS is the ideal partner for onsite generation, thanks to the financial benefits that bring fast return on investments, government support, and an enhanced relationship to the smart grid.

The marketplace for EMS is huge and will surpass $6 billion by 2014, according to Pike Research, a Boulder, CO-based consultancy focusing on global clean technology markets. The prediction could be conservative, considering that the US plays host to approximately 70 billion square-feet of commercial building space. For hardware suppliers, software/application vendors, service providers, and energy service companies (ESCO), it’s a golden opportunity, and Pike has declared that the field is wide open. Despite strong returns on investment for EMS, just 14% of the market potential has been tapped, so there’s a significant opportunity for new industry players. That isn’t to say that many seasoned players haven’t been enjoying steady growth in these sectors. But 2010 may well be remembered as the year that the Federal Energy Regulatory Commission (FERC) put Order 719 into the marketplace. (See FERC Order 719.) By mandating that a utility’s customers have the right to bid and collect fees in different types of services that were previously unavailable to them (such as demand response and curtailment), steady growth has been replaced with phenomenal growth, and it’s pushing rapid advances in both EMS and smart grid technology.

Raising the Grid’s IQ
The full potential of EMS and demand response depends upon a smart grid that can maintain reliable power and communicate information securely. While recent assessments of the grid rank about the same as the rest of country’s long-neglected infrastructure, it’s getting some attention from the federal government’s stimulus plan, with a budget allocation of about $4.5 billion. Secretary of Energy Steven Chu recently launched a round of stimulus funding set at $620 million for 32 smart grid demonstration projects, and the Secure Interoperable Open Smart Grid Demonstration in New York and New Jersey represents a good example of what’s needed to move ahead.

The demonstration is an effort between New York utility Con Edison and the nation’s second-largest defense contractor, The Boeing Company, St. Louis, MO. What does the Department of Energy (DOE) expect to gain from awarding a $45.39-million grant to this team? Nothing less than a “. . . scalable, cost-effective smart grid prototype that promotes cyber security, reduces electricity demand and peak energy use, and increases reliability and energy efficiency. The system will include renewable energy generation, grid monitoring, electric vehicle charging stations, transmission automation, and consumer systems that will help expand the use of renewable energy and lead to greater consumer participation in the electricity system.” All reasonable goals, but, not surprisingly, many aggressive companies aren’t waiting for government money when it comes to reducing electricity demand and peak energy use.

For example, the Building Technologies Division of Siemens Industry Inc., Buffalo Grove, IL, already enjoyed a strong track record in EMS services, yet, in October of 2010, it announced that it was acquiring Site Controls LLC, an Austin, TX-based provider of enterprise-wide energy management solutions for multi-site commercial businesses.

Site Controls’ energy management platform, Site-Command offers real-time centralized visibility and control of multiple locations from a central point and nicely supplements Siemens’ portfolio of building automation and HVAC control solutions. The company is banking on Site-Command and a sister product, SureGrid, to establish a leadership position in both retail and commercial markets, such as financial, big box retailers, fitness clubs, convenience stores, and restaurants.

Retail chain operations are ideal for EMS services, notes Dan Kubala, marketing director, Building Technologies Division. “There are over one million buildings operated by chain retailers in the US, so there’s a huge impact in that market. But vendors have not heretofore been successful in really solving the problem of chain operators. And that’s an enterprise and information problem, not necessarily a hardware problem.”

The Cloud’s Silver Lining
Leveraging technology and the cloud allows software to do the heavy lifting, explains Mike Frost, senior director of national sales, Building Technologies. The cloud is industry vernacular for a data server that keeps track of all energy-related information from a chain of retail locations. “We take all data from stores scattered across the country and roll them up into a collective real-time updated status. So we can quickly identify which stores need attention immediately, and why.”

Photo: EnerNoc Site technician Rob Kenerson explains the operations of the EnerNoc Site Controller to a customer.

To take advantage of profitable demand response programs, Site Controls expanded its energy management platform through SureGrid, a turnkey energy aggregation and demand response solution for reducing peak power demand when the electrical grid is under stress. “It’s a great opportunity for retailers as the backbone of a smart grid,” he says. “Peak demand tends to happen within large metropolitan areas and stores are creating a lot that load.” With its cloud-based server, SureGrid can connect thousands of buildings to a utility.

Then, a retail chain can curtail a set number of megawatts that could come from different buildings on a day-to-day basis. “Most of these retail buildings are designed for maximum occupancy, but are rarely fully occupied,” says Frost. “So the cloud-based technology can manage energy in a fashion that is unnoticed at the site.”

Kubala cites Michaels Stores, a specialty retailer of arts and crafts, as a typical success story. Michaels has deployed Site Controls EMS at more than 900 retail stores, with more than satisfactory results. “Michaels has been with us for over five years after an initial trial that resulted in a 17% energy use reduction,” says Kubala. “Then, we were able to identify additional sources of savings so that now they are exceeding 27% and looking at 30% reductions over their baseline from five years ago.” Michaels deployed the energy system in 2006 to address HVAC systems and lighting issues. Overall electricity usage dropped by 137 million kWh annually, and carbon dioxide emissions fell by approximately 192 million pounds.

