Archive | 2009


6:00 am
April 1, 2009
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Utilities Manager: Energy Incentive Programs: Are They Worth the Effort?


William C. Livoti

There are numerous opinions on the value of energy incentive programs—and even more opinions on how such programs should be structured. Here, we will ask questions about and discuss the value and purpose of these programs.

What’s in ‘em for you
First, why have the utilities, states and federal government implemented energy incentive programs? The simple answer is to reduce consumption. The more complicated answer is to minimize the risk of rolling blackouts, brownouts and power surges and to keep from having to build new power plants and transmission lines.

Yes, it takes time. Yes, you need to understand the process. And, yes, you must submit proper documentation.

Why federal involvement? Think of the uproar if we were to begin experiencing rolling blackouts during peak demand (or any time for that matter)? The American consumer has very little tolerance for power disruption—in fact, there seems to be a widely held misconception that electricity is a right rather than a privilege. In India and South Africa, though, power disruption, including rolling blackouts, is commonplace. Can you imagine what life would be like if you were allocated power for only 8 to 12 hours a day? Washington simply does not want to deal with the repercussions from the general public. Our state governments have a similar take on the situation.

Why, though, would the utilities offer incentive programs? They just don’t want to invest in additional power plants, transmission lines, etc. Building plants and adding transmission lines calls for significant capital investment. Power plants don’t pay for themselves overnight, you know—it could take 20 to 30+ years to pay for a large one. Consider that it costs roughly $2500 per Kw to build a fossil power plant; around $3000 per Kw to build a renewable energy plant; and 2.4 cents per Kw for energy conservation. Now, do you see why utilities have such aggressive incentive programs?

Are incentive programs really worth the effort? You bet they are! Pump systems offer the greatest opportunity, specifically around Premium Efficient motors, VFDs, controls and positive displacement vs. centrifugal pumps.

Use ‘em or lose ‘em
While justifying a system upgrade on energy alone may not make good business sense, adding the available incentives could make the project viable. In addition, your local utility will provide technical support (assuming they have a program in place). The paperwork is another matter. Yes, it takes time. Yes, you need to understand the process. And, yes, you must submit proper documentation in order to receive federal tax breaks for energy reduction.

For help, the best Website with the most comprehensive information, including links to utility, state and federal programs, is DSIRE (Database of State Incentives for Renewable Energy and Efficiency), located at www. If you don’t feel like dealing with the studies and paperwork by yourself, there are other options. For example, some vendors will perform energy assessments for you, provide cost savings data, develop project justifications and make recommendations on incentives—as well as complete paperwork for same.

Take advantage of incentive programs. Remember the advice to “use it or lose it?” Some utilities have withdrawn programs because of lack of response. Act fast. Don’t wait until energy conservation programs become mandatory. UM

Where to go for additional information: or

Bill Livoti, our new Utilities Manager columnist, is senior principal engineer for Power Generation and Fluid Handling with Baldor Electric Company. He also is vice chair of the Pump Systems Matter initiative. E-mail:

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6:00 am
April 1, 2009
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Utilities Manager: Where Did the Promised Savings Go?

0409-um-savings_ing1Reducing energy use is an important economic decision that should be based on sound financial data, measurements and calculations. Most businesses, though, are making economic decisions based on inaccurate (often inflated) dollar savings projections. Thus, the period needed to recoup their investment is much longer than they have been told. Let’s look at how this happens.

Most energy-saving companies, consultants and government entities use an “average cost per kilowatt-hour (kWh)” to calculate dollar savings for their energy projects. The building owner is told that the “average cost per kWh” times the number of kWh saved is your projected dollar savings. On its face, this is a reasonable and traceable method. In reality, however, it can grossly overstate  the savings.

There are a variety of ways to derive an “average cost per kWh.” Such numbers can come from utilities, government statistics or from dividing the cost—or some portion of the cost—of a bill(s) by the number of kWh used.

As an example, we’ll take a monthly bill from one of our clients that is on the PECO Energy Company (Exelon) High Tension (HT) electricity tariff.

