4-Project Prioritization and Approaches to Implementation...project as well as all of the costs and...
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Project Prioritization and Approaches to Implementation Glenn Barnes Environmental Finance Center University of North Carolina at Chapel Hill 919-962-2789 [email protected]
Transcript of 4-Project Prioritization and Approaches to Implementation...project as well as all of the costs and...
Project Prioritization and Approaches to
ImplementationGlenn BarnesEnvironmental Finance CenterUniversity of North Carolina at Chapel [email protected]
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Approaches to Implementation
• There are a variety of ways to approach implementing energy management projects at your organization.
• You may wish to do some ad hoc projects.• But an energy management plan is more
systematic and can form a “virtuous cycle”• Consider using the NYSERDA model.
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The NYSERDA Modelhttp://www.nyserda.ny.gov/Energy-Efficiency-and-Renewable-Programs/Commercial-and-Industrial/Sectors/Municipal-Water-and-Wastewater-Facilities/MWWT-Tools-and-Materials.aspx
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Energy Management Program -Basic Steps
• Step 1. Establish Organizational Commitment • Step 2. Develop a Baseline of Energy Use • Step 3. Evaluate the System and Collect Data • Step 4. Identify Energy Efficiency Opportunities • Step 5. Prioritize Opportunities for Implementation • Step 6. Develop an Implementation Plan • Step 7. Provide for Progress Tracking and
ReportingSource: NYSERDA
NYSERDA Step 5: Prioritizing Energy Opportunities for Implementation
1. Project Economics 1012. The Process of Prioritizing
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Step 5: Prioritize Opportunities for Implementation
• The final product of this step is a short list of energy efficiency opportunities that have been selected and carefully evaluated out of the list of opportunities generated in the previous step
• Identify a consistent method to compare and rank opportunities (consider both the monetary and non-monetary)
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Project Economics: Comparing Costs and Benefits
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Simple Payback Period: Definition
• Also known as Payback Period or Simple Payback.• Does not account for the time value of money.• The SPB method calculates the length of time over
which cumulative energy savings and other project benefits will be equal to (or “payback”) the initial project investment. To calculate the SPB, divide the total project cost by the total expected benefit.
Source: NYSERDA, “Water & Wastewater Energy Management: Best Practices Handbook,” 2010.
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Simple Payback Period: Example• You are evaluating Project A, whether to replace
pump motors with more efficient models.• The new motors cost $200,000 total.• They are expected to reduce energy costs by
$100,000 per year and last for 5 years before another $200,000 motor replacement is needed.
• The Simple Payback Period for Project A is 2 years.
Source: NYSERDA, “Water & Wastewater Energy Management: Best Practices Handbook,” 2010.
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Savings vs. Avoided Costs
Source: Energy Information Administration, 2009, Annual Energy Outlook, cited in ACEEE’s report on NC’s energy future: http://www.energync.net/Portals/14/Documents/EnergyPolicyCouncil/ACEEE_03182010_final_report_text.pdf
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Life-Cycle Cost (LCC) Analysis• LCC analysis considers the initial cost of the
project as well as all of the costs and benefits over the lifetime of the project. The LCC approach may incorporate the time value of money, the volatility of utility costs, or other factors, such as operation and maintenance costs or other costs.
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LCC: Derby and KANWE• Town of Derby has population 23,600• 10 minutes SE of Wichita, Kansas• Has Water and Wastewater utilities• Participates in KANWE, the Kansas Water
and Energy Partnership, with the U.S. EPA, the EFC at Wichita St. University, and other groups.
• Looking at energy savings projects for WWTP.
Source: “The Quest for Energy Savings! City of Derby, KS. By Eddie Sheppard, Assistant Director of Public Works, December 2012.
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LCC: Derby and KANWE
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Net Present Value (NPV)• NPV can be one of the most useful ways of
assessing to “go” or “no go,” and rank, projects. Calculating an NPV crunches all the numbers into one positive or negative dollar number for the value of the project as a whole.
• NPV takes into account the time value of money by summing up all the individual (e.g. annual) cash flows at all the different points in time for the project, and discounting them by the discount rate (interest rate) to “compare apples to apples.”
Where i = discount rate, N = total number of periods, t = the time of any given cash flow, and Rt = the net cash flow at time t.
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Resources
• NYSERDA’s Payback Analysis Toolhttp://www.nyserda.ny.gov/Energy-Efficiency-and-Renewable-Programs/Commercial-and-Industrial/Sectors/Municipal-Water-and-Wastewater-Facilities/MWWT-Tools-and-Materials.aspx
• Department of Energy’s MotorMaster+http://www1.eere.energy.gov/manufacturing/tech_assistance/software_motormaster.html
• Department of Energy’s Life Cycle Cost Analysis for Sustainable Buildingshttp://www1.eere.energy.gov/femp/program/lifecycle.html
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How should I prioritize?• There are many processes you could use to
prioritize energy management projects for your water or wastewater utility.
• One resource for process review is the Energy Project Decision Matrix, developed as part of A.M. Kan Work! – an interactive guide to asset management and energy efficiency from the New Mexico Environmental Finance Center and Kansas Department of Environmental Health.
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The Matrix
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Energy Project Decision Matrix
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Scoring in the Decision Matrix• Score each
category from 1 to 5. Bigger numbers are better!
• In other words, higher scores are more attractive projects for energy savings, ease of implementation, and so on.
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Energy Cost and Implementation Cost
• Energy Cost Savings: Current energy cost less future energy cost.– High energy savings = 5 points– Low energy savings = 1 point– Could also boost score to reflect use of
renewable energy, if that has value to your utility.
