OUR GREAT MINDS

    by Tina Olivero

    Conservant Systems Provides Thought Leadership on the Electrification of Energy

    The electrification of energy is one of the most important transitions the world is making today. Conservant Systems is a leader in this space, providing thought-leadership and insights on why this transition is so important. Their team has deep expertise in energy storage, electric vehicles, renewables, and grid modernization. They are committed to helping their clients make the most of this opportunity and create a more sustainable future.

    The OGM had the opportunity to interview Chris Roman, Energy Efficiency Expert and Certified Energy Manager of Conservant Systems and an energy industry professional to discuss whether complete electrification is worth it, or if we should be finding other ways to become more energy efficient. 

    The OGM: In its simplest terms, what does electrification mean to you?

    Chris Roman: Electrification is the process of designing or changing machinery to use electricity as a fuel source. This practice is also commonly referred to as “fuel switching”. Cars converting their combustion engines to use batteries charged with electricity is the most common example today.

    The OGM: Why is electrification important for a sustainable future?

    Chris Roman: The premise is that machinery that runs off of natural gas has a bi-product that pollutes the air, in the form of carbon dioxide (CO2). In order to pollute less CO2 to the atmosphere, we need to change the fuel that our machines run off. If enough machinery is converted, we should be extending the useful life of our planet and have a more sustainable future.

    The OGM: How do companies be more “electrification” savvy and how do they ensure their properties are more electrified, cost-efficient, carbon-efficient, and still remain profitable?

    Chris Roman: To become more electrification savvy, a building owner would need to understand the type of equipment they have within their facility. Different facilities are going to have much different equipment in them depending on the type of business they are running. Obviously, the equipment that consumes natural gas is the target to electrify or look for ways to reduce the overall need for the equipment to consume natural gas. Boilers are a great example of this opportunity. One proven way to reduce, or eliminate, the need for a boiler in a commercial or industrial facility is the HEDS technology. More information about HEDS and how it is helping companies become more energy efficient / electrification savvy can be found here.

    The OGM: What are the major inhibitors to adapting electrification solutions and how can we overcome them?

    Chris Roman: I think there are two main inhibitors to adapting electrification on a macro level. The first, and easiest to overcome, is the education on what that term means and what that might mean to the day-to-day operations of a facility. The second is a sound understanding of the concept within the engineering and facility management worlds. The practice of designing facilities and maintaining facilities is fairly staunch in a practical/traditional approach. There are a lot of risks that engineers and facility managers take on when trying new ideas or implementing emerging technologies. Therefore, blindly adopting a new, or different, strategy is something that is going to take some time to circulate throughout those communities.

    The OGM: How does a company go about getting an energy audit?

    Chris Roman: Energy Audits are the first key to reducing your operational costs; utilities, maintenance, etc… The type of Energy Audits that everyone should be looking to obtain are ASHRAE Level 1 & Level 2 Energy Audits. Level 1 audits range from $0.08 per square foot to $0.15 per square foot. A level 2 audit ranges from $0.15 per square foot to $0.25 per square foot. On a 100,000-square-foot facility, a level 1 and 2 ASHRAE audit would run $23,000 on the low end. These necessary auditing costs will be recouped in the energy savings measures derived, however, there may be no need to pay for energy audits depending on your local utility. I live in San Diego, and San Diego Gas & Electric (SDG&E) is our local gas and electric utility.  SDG&E offers a no-cost Comprehensive Audit Program (CAP) where you receive ASHRAE Level 1 and Level 2 audits. A link to their program can be found here. If you are interested in an Energy Audit, of any type, I would encourage you to contact your local utility and our account representative and inquire about what customer audit programs may be available. Chances are they will have something to get you on the right track.

    The OGM: Is electrification really worth it?

    Chris Roman: Electrification is really in the eye of the beholder. While I believe everyone wants to do the right thing, a lot of it really comes down to practicality and cost. Some facilities may be too complex to adopt electrification strategies, some facilities might not have the investment opportunities available to them.