  • This Exelon Website tells us the average price for the PECO HT rate was $0.0505/kWh in 2007.
  • This U.S. Energy Information Agency Website tells us that the average price of electricity to commercial customers in Pennsylvania was about $0.089/kWh in September 2006.
  • If we divide the total cost of the September 2006 bill of $25,012 for our client’s facility by the number of kWh used that month (265,000), we come up with a cost of $0.0944/kWh.


If we reduce the kWh use of this building in this month (September 2006) by 25%, or 66,250 kWh, we come up with the dollar savings calculations using the three “average costs per kWh” numbers shown in Table I.

Any of these three numbers is commonly used to calculate savings. The problem is that they don’t correspond to the actual savings our client will realize.

One reason is that the amount of money that an energy reduction project will save depends primarily on the number of kilowatt-hours of use (kWh) and the kilowatts of demand (KW) reduced each month and throughout the year—not just the kWh reduced. Actual dollar savings depend on how these two are linked through variables such as winter, summer, heating, demand ratchets and rate blocks, just to name a few. Some commercial electricity tariffs are mind-boggling, containing 30 or 40 or more independent and linked variables. It is these complex rate structures that determine your bills and savings.

Research, model and verify
If you want to accurately determine financial savings, you must first research, model and verify the formulae for the rate structures that comprise the applicable tariff. That way, when you plug in the kWh and KW numbers for the month—along with other numbers such as power factor, sales tax, energy efficiency surcharges, etc.—you come up with the same cost as the utility for that month and tariff.

In our example, we’ve modeled the tariff and already know the kWh, KW and cost (and other variables) of the monthly bill. To see the real savings from your energy reduction effort, enter the reduced kWh values into our algorithm of the tariff and calculate the actual bill. The difference between the bill without the kWh reduction and the bill that reflects the kWh reduction is your actual savings (in real life, we would calculate a historical baseline cost for that month and subtract the current month bill from the baseline cost to calculate the real savings). As shown in Table II, we can now compare the “savings” from the three average costs per kWh to the actual reduction calculated from the model of the tariff.

Overestimating savings
Why does simply using average cost per kWh usually lead to overestimation of savings? If we chart the algorithms for this tariff, we can see how all the interlocked variables and rate block costs actually contribute to the bill. This data in Fig. 1 shows the different cost blocks produced by the example facility with its unique kWh use and KW demand relative to the PECO HT tariff (every building uses different amounts of electricity and its interactions with the rate will be different).


Because of the complexity of the interactions between kWh and KW, we can see that there are three different pricing blocks for kWh use. The first block of use is charged at about $0.18/kWh while additional blocks cost much less. Note that this first block accounts for $17,219 of the $25,012 bill.


Here’s the million-dollar question. If we reduce kWh use by 25%, from which blocks did the dollar reductions come? The answer is shown in Fig. 2. In this example—as it is in many cases—reductions are weighted toward the less expensive kWh blocks. Therefore, if most of your kWh reductions come from the block priced at $0.03/kWh, your actual savings will be much less than if you use an “average cost per kWh” of $0.089/kWh.

Businesses need and deserve accurate data and numbers upon which to make sound economic decisions. That’s why it is so important for you to remember that actual dollar savings depend on the structure of the tariff and the electricity consumption of the facility in question.

The only way to accurately quantify savings and paybacks for energy reduction projects is to enter actual kWh, KW and other pertinent values into the algorithm of the tariff and calculate dollar savings against a baseline. Otherwise, your savings will usually be inflated—in some cases by a factor or two or three— and the paybacks on your investments will be much longer than promised or expected.

Paul Grover is CTO of Kilawatt Technologies, Inc., of Shelburne, VT, which provides measured energy reduction services to improve operational efficiency of commercial and institutional buildings. Telephone: (802) 985-2285; e-mail:

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6:00 am
April 1, 2009
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Utilities Manager: Payback From Compressed Air Heat Recovery Systems

Compressed air, considered to be the “4th Utility,” is necessary in most manufacturing plants. The generation of compressed air requires large amounts of energy and can account for up to 10% of a plant’s total energy costs. Up to 93% of the energy required to compress air is converted to heat energy. By recovering and redirecting this heat, some of the operating costs associated with compressed air can be offset. Due to their operating principles and design, lubricated rotary screw air compressors are highly suited to the recovery of the heat of compression. In such units, this heat is removed by fl ooding the compression chamber with a lubricating fl uid. The fl uid is then separated from the compressed air and cooled by the use of an air-cooled heat exchanger. Additional heat can be recovered from the compressed air aftercooler. Cooling air fl ow is generated by the compressor package cooling fan. While water-cooled models are available, the recovery of this heat is more costly and complicated. The amount of heat recovered can vary with heat exchanger effectiveness but is typically 80-90%. Hot air recovered from the compressor can be from 35 F to 50 F higher than ambient. Heat recovery and—subsequently—energy savings are reduced when a compressor is operating at less than full capacity.

