How understanding your Energy costs can save you Green this Summer
August 08, 2016
(This article is part of the Roadmap 2 Summer Series. Click here to read last week’s article.)
With above-average temperatures kicking off the season in much of North America, this summer is shaping up to be one of the hottest ever. May and June both joined the record books as the warmest on record, according to the National Oceanic and Atmospheric Administration (NOAA). June’s average temperature in the lower 48 states was 71.8 degrees Fahrenheit — 3.3 degrees above normal.
With summer temps hitting record levels, building owners and managers are looking for ways to control energy costs. Your energy spend is a big part of your budget, and there are two main ways to impact it: reducing the amount of energy consumed in your building and reducing how much you pay for that energy.
Many factors can impact energy rates, including weather, increased summer consumption and demand, and whether you are located in a regulated or deregulated state. Gaining a better understanding of how your energy cost is calculated is the first step toward reducing the impact on your bottom line.
Regulated or deregulated?
It is important to know if your building is located in a regulated or deregulated state or province. If deregulated, consumers have the ability to purchase electricity on the open market from the supplier of their choice. Consumers are still connected to a specific utility that owns the infrastructure and delivers electricity to the customer; the choice lies in choosing the commodity supplier. A handful of states and provinces offer consumers this option. If you are in a deregulated area, Trane offers services to help you negotiate and procure electricity at a lower cost.
On the flip side, customers in a regulated market are unable to buy electricity on the open market, but they still have opportunities for cost savings; Trane can help such customers realize these opportunities.
In regulated states and provinces it’s important to pay attention to tariff rates. Tariff rates are typically determined based upon a number of factors, such as the size of the building, past utility demand of the building and geographic location. Because this cumulative formula can be complicated, utilizing the expertise of a partner like Trane helps you gain a better understanding of your utility rates and how they are applied. Trane can also help you find solutions that minimize costs and manage energy demand, for a positive impact on your bottom line.
Understanding peak demand
Another important factor to understand about your utility costs is how much you are paying in demand charges, which are typically much higher in the summer as utilities attempt to manage power production in the face of increased demand. Many commercial customers are charged both for actual energy usage and for demand — which measures when energy is being used.
Energy consumption is typically measured in kilowatt hours, while peak demand is measured in kilowatts. Most utilities have seasonal pricing, with higher prices in the high-demand summer months. Rates are also often higher during working hours than on nights and weekends. This is referred to as “on peak” versus “off peak.”
While off-peak pricing tends to stay steady year-round, on-peak prices can vary significantly from winter to summer. Depending on the contract, the demand charges you pay can even exceed usage charges in the summer. Shifting some of your energy usage to off-peak hours during the summer — through technology such as thermal ice storage, for example — can help save you significant money in demand charges.
Even in a deregulated state or province — where many supply contracts use fixed prices per kilowatt hour — peak demand can still have an impact on energy costs. This is because peak demand can show up in the price calculation of a future contract, when your building’s peak demand history may be used to determine your price.
Because most commercial customers are financially impacted — either now or in the future — by demand, it’s critical to monitor and manage peak demand to avoid excessive charges.
Taking steps to lower costs
One obvious way to reduce your energy costs is to reduce energy consumption. Ensuring that your building is properly insulated, turning off lights and unplugging equipment when it’s not in use are some small steps that can help you improve efficiency — and reduce your utility bill.
Paying attention to when your building uses energy — and better managing the load — will also pay off in energy savings. Trane offers peak load management solutions that help you monitor and predict peak demand windows, so you can shift some of your building load to when energy is cheaper. In addition, having a flat, predictable building load profile can contribute to favorable energy pricing from suppliers.
Today’s building systems and equipment can provide real-time data to help you better manage peak demand. Systems and equipment can also be automated to respond to peak demand signals by adjusting setpoints or slowing fans.
Your energy purchasing strategy is important. If you’re going to take measures to reduce peak demand, you need to make sure your contract allows you to benefit financially from that — rather than simply driving down the cost for your supplier. It’s important to coordinate any demand-side reduction efforts with your supply-side contracting when you’re located in a deregulated state.
Trane has the expertise and market intelligence to help you negotiate the most favorable contract terms — and to help you find ways for your building and systems to use energy in the most efficient way — so you can beat the heat this summer without paying a premium in utility costs. To learn more, visit our site or have a local Trane representative contact you.
Join us next week, when we discuss how renewable options and sustainability efforts can help you reduce energy costs.