    As far as the value of electrification an obvious place to start is the cost of the units on average. Paying a utility for one kilowatt-hour is going to run you $0.10 to $0.30 depending on where you live in the country. Paying the utility for one unit of natural gas (Therm) is going to cost you $0.70 to $1.25. There is an obvious cost-saving for switching fuels. However, the engineering analysis that needs to be completed is to ensure that the equipment wouldn’t consume more electricity, at a lower cost per unit, and still increase your overall monthly utility bill. While the kilowatt-hour is much cheaper it also carries much less “work”, or BTUs, than its carbon-intensive counterpart, natural gas. One kilowatt-hour has 3,412 BTUs while one unit of natural gas contains 100,000 BTUs. The energy analysis would yield the cost-effectiveness of electrification and the outcome could be very different for different folks. The final cost variable to consider is the projected cost of electricity over time versus the projected cost of natural gas over time. Looking at the Consumer Price Index (CPI), calculated by the U.S. Bureau of Labor Statics, can help bring these numbers into focus. Obviously, past performance is not purely indicative of future performance but it is a decent indicator to monitor.

    Link: Prices for Electricity

    Over the last 109 years, electricity experienced an average inflation rate of 1.54% per year. In the last two years on the graph, 2021 & 2022, the electricity inflation rate has been 3% and 7.5% respectively.

    Link: Prices for Natural Gas

    Over the last 97 years, natural gas experienced an average inflation cost of 3.38% per year. In the last two years on the graph, 2021 & 2022, the natural gas inflation rate has been 16% and 15% respectively.

    Therefore, historically, there is a cost value reduction hedge towards electrification based on the inflation of the two units of energy.

    The OGM: What incentives are on the horizon for the implementation of electrification systems?

    Chris Roman: Incentives are driven by the local utilities. Investor-Owned Utilities (IOUs) are driven by policies set by the State and the Utilities Commission that govern each territory they are assigned.  Therefore, it becomes important to understand the policy around fuel switching for each State in the Union. In May of 2o20, the American Council for Energy-Efficient Economy (ACEEE) released a policy brief on the state policies. The figure below highlights the five different categories that the governing policies fall within.

    Link: Fuel switching policy brief

    The reason we need to understand the policy focus is that their policies will dictate if a utility can, or will, offer a utility incentive for electrification. Keep in mind that fuel switching can go both ways, electricity to natural gas, or natural gas to electricity.  However, we are focusing on only one way of fuel switching for electrification and that is natural gas-consuming equipment converted to equipment that consumes electricity. The policy category that ACEEE has identified that alludes to supporting electrification is the “Fuel switching or substation encouraged through guidelines or fuel-neutral goals”. This verbiage is indicative of a policy in place that allows for flexibility. The states that have these policies in place are California, New York, Vermont, New Hampshire, Tennessee, and Alaska. These states are the states that are most likely to provide incentives for fuel switching/electrification. Most of the electrification projects would be classified as Custom Incentive projects and would yield incentives. Custom incentives set by SDG&E are $1.25 per unit of natural gas (Therm).

    There are also new pilot programs emerging in the state of California that are focusing on reducing Green House Gas (GHG) Emissions versus the specific units of energy we mentioned above. One pilot program that brings electrification into focus is SCEs called the Clean Energy Optimization Pilot (CEOP) Program. Pilot programs always have the ability to become a “mainstream program”, but that evolution is highly dependent on the program’s success/cost-effectiveness. SCEs GHG reduction pilot program supports electrification in a big way. As we discussed before natural gas, or Therms, are very carbon-intensive. You can reduce a tremendous amount of GHGs annually by executing electrification projects and receive a very hefty incentive per unit of GHG reduction. The value of each unit is somewhere around $600 per unit reduced year over year.

    Source and Images: www.conservantsystems.com

    Tina Olivero

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