Applications abound
There are many different applications for recovered heat of compression. Each offers unique savings opportunities, as well as installation considerations and investment. Potential applications include the following:

0409-payback_img1Preheated make-up air… A preheated make-up air application (see Fig. 1) involves ducting the compressor package inlet outside the building. The outside air is heated as it is used for cooling and exhausted into the space surrounding the compressor. For every cubic foot of air pulled in by the heat recovery system, a cubic foot of air that would have infi ltrated the building at outside temperature is eliminated. Savings are realized because the plant’s primary heating system does not have to heat the air brought into the building by the heat recovery system.

This application can yield signifi cant savings and a short payback period since installation costs are minimized. No extensive ductwork or booster fans are required to connect to the plant’s primary heating system. Additionally, a higher fl ow fan may not be required in the compressor package. In colder environments, care must be taken so that the temperature of the outside air drawn into the compressor package is not so low that it will cause the air or moisture in the lines to freeze. Heat recovery systems are available that can automatically recirculate warm air to maintain a constant temperature inside a compressor package. This functionality also can provide a compressor with the ability to operate in unheated spaces, as well as maintain a more comfortable exhaust temperature.

Supplementary heating… A heat recovery system can also be used to supplement a plant’s primary heating system (see Fig. 2). In this instance, it is desirable for the air to be heated to a higher temperature than in a preheated make-up air application. This type of installation may require more extensive ductwork to distribute the heated air. Consideration must be given to the compressor package cooling fan. Extensive ductwork may necessitate a higher-fl ow fan or downstream booster fans.

As with a preheated make-up air installation, use of a thermostatically controlled heat recovery system drawing in outside air can increase savings by reducing infi ltration while still providing usable heat. A system without this level of control may not be able to heat the outside air to a temperature suffi cient for space heating.

0409-payback_img2Process heating… Recovered heat of compression may be used in process heating such as parts drying and boiler preheating. A benefi t to this application is the high rate of return due to the yearround heat recovery. This also can provide opportunity for heat recovery in warm climates. One installation consideration is proximity of the compressor to the point of usage. In addition to minimizing heat loss through ductwork, the cost of ductwork and booster fans will be minimized by placing the compressor close to the point of use.

In a heating or preheated make-up air system there are instances in which it is desirable to reject the recovered heat outdoors. This can be accomplished by use of additional ductwork and manually actuated dampers. It is possible to fabricate or purchase a system which will automatically utilize or reject the recovered heat of compression based on building and outside conditions.

0409-payback_img3Calculating savings
Calculating potential savings and payback time from recovering heat of compression can vary depending on compressor size, operating conditions, local energy rates, use of the recovered heat, location and initial investment. The plot in Fig. 3 details savings potential based on energy cost and compressor size.

As shown in Fig. 3, a 300 HP compressor can generate 12,378 BTU/minute. This represents 7.42 therms/hour of usable heat that is worth $3710 per 1000 hours of compressor operation at $0.50/therm. Annual heating cost savings of up to $14,840 easily can be realized. These savings are achieved without negative impact to the compressor’s cooling effi ciency.

As energy costs continue to rise, utilizing recovered heat from the production of compressed air becomes more attractive—much more attractive! While systems can be fi tted to existing machines, the best time to confi gure a heat recovery system is upon the purchase and installation of new and replacement equipment.

Jeremy Sickmiller is a senior engineer with Sullair Corporation, based in Michigan City, IN. E-mail:

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6:00 am
April 1, 2009
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Utilities Manager: Learn and Prepare


Jane Alexander, Editor-In-Chief

“Energy is wealth,” says Christopher Russell, energy consultant and author of Industrial Energy Harvest. “Fuels and power are forms of currency.”






