Project Prioritization and Approaches to Implementation · • Project B (which we will contrast...
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Project Prioritization and Approaches to Implementation www.efcnetwork.org David Tucker
Transcript of Project Prioritization and Approaches to Implementation · • Project B (which we will contrast...
Project Prioritization
and Approaches to
Implementation
www.efcnetwork.org
David Tucker
www.efcnetwork.org
Do you have an Energy
Management Program?
• Who’s on the team? Who’s driving?
• Is it informal or formal?
– Energy Star,
– Asset Management,
– ISO 14001,
– ANSI/MSE 2000: A management system for Energy,
– Portfolio Manager,
– Other
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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 model
• New York State Energy Research &
Development Authority
• Public benefit corporation created in 1975.
• Mission:
– Use innovation and technology to solve some
of New York’s most difficult energy &
environmental problems in ways that improve
the state’s economy.
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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 Reporting
Source: NYSERDA
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NYSERDA Resources http://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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The Seven Steps
• We’ll go over the seven steps of the
NYSERDA Water and Wastewater Energy
Management program at the end of this
session, if there is time.
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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 Reporting
Source: NYSERDA
NYSERDA Step 5: Prioritizing Energy
Opportunities for Implementation
1. Project Economics 101
2. The Process of Prioritizing
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TurningPoint Questions
I brought today ideas / examples of
energy projects I am considering
A.True
B.False
True
False
0%0%
My system is considering energy
management projects to:
A. Purchase more efficient
pump motors
B. Install VFD’s on existing
pump motors
C. Adjust water pumping
schedules
D. Lighting improvements
E. HVAC improvements
F. Install solar panels
G. Other
Purchase
more
effi
cient..
.
Inst
all VFD
’s on e
xistin
g...
Adjust
wate
r pum
ping s.
..
Lightin
g im
prove
ments
HVAC impro
vements
Inst
all sola
r panels
Other
14% 14% 14% 14%14%14%14%
My level of familiarity with project
economics is:
A. Just call me Alan
Greenspan!
B. I know my costs from
my benefits.
C. I’m glad my life
doesn’t depend on it.
D. What the heck is an
NPV?
E. It’s “payback” time for
you asking me this! Ju
st ca
ll m
e Ala
n Gre
ens...
I know
my co
sts f
rom
m...
I’m g
lad m
y life
doesn
’t ...
What t
he heck
is an
NPV?
It’s “
payback” t
ime fo
r y..
20% 20% 20%20%20%
My Project Priorities
A. Energy cost savings
B. Cost of implementation
C. Simple payback period
D. Regulatory compliance
or service level goals
E. Advantageous funding
availability
F. Operational feasibility
G. Other Energy c
ost sa
vings
Cost o
f im
plem
entatio
n
Simple
payback
perio
d
Regulato
ry co
mplia
nce o
r...
Advantage
ous fundin
g av.
..
Operatio
nal feasib
ility
Other
14% 14% 14% 14%14%14%14%
Q: When considering my energy management project priorities, I think the most important priority is:
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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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NPV: Simple Example
• Project A is to proceed with business-as-usual (BAU) with our
water treatment plant. No new capital investment. (Always
look at the BAU!)
• Project B (which we will contrast with Project A as the
baseline) is to implement a WTP capital improvement project:
putting variable frequency drives (VFDs) on 2 pumps.
• Let’s assume Project B operates for only 2 years (years 1 and
2), and then we sell the WTP Jan. 1, year 3. Initial investment
is made Dec. 31, year 0. We will start cash flow discounting in
year 1 (not 0), and will omit taxes, depreciation, inflation,
distributional analysis, etc.