• Cost of Implementation: Total project cost.– Low cost = 5 points– High cost = 1 point
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Payback Period and Regulation• Payback Period: Number of years required to
pay for the project with energy cost savings.– Low number of years = 5 points– High number of years = 1 point
• Necessary to Meet Regulatory Requirements:– 5 points if needed to meet a current regulatory
requirement– 3 points for an anticipated requirement– 1 point for no regulatory requirement
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Service Goals and Funding Options
• Necessary to Meet Level of Service Goals:– 5 points if needed to meet a level of service
goal, e.g. energy reduction or GHG emissions goals
– 1 point if no Level of Service Goal• Availability of Advantageous Funding:
– 5 points if the project can be funded with existing internal sources or there is a good external source, such as a tax rebate or grant.
– 1 point if no advantageous funding.
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Feasibility and Larger Projects
• Operational Feasibility:– 5 points if the project can be operated within
the capabilities of the existing staff (e.g. easy training)
– 1 point if considerable operational change required
• Part of a Larger Project:– 5 points if the energy efficiency project is part
of a larger project– 1 point if it is a stand-alone energy project
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Energy Project Decision Matrix
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Observations about the Matrix• Total Score: allows you to compare / rank
potential energy management projects.• Higher Scores: indicate E.M. projects that may
be most advantageous to the utility.• Caution: As all columns are weighted equally in
this matrix, you may want to consider some columns as more important than others.
• And don’t forget: Watch out for Agent Smith!
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Tips for Using the Decision Matrix in Your Utility
• Involve your energy team and discuss evaluation criteria (You can use the matrix provided as a starting point.)
• Set weights based on the level of importance to your system.
• What’s missing? In addition to the matrix, other commonly used criteria may include:
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Tips for Using the Decision Matrix in Your Utility
• Ease of implementation• Time until solution is fully implemented• Cost to maintain• Support or opposition to the solution• Enthusiasm by team members• Potential effects on customers• Potential problems during implementation
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Tips for Using the Decision Matrix in Your Utility
• If individuals on the team assign different ratings to the same criterion, discuss this so people can learn from each other’s views and arrive at a consensus. Do not average the ratings or vote for the most popular one.
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Some Keys to Success• Convert all energy efficiency opportunities
characteristics to monetary terms whenever possible.
• Evaluate all energy management, including ancillary benefits when possible.
• Test the sensitivity of results to determine the impact of important assumptions (e.g. time horizons)
• Make sure that the final results make sense in terms of the utility’s capabilities.
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Smart Management for Small Water Systems
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A Short Exercise
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Equipment Changes: Your Small Water System
Exercise: Energy Project Decision Matrix
Note: Scenarios are based upon electricity cost of $0.44/kWh
Your small water system could reduce electrical energy use by implementing numerous strategies, including:
Process Targeted / Goal Improvement and Estimated Savings
Implementation Cost ($)
Estimated Annual Energy Savings (kWh)
Estimated Annual Cost Savings ($)
Simple Pay‐Back (Years)
Lighting (A) Reduce number of lighting hours by 40%No cost. Turn lights off. 7,488 $3,295 0
Lighting (B)Replace T12 fluorescent light bulbs and fixtures with T8 equivalents $12,470 22,976 $10,109 1.23
High Service PumpsReplace high service pumps with premium efficiency ones at two pumping locations $52,400 34,640 $15,242 3.44
HVAC and Window Films
Replace air conditioning with high efficiency system and install window films to reduce solar heat gain $218,382 138,104 $60,766 3.59
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Exercise: Energy Project Decision Matrix
Lighting (A)
Lighting (B)High service pumps
HVAC
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Guidelines for assigning points from 1 to 5 using the Energy Project Decision Matrix from A.M. Kan Work!
Category Suggested Guidelines
Energy Cost Savings Current energy cost less future energy cost; high energy savings = 5 points; low energy savings = 1 point
Cost of Implementation Total cost of the energy management project; low cost = 5 points; high cost = 1 point
Payback PeriodNumber of years required to pay for the project with energy cost savings; low number of years = 5 points; high number of years = 1 point
Necessary to Meet Regulatory RequirementsIf needed to meet current regulatory requirements = 5 points; anticipated requirement = 3 points; no requirement = 1 point
Necessary to Meet Level of Service GoalsIf needed to meet a level of service (LOS) goal, such as energy reduction or greenhouse gas emissions goals = 5 points; no LOS goal = 1 point
Availability of Advantageous FundingIf the project can be funded with existing internal sources or there is a good external source, such as a tax rebate or grant = 5 points; no advantageous funding = 1 point
Operational FeasibilityIf the project can be operated within the capabilities of the existing staff = 5 points; if considerable operational change is required = 1 point
Part of a Larger Project If the energy management project is part of a larger project = 5 points; stand‐alone project = 1 point
Total Score The energy management projects with the highest scores may be the most advantageous to the utility
Instructions: Energy Project Decision Matrix
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Equipment Changes: Your Small Water System
Exercise: Energy Project Decision Matrix
Note: Scenarios are based upon electricity cost of $0.44/kWh
Your small water system could reduce electrical energy use by implementing numerous strategies, including:
Process Targeted / Goal Improvement and Estimated Savings
Implementation Cost ($)
Estimated Annual Energy Savings (kWh)
Estimated Annual Cost Savings ($)
Simple Pay‐Back (Years)
Lighting (A) Reduce number of lighting hours by 40%No cost. Turn lights off. 7,488 $3,295 0
Lighting (B)Replace T12 fluorescent light bulbs and fixtures with T8 equivalents $12,470 22,976 $10,109 1.23
High Service PumpsReplace high service pumps with premium efficiency ones at two pumping locations $52,400 34,640 $15,242 3.44
HVAC and Window Films
Replace air conditioning with high efficiency system and install window films to reduce solar heat gain $218,382 138,104 $60,766 3.59