The sooner you learn how these and other energy facts of life impact your operations, the better. That’s why you can’t afford to miss this upcoming opportunity to hear from Russell in person. He, along with a number of other noted energy experts from across the country, will be among the featured speakers at ENERGY SUMMIT 09, in Grand Rapids, MI, on Thursday, June 25. Attendees can count on learning plenty at this exciting conference—including new ways to reduce their energy costs and how to prepare for looming carbon regulations. The information-packed event runs from 7:30 a.m. until 4:30 p.m. at the Eberhard Center, on the downtown campus of Grand Valley State University (GVSU).

Russell’s presentation will “connect the dots” between energy use and business performance. It’s based on his extensive experience working with corporate energy managers, utilities, trade associations and government agency energy programs.

Other speakers in the morning sessions and afternoon workshops will focus on energy use in commercial and manufacturing facilities, how to prepare for emerging carbon caps and trade markets and the growing use of renewable energy sources. Topics will include efficiencies in lighting, compressed air, pumping, steam and HVAC systems, as well as fuel switching, waste reduction, process changes and leak reduction, to name but a few.

Another key presenter will be Peter Garforth of Garforth International, which has offices in Toledo, OH and Brussels, Belgium. Garforth, a renowned expert on integrated energy planning, will explain the approaches that allow entire corporations—and even entire communities—to achieve breakthrough reductions in energy use and greenhouse gas creation and simultaneously enhance competitiveness and market attractiveness. Garforth was formerly head of Strategy at Owens Corning where he initiated a global program that has yielded tens of million of dollars in energy productivity.

0409-um-energy_img2A West Michigan company that is one of a handful developing carbon credits nationwide will also be on the conference agenda. Dr. David Armstrong of Viability, LLC will talk about the role that carbon credits play in funding energy efficiency and renewable energy projects. Viability identifies financial incentives for companies, such as federal and state grants, tax credits, carbon credits and renewable energy credits.

Attendees will gain an understanding of carbon credits and how they can be used to offset standards, thereby avoiding penalties or create income by selling excess credits to other firms. Impending regulation is going to put penalties in place for those exceeding carbon emission standards as a measure to control climate change. Europe, Canada, Japan and most other industrialized countries have established standards to meet emission limits arising from the 1997 Kyoto Protocol. The U.S. is expected to announce its climate protection and carbon policies this fall. Since 2005, the European Union has been using a cap-and-trade system that sets a ceiling limit for overall emissions associated with a system for buying and selling credits as needed to meet the limits.

The carbon regulations are a response to limit manmade climate change through reducing CO2 emissions and five other greenhouse gases—methane (CH4), nitrous oxide (NOx), hydrofluorocarbons (HFCs), perfluorocarbons (PFCs) and sulfur hexafluoride (SF6). Going forward, companies can reduce their carbon footprint by reducing energy consumption and switching to clean and renewable fuel sources. To do so, however, large energy users will need to aggressively manage comprehensive energy efficiency programs, implement new technologies and use more clean and renewable energy sources.

Other speakers are expected from the U.S. Department of Energy, the American Council for Energy Efficient Economy and The Right Place, a regional economic development organization. They will be joined by presenters and exhibitors from Armstrong International, Baldor Dodge Reliance, Sun Chemical, Azon USA, the Michigan Energy Office, the Technical Energy Performance Group, Structure- Tec, Hatch Corporation and Sullair, among others. ENERGY SUMMIT 09 is being coordinated by Blue Strategies Group, in partnership with Maintenance Technology magazine. Blue Strategies is forming an educational foundation to promote knowledge about energy, innovation and market diversification. For more information, call 269.352.4583, or visit A full conference agenda will be available on the Website by April 30.

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6:00 am
January 1, 2009
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Utilities Manager: Save Money Through Routine Maintenance

It’s true: an ounce of prevention is worth a pound of cure. Proactive motor maintenance and planning keeps you from having to cure a crisis, plus it’s easier and less costly than taking a reactive approach. Establishing a routine maintenance program for your industrial motors can alert you to problems before they happen so that you can schedule downtime and plan for motor repair and replacement and prevent the surprise failures that bring productivity to a standstill.