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Project A: NPV Equals $6,587
PROJECT A - BUSINESS-AS-USUAL - NET PRESENT VALUE ANALYSIS
0.05 Discount Rate (i.e. the interest rate or CoC)
YEAR 0 1 2 3
Operations in this year? NO YES YES NO
Discount the Present Value for this year? NO YES YES YES (t=2)
Assume all transactions happen on what date? 31-Dec 31-Dec 31-Dec 1-Jan
CASH IN
Flows
Water System Revenue 200,000 200,000
Stocks
WTP Liquidation Value of Initial Investment 950,000
WTP Liquidation Value of Capital Improvements 0
CASH IN SUB-TOTALS 0 200,000 200,000 950,000
CASH OUT
Flows
Water System Expenses 100,000 100,000
Stocks
WTP Initial Investment (i.e. plant value) 1,000,000
WTP Capital Improvements Investment 0
CASH OUT SUB-TOTALS 1,000,000 100,000 100,000 0
NET CASH FLOWS (1,000,000) 100,000 100,000 950,000
PRESENT VALUES OF NET CASH FLOWS (1,000,000) 95,238 90,703 820,646
NPV OF PROJECT (First Excel Method) $6,587
NPV OF PROJECT (Second Excel Method) $6,587
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Project B: NPV Equals $9,368
PROJECT B - INSTALL VFD UNITS ON TWO PUMPS - NET PRESENT VALUE ANALYSIS
0.05 Discount Rate (i.e. the interest rate or CoC)
YEAR 0 1 2 3
Operations in this year? NO YES YES NO
Discount the Present Value for this year? NO YES YES YES (t=2)
Assume all transactions happen on what date? 31-Dec 31-Dec 31-Dec 1-Jan
CASH IN
Flows
Water System Revenue 200,000 200,000
Stocks
WTP Liquidation Value of Initial Investment 950,000
WTP Liquidation Value of Capital Improvements 40,000
CASH IN SUB-TOTALS 0 200,000 200,000 990,000
CASH OUT
Flows
Water System Expenses 82,130 82,130
Stocks
WTP Initial Investment (i.e. plant value) 1,000,000
WTP Capital Improvements Investment 65,000
CASH OUT SUB-TOTALS 1,065,000 82,130 82,130 0
NET CASH FLOWS (1,065,000) 117,870 117,870 990,000
PRESENT VALUES OF NET CASH FLOWS (1,065,000) 112,257 106,912 855,199
NPV OF PROJECT (First Excel Method) $9,368
NPV OF PROJECT (Second Excel Method) $9,368
Summary: Elizabeth City, NC, Projected Savings
Annual 5-Year
Automatic
Blower and
motor control
33,500.00$ 186,967.67$ 568,510 39,316.00$ 196,580.00$ 288 0.85
Lightings 1,350.00$ 27,260.77$ 74,006 5,180.00$ 25,900.00$ 38 0.26
Lightings 12,759.00$ 7,770.81$ 36,151 3,615.00$ 18,075.00$ 18 3.53
Roof Insulation 29,900.00$ 2,222.29$ 55,706 5,571.00$ 27,855.00$ 28 5.4
Water heater 28.00$ 1,233.77$ 4,367 305.00$ 1,525.00$ 2 0.092
Lightings 7,523.00$ 2,215.00$ 2,507 1,702.00$ 8,510.00$ 12 4.42
Water heater 14.00$ 710.30$ 2,507 175.00$ 875.00$ 1 0.08
TOTAL 85,074.00$ 743,754 55,864.00$ 279,320.00$ 388 2.42
Waste Water
Treatment
Plant
Parks,recreat
ion and
Senior center
Midgett
Municipal
Project
NPV Payback (Yr)
CO2
Reduction
(metric
tons/Yr)
Estimated Cost Savings
Project Costs
(Equipment &
Labor)
Estimated
Energy
Savings
(kWh/Yr)
Courtesy of: Mohammad Sayemuzzaman, 2011 Climate Corps Fellow, Environmental Defense Fund, Elizabeth City, N.C.
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Resources
• NYSERDA’s Payback Analysis Tool http://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.h
tml
• Department of Energy’s Life Cycle Cost
Analysis for Sustainable Buildings http://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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Energy Project Decision Matrix
We will have a group exercise and
discussion using this matrix shortly.
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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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Gratuitous “Agent Smith” Image
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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 two 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.
Thank You
David R. Tucker
Project Director
Environmental Finance Center
School of Government, UNC-Chapel Hill
(919) 966-4199
http://efc.unc.edu
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Additional Slides: NYSERDA
Developing an
Implementation Plan
“A goal without a plan is just a wish.” - Antoine de Saint-Exupéry
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Step 1 – Establish Organizational
Commitment
• Is your team defined?
• Does it represent various interests and responsibilities within the utility? (i.e. elected official, manager, operator, member of finance team, etc.)