Integrating DE Data
The next logical step Frost sees will be the integration of distributed energy. “We have connected with a lot of customers that are in the pilot stage of adding distributed energy (DE), and we can integrate that data into our energy management platform so the customer can understand how that asset is performing,” says Frost.

According to Steven E. Kuehn, director of media relations at the Building Technologies Division of Siemens, the company has helped many of its performance contracting customers and others with implementing alternative energy and cogeneration methods.

“There’s great potential to bring these various generation and load management packages together so we have smart buildings, smart consumption, and a smart grid,” he says.

The Department of Energy and its National Renewable Energy Laboratory have a similar opinion, and their expectations for energy savings are 50% for general merchandise and grocery stores, and medium box retail. But the DOE’s newest focus is on large office buildings and hospitals. In two reports released in September 2010, the agency provides recommendations on how to achieve 50% energy savings in large office buildings and large hospitals. The reports can be found at: www1.eere.energy.gov/buildings.

Large office buildings certainly can combine distributed energy and demand response for huge savings, says Gregg Dixon, senior vice president of marketing at EnerNOC, Boston, MA. EnerNOC works with more than 100 utilities across North America, supplying demand response and energy efficiency programs. Dixon cites a recent project in the heart of New York City, NY, that demonstrates the financial impact of combining onsite energy with EMS and demand response. The combined heat and power (CHP) plant of One Penn Plaza was commissioned in late November 2010 and uses a 6.1-MW natural gas–driven turbine that provides about 40% of the power for the 70-story high-rise.

Dixon explains that by providing a demand response solution for that plant, building is getting the benefit of CHP and the benefit of credits associated with the New York ISO market. “We’re delivering 20% more value to that project, and it would have otherwise earned just from the benefits of CHP,” he says. “And that reduces the amount of time of payback on a system like that significantly.”

Energy management and demand response are indeed significant components for distributed generation projects, according to the president of the consulting firm managing One Penn Plaza’s CHP installation. Thomas W. Smith, president and CEO of Endurant Energy, Westmont, IL, explains, “Energy management has definitely benefited cogeneration projects. We typically run this plant from 5:30 in the morning to 10 at night to reduce the electric and steam demands for the building. New York has a peak demand problem, and an energy system that can monitor in real-time how much energy we’re producing and displacing is very important. Relative to the project itself, it’s in an area that is very constrained from an electricity standpoint. So when you add 6.1 megawatts of power in a grid-constrained area, it’s beneficial to Con Edison as well as the building.”

Photo: Powerit Solutions The need for understanding the complex technology and regulations has created an opportunity for companies such as Powerit.

Photo: Site Controls To take advantage of profitable demand response programs, Site Controls expanded its energy management platform.

Making money by shutting off DE?
Dixon predicts that as more renewable energy sources contribute to the grid, supplementing power won’t be the only method of benefiting the grid—or profiting from the need of a utility or independent system operator to control power fluctuations. He notes that EnerNOC is anticipating opportunities for distributed energy installations to get paid to shut down as a method of controlling power surges and spikes on the grid.

“Believe it or not, when load is dropping off of the grid in the early evening, you have huge generators that the operators want to throttle down softly,” he says. “But a simple mechanical drop in generation may not be possible, so putting more load on the grid can soften the landing. If you have a combined heat and power plant and can shut down so your facility can consume more power from the grid, it’s an advantage financially because the grid pays extremely well for regulation services. But it’s very complicated to take advantage of this market, and you need a deep understanding of the markets and the technology to make sure that the power production is being measured and settled properly.”

Deeper Savings With Automation
The need for understanding the complex technology and regulations has created an opportunity for companies such as Seattle, WA-based, Powerit, an integrator of EMS solutions and hardware/software products. EnerNOC introduced Powerit to one of their customers, Mission Foods, when the company wanted to take advantage of demand response programs along with an EMS program.

Industries such as food processing are very sensitive to risk issues in the deployment of EMS, says Bob Zak, general manager and president of Powerit Solutions, North America. “You’re talking about the regulation market and fast demand response notice that can be within seconds. It’s managing a reduction in how much power is taken from the grid and how the plant is going to respond and manage their load for financial benefit.”

“You need a cohesive strategy where there are no conflicts,” asserts Zak. “We want to avoid taking any kind of action unless it’s absolutely necessary, and you’ll have mistakes if you try it manually. So automation solves the problem because it can dive deeper into the potential savings while controlling your power system.”

While improved data is an obvious benefit from EMS, the improvements often involve higher quantities at deeper levels of detail. Even with user-friendly graphic interfaces, analyzing the data and integrating it into the complex operations typically found within enterprise-wide solutions can be challenging. Not surprisingly, the challenge is also viewed as an educational opportunity at the University of California, Davis (UC Davis).