Healthy motors are crucial to your operations, and there are several preventive practices and tests that can help you keep them that way. As a rule, motors should be kept appropriately lubricated and clean. Assuring that each motor has the proper amount of lubricant, as indicated by the manufacturer specifications, can prevent one of the major causes of premature motor failure—excess lubricant being forced out of the bearing housings and damaging motor windings. Motors also must be kept free of debris and buildup. Clean, clear air passages provide access for heat to dissipate away from the motor and fresh air to reach the motor to cool it.

Periodic testing, including insulation resistance testing, polarization-index testing and vibration testing are all important—and should be conducted at regular intervals. Just how often depends on the type of motor, the application and the operating environment. It is equally important that the results for each test be recorded. This provides the means to track motor performance over time and ultimately indicates when a motor should be repaired or replaced, before a surprise failure or other problem occurs.

Insulation resistance tests identify signs of insulation deterioration. These tests can be affected by temperature and humidity, so it is important to have consistent conditions when these tests are conducted. Polarization-Index (P-I) tests detect contamination that could damage windings. These tests also can help to identify gradual deterioration of insulation. It is particularly important to include P-I tests in your routine maintenance program if you suspect that a foreign substance has contaminated the insulation system. Vibration testing identifies several key factors, including wear on the bearings, mechanical looseness, misalignment, defective belts and rotors and electrical unbalance.

Sound motor management includes a routine maintenance program, and can help reduce downtime, decrease energy costs and increase productivity. Knowing when downtime, motor repair and motor replacement will occur— rather than being surprised by a crisis—lets you plan ahead, ensure production and save money. In addition to lost productivity, surprise system downtime frequently forces a costly capital investment in the rush to buy the motor that’s most readily available, as opposed to investing in the motor that best meets your operational and efficiency parameters.

There are many resources available to help you develop or enhance your motor maintenance program. The Motor Decisions Matter (MDM) Campaign, sponsored by utility efficiency programs, motor manufacturers and motor sales and service centers, offers free tools, such as the Motor Planning Kit, and links to helpful resources on the MDM Website: UM


The Motor Decisions Matter campaign is managed by the Consortium for Energy Efficiency, a North American nonprofit organization that promotes energy-saving products, equipment and technologies. For further information about MDM, contact Kellem Emanuele at or (617) 589-3949, x225.

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6:00 am
January 1, 2009
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Utilities Manager: Simple Payback: Benefits & Limitations


William C. Livoti

Simple payback is a common economic analysis method—one that most business owners can understand. In the context of energy efficiency, it calculates the amount of time it will take to recover installation costs based on annual energy cost savings.

The equation for simple payback is annual energy cost savings per year divided by the initial installation cost. While this simplistic formula can be used for evaluating a potential plant project, the real question is whether this is the best method for justifying the project. Let’s break it down.

Simple Payback Formula


Invest $5000 that reduces operating cost by $450/year


By definition, this formula is quite basic and easy to analyze. Those characteristics, however, are where the benefits end. Simple payback fails to take into account a number of key components when justifying a project.

Simple Payback Strengths

  • Easily understood
  • Easily applied
  • An easy method of comparing merits of entirely different projects

Simple Payback Weaknesses

  • Not economically sound
  • Does not take account for present value
  • Completely ignores long-term inflows
  • No long-term projects

Simple payback can only provide information on how long it takes to recoup the investment—it cannot determine a project’s profitability. A simple payback of two years or less, however, usually suggests a profitable project. A longer simple payback requires more study.

Unfortunately, the simple payback method also doesn’t account for savings that may continue from a project after the initial investment is paid back from the profits of the project. That being said, for a quick review, this method is a helpful “sanity check.”

Bottom Line?
Unless your principal objective is to quickly recapture invested funds so that they can be put to use in other places, simple payback is not the most useful method for project justification. Most importantly, in situations where maximizing return on invested capital is of paramount importance, approving projects based on simple payback alone can lead to seriously flawed decisionmaking. That type of decision-making is something we can ill afford in today’s economy. UM

Bill Livoti is our new UTILITIES MANAGER columnist, is senior principal engineer for Power Generation and Fluid Handling with Baldor Electric Company. He also is vice chair of the Pump System Matter initiative.

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