• Team responsibilities include: develop the plan, establish goals, define the resources needed, provide information to others (i.e. CIP team)
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Why bother?
• Without the commitment of several
individuals at varying levels within your
utility, successful implementation of an
energy management plan will be difficult
• Think of The Avengers – no one individual
could have saved the city; it took all of
them working towards a common goal to
be successful!
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Step 2 - Developing An Energy
Baseline – What Should You Do?
• Gather basic information
– One year of data minimum
– Examples: utility billing records, SCADA system records, O&M records, equipment or motor lists (horsepower & load)
• Organize treatment processes by functional area
• Evaluate energy bills and understand the energy rate structure
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Developing An Energy Baseline
– What Else Should You Do?
• Review hydraulic data (flow) and compare
it to energy use
– Identify wet weather, seasonal patterns
• Build a basic ‘model’ to organize data, and
capture energy use patterns
• Create basic graphics and reports to
communicate initial findings
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Why bother?
• Energy efficiency gains = $$ saved
– The process of investigating energy use, and improving awareness among staff, can provide measurable energy efficiency gains on the order of 3-5%.
• Value shown before resources committed
– Successfully developing a basic understanding of energy use can be a good ‘early victory’, allowing the team to demonstrate some value even before any significant resources are committed to the program.
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Step 3- Evaluate the System and
Collect Data • Use the spreadsheet provided or any other format
that is easy and acceptable to your team
• This step goes beyond the baseline development (historical records). It involves data collection in the field
– System walk-through (note operational information, motor sizes, etc.)
– Staff interviews (operational practices, maintenance practices/history, take suggestions)
– Energy performance data (field data from direct measurements, average equipment run time, sub-metering, etc.)
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Possible Areas of Evaluation
• Raw and Finished
Water Pumping
• Chemical Mixing
• Backwashing
• Well Systems
• Ozonation
• Load Shifting
• Distribution
• Supervisory Control
and Data Acquisition
(SCADA)
• Energy Efficient
Motors
And… System Water Loss
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Step 4: Identify Energy Efficiency
Opportunities
• Energy efficiency opportunities can be
defined as any system change that helps
to reach a stated energy management
goal.
• At this stage the energy management
team should identify a broad array of
energy efficiency opportunities
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Example Projects
Raw and Finished Water Pumping
• Typically biggest energy consumers at water plants
• Pump selection – Was a pump selected for “future growth” that is unlikely to
happen in the near future?
• Age – Older motors are typically less efficient than newer
• Pump Testing and Pump Curves – Can you read your pump curve?
– Is the pump running as efficiently as possible during routine operations?
• Valve Throttling – Burning energy to “burn head” – Replace with Variable Speed Devices
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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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Step 6: Develop an
Implementation Plan • How to Do It – Business Plan
• Actions required in this step include the following: – List the projects chosen for implementation and describe the
goals and objectives of the program
– Explain the resources needed, including a budget and financing plan
– Develop any specifications needed, including design criteria and procurement related documents
– Provide any changes in standard operating procedures, and/or process control strategies
– Set the schedule for implementation, including milestones and gaining the necessary regulatory approvals (if applicable)
– Set realistic expectations for the project in terms of resources required, schedule, procurement time frame, and expected results
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Step 7: Provide for Progress
Tracking and Reporting • The success of a project should be measured as it
is being implemented
• The specific actions required in this step include the following: – Assign the responsibility for tracking the progress of a
project and reporting on that progress. Allocate the resources necessary to fulfill the responsibilities.
– Set the performance metrics that will be used.
– Create a communication plan. Identify who needs to be included in progress reports (examples: elected officials, public, etc.), when reports should be made, and any actions that need to occur in response to reports.
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Additional Slides: S.M.A.R.T.
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Be S.M.A.R.T. About Deliverables
S = Specific
Is it clear and focused to avoid
misinterpretation?
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Be S.M.A.R.T. About Deliverables
M = Measurable
Can it be quantified and
compared to other data?
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Be S.M.A.R.T. About Deliverables
A = Attainable
Is it achievable and reasonable
under normal conditions?
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Be S.M.A.R.T. About Deliverables
R = Realistic
Is it cost-effective and can it be
done by the facility?
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Be S.M.A.R.T. About Deliverables
T = Timely
Is it doable within your given
timeframe?
