Re: [Phys-l] Efficiency problem

[Hugh Haskell <haskellh@verizon.net>]

I'm currently reading Peter Fox-Penner's New book "Smart Power: 
Climate Change, the Smart Grid and the Future of Electric Utilities." 
At one point he talks about a new scheme to make it easier to afford 
energy efficiency programs. Hers is what he has to say about it (from 
p, 150):

> Finally, EE [energy efficiency] can simply be turned over to the 
> private sector. There are already several dozen for-profit firms 
> known as "energy service companies" (ESCOs) that specialize in 
> designing and installing EE measures. When working independently 
> ESCOs frequently use a shared savings business model. the ESCO 
> rasies its own capital and pays for all of the cost of efficient new 
> equipment in someone's structure, such as a new commercial air 
> chiller in an office building. The chiller lowers thepower bill of 
> the customer for its entire lifetime, compared to the power bill 
> with the old, inefficient chiller. The ESCO signs a contract that 
> allows it to receive and keep most of the difference between the old 
> and new power bill until it earns back all of the capital it spent 
> on the new chiller, plus a profit. After it has been repaid, most of 
> the bill savings reverts to the customer.
>
> Even more than utility programs, ESCOs and their shred-savings model 
> would seem to be an ideal solution to the main EE barriers. Because 
> they spec, install, and provide the capital for an EE measure, the 
> customer sits back and does almost nothing while an experienced firm 
> does all the work and pays for everything out of its pocket. The 
> customer sees only a lower power bill with no capital of its own 
> ever needed.
>
> Unfortunately, the economics of the shared savings model severely 
> limits the markets and technologies ESCOs can install and still earn 
> a profit. In commercial buildings, ESCOs find it difficult to get 
> customers to agree to measures and terms that tap the full EE 
> potential of a customer site. Instead they usually settle for doing 
> the easier measures with rapid paybacks without installing the 
> bigger, longer savings measures. This phenomenon is less of a 
> problem when ESCOs contract with government agencies, who operate 
> under mandates to tap as much of their EE potential as they possibly 
> can. Outside the government sector, however, the for-profit 
> efficiency business can't tap nearly as much efficiency potential as 
> utility or publicly funded programs.

This same model can be followed by a utility when installing EE 
features for a customer, public or private. Utilities can also 
undertake to construct renewable or other high efficiency power 
generating systems under a similar arrangement call a provider 
purchase agreement (PPA), where the power utility agrees to install a 
power generating system and guarantees to provide a certain amount of 
power to the customer at an agreed price in advance (with built-in 
escalation to take account of inflation) for a fixed term, during 
which the utility owns the generation system and is responsible for 
its maintenance and operation. After a fixed period, depending on the 
capital cost involved, the system reverts to the ownership of the 
customer, who they pays only for operating and maintaining the 
facility for the remainder of the system's life. This also seems to 
be a model that is particularly will-suited to governmental agencies 
or non-profit groups, however, it doesn't appear that it is 
particularly well-suited to the issues faced by Bluffton. However, an 
ESCO-based arrangement might be found to be workable if the price can 
be made sufficiently attractive.

Hugh

--
Hugh Haskell
mailto:hugh@ieer.org
mailto:haskellh@verizon.net

So-called "global warming" is just a secret ploy by wacko 
tree-huggers to make America energy independent, clean our air and 
water, improve the fuel efficiency of our vehicles, kick-start 
21st-century industries, and make our cities safer. Don't let them 
get away with it!!

					Chip Giller, Founder, Grist.org