Picture a time when a company’s buildings look less like net energy consumers and more like integrated power plants, suggests William “Billy” Grayson, principal of Bent Branch Strategies and former director of sustainability at Liberty Property Trust. That’s what Grayson believes the future will look like.
Grayson will be speaking about this and how the role of energy managers is evolving at the 2017 Environmental Leader Conference in June. We recently caught up with him to find out the major shifts happening in energy management.
What is a trend you’re seeing in energy management?
One is the availability of really granular data. We’ve gone from the time when you had to work with utility companies and maybe a couple brokers to do energy procurement to having your own dashboard. Now the energy manager has almost the same tools that the energy brokers would have.
Related to that, what are the biggest challenges?
When you have this data at an affordable price, you still often need some guidance on how to project long-term trends and build a mix of energy that leads to price stability, helping you get the best deal.
Everybody has to figure out how to integrate renewable energy — onsite or offsite — into their energy management mix. You’re looking at more long-term deals. Normally when I’m buying electricity through the grid, I’ll sign for a year or two, not for 20. Doing a solar power purchase agreement is very different than buying electricity or gas through the grid, even for a sophisticated energy manager.
What are examples of companies using energy management to meet sustainability and financial goals?
In industrial real estate, Prologis has had an interesting time integrating renewables into their portfolio and figuring out ways to make money from onsite renewable energy. They’re the biggest owner of warehouses in the United States. They have 120 megawatts installed of solar — that’s about 10 times as much as any other industrial real estate owner.
Amazon is investing in renewables in a major way for their data centers, putting up solar farms and buying big chunks of renewables. Like other owners of large data centers, they do this for the long-term price stability. They are also investing in renewables in their supply chain.
How do these strategies help?
Data centers are incredibly energy intensive. In some ways, having price certainty is as important as having the lowest price on any one day. So if you can agree to buy power for 10 or 20 years through a long-term contract, that creates enough of a market that somebody can build a solar project usually at or below the current cost per kilowatt hour of electricity.
It’s also a good investment for companies in heavy manufacturing. If you are going to invest $500 million to build a semiconductor manufacturing plant, it’s likely you are planning to be there for at least 20 years. Investing in a long-term solar contract in many states will give you a lower price for energy than other alternatives, and guarantee that your energy prices won’t go up more than 1% per year for the next 20 years.
Which options do companies typically have?
One is to have the solar on your property. If you do that, there’s an option of owning it or buying the power from a third-party who would rent space on your property and then sell power over a long-term contract — a power purchase agreement. The second is to buy a stake in an offsite power project, where you’re helping build a giant solar power plant and agreeing to buy a percentage of that power for a certain number of years. There are pluses and minuses to both.
What can new technologies going into buildings do for energy managers?
Business management systems used to be fairly simple. They knew how to control heating, cooling, lighting, and ventilation. With the proliferation of cheap new microsensors, now we can learn more about how the building is using energy in real-time from many more points. Companies have also developed algorithms to harness that data and train their building automation systems to be smarter, reducing energy consumption, and automatically shaving electricity in ways that the tenants won’t even really notice.
On days when the grid becomes constrained, the utility is more willing to pay you to reduce energy use. The real-time energy price data we get helps the BMS or BAS figure out exactly how much money you can save by shaving electricity at certain times on those days.
For some of our tenants in Texas, it was saving them $50,000 a year. For many of our office buildings, it was saving us $2,500 a year. It varied based on where you were, how much you could shave, and how much the utility companies were willing to pay you to shave.
How is the role of an energy manager changing now?
Traditionally, an energy manager was buying mainly electricity, maybe gas, and spending a little time working with the CFO or the COO to do budgeting and forecasting. They were hopefully shaving 10-15% off what you otherwise would have paid for electricity, giving some price stability. That job can be automated.
A smart energy manager is figuring out how to take advantage of the boom in renewable energy. They are focused on demand-side management, where they have to work with the sustainability director or property managers to make buildings or manufacturing facilities more energy efficient. And leverage new technologies so they can do this cheaper and faster.
What do you think the future will look like for energy management?
An energy manager is going to have to learn about smart grids, solar, and energy storage in a way that they might not know about now. We’re going to be working where your building looks less like an energy user and more like an integrated power plant. There’s a chance that some buildings will produce and sell more energy to the grid than they will consume. Start thinking about what it would be like to manage a new type of power plant: a net energy provider.
What will help energy managers do their jobs more effectively?
It’s important to apply a sustainability lens to the good work they’re doing. They should all be able to calculate greenhouse gas emissions and understand what that means. They should be able to talk about how what they do helps reinforce the company’s sustainability mission. If they have a sustainability manager, they’re going to make that person’s job lot easier.
If they don’t have a sustainability manager, at some point their CFO, director, or investor relations is going to ask how much greenhouse gas emissions the company has or how much they’re avoiding, because a big European investor told them they’re not going to give any more money until they can tell them about this. I’ve seen that happen.
The biggest investors in the world and many of the biggest companies in the world are asking their suppliers and their investments to report on energy and environmental impact. So if you want to do business with Walmart or Unilever, or attract investments from major global banks and private equity investors, you better start tracking.
Billy Grayson will be speaking at the Environmental Leader Conference in Denver June 5-7, 2017. His session, The Energy Manager’s Role in Meeting Environmental Goals, starts at 2:10 pm on June 6.