James H. Smith, professor of engineering, UC Davis Extension Program, says, “Our Energy Resource Management Certificate Program is designed for professionals in engineering, construction planning, and design and facility-plant operations who seek to expand their expertise in this critical area.”

The six-course (17 units) program focuses on the four key issues in energy management: supply, demand, regulatory, and environmental. “This course was created by a professor who is a former manager at Del Monte food factory,” notes Smith. “It’s targeted at people that run enterprisewide organizations, so we have students in areas such as food processing, and others with large energy needs and demands. Students gain knowledge in how to supply that energy to the organization at a competitive price while complying with regulations and environmental issues.”

The complexity of energy usage will continue to grow, says Mo Rousso, president and CEO of Helio Energy Solutions, Murrieta, CA. “You have energy economics, engineering, and demand and supply,” says Rousso. “Then efficiency and demand response, plus tariffs, schedules, and incentives.”

Helio has to consider all of those factors for a project with a major grocery chain. Initial tasks include focusing on the production line for demand savings and developing usage cases to optimize energy usage, plus the development of benchmarks and metrics within the organization. “They actually want to want to get to the point where they can quantify the amount of energy used to make a loaf of bread,” he says.

Compelling Economics
Such knowledge is equally important when planning a distributed energy project. For example, Helio recently consulted on a photovoltaic power (PV) system for an agricultural project in California’s San Joaquin Valley. The original plan called for a PV system with a pretax internal rate of investment of around 11%. But after Helio optimized the food processing plant’s energy usage with thermal improvements, equipment retrofits, and efficient lighting, the 11% pre-tax estimate skyrocketed to 40%.

“It went from a $4-million project to a $10-million project,” recalls Rousso. “However, when you look at the current finance environment, it’s easier to get money for a $10-million project, and it’s more attractive and efficient for energy usage. There are many distributed energy solutions, and, in looking at commercial buildings, heating and lighting needs are factors. You can look at PV as a peaking solution and also run a microturbine to provide baseline energy, and then have a source of waste heat for various processes, such as an absorption chiller, to cool the building. So if you think of the building as an envelope, you start to create very compelling economic solutions for your client.”

Photo: Helio Energy Solutions While improved data is an obvious benefit from EMS, the improvements often involve higher quantities at deeper levels of detail.

All told, the combination of EMS and demand response could also be the most compelling economic argument for distributed energy. The efficiency of onsite power has always been superior to that of the grid, and that superiority is now subject to substantially improved economics and revenue streams. It’s a winning combination for the retail and commercial building industry, and the energy industry.

Automation was the obvious answer for Jake Nixon, director of process improvement at Oxnard, CA-based Mission Produce. The Mission facility (which was highlighted in the November/December 2010 issue of Distributed Energy) has about 20 power-hungry compressors and other machines spread out over a number of buildings. Moreover, the equipment has to be shut down in a set sequence that would make it nearly impossible to accomplish manually. 

After surveying Mission’s operations, Powerit identified six areas for energy management and demand response automation, including: cold room evaporators with variable frequency drives (VFDs), condensers with VFDs, Freon refrigeration compressors (sequencing and staging), hydro-coolers, ripening rooms, battery chargers, and lights.

Photo: Helio Energy Solutions As more renewable energy sources contribute to the grid, there will be a greater need to control power fluctuations via EMS.

Photo: Helio Energy Solutions

“The Powerit guys did a good job,” says Nixon. “They researched our equipment and the software, and they purchased the same kind of controllers we had onsite so they could program and test them in their own labs. Their onsite installation engineers and product managers stayed through the process to make sure it worked. And then, they were very good about support.” The staff at Mission gained an additional benefit by boosting their knowledge base of the refrigeration equipment and improved transparency of operations with their software.

Zak notes that it’s typical to see additional benefits to the operation rather than just energy savings. “We’ve had people say that they love the energy savings and financial gain, but at the end of the day they like it more for the data and operational benefits they derive.”

FERC Order 719
FERC Order 719 requires utilities, ISOs (independent system operators), and RTOs (regional transmission organizations) to allow their customers to collect fees for demand response curtailment, as follows.

“The Commission required each RTO and ISO to: 1) accept bids from demand response resources in RTOs’ and ISOs’ markets for certain ancillary services on a basis comparable to other resources; 2) eliminate, during a system emergency, a charge to a buyer that takes less electric energy in the real-time market than it purchased in the day-ahead market; 3) in certain circumstances, permit an aggregator of retail customers (ARC) to bid demand response on behalf of retail customers directly into the organized energy market; and 4) modify their market rules, as necessary, to allow the market-clearing price, during periods of operating reserve shortage, to reach a level that rebalances supply and demand so as to maintain reliability while providing sufficient provisions for mitigating market power.”