District Cooling Systems

Do Electricity Rates Keep You Up at Night?

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$/  Barrel  2010    Dollars  

Oil  Prices  -­‐  EIA  2000  AEO  vs  Actual  

LOW  Oil  Price  (EIA  2000  AEO)   REF  Oil  Price  (EIA  2000  AEO)   HIGH  Oil  Price  (EIA  2000  AEO)   Hawaii  Fuel  Oil  

•  By  2012,  Hawai‘i  oil  prices  rose  to  3.8  times  the  EIA’s  forecasted  “High”  oil  price  •  In  hindsight,  a  Uixed  rate  contract  signed  in  2000,  even  based  on  a  $40  per  barrel  oil  price  -­‐  consistently  above  the  “High”  forecast  -­‐  would  have  turned  out  to  be  a  huge  windfall  for  building  owners  

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Monte Carlo Analysis: Quantifying Risk

Model  Input  (Variable)   Source  

•  Monthly  weighted  average  fuel  oil  prices  in  Hawai‘i  

•  DBEDT  (Jan  2000  –  Jun  2013)    &  HEI  (Jul  –  Aug  2013)  

•  GDP  Chain-­‐type  Price  Index  (for  inUlation  adjustments)  

•  U.S.  Dept  of  Commerce:  Bureau  of  Economic  Analysis  

•  “Low”,  “Reference”,  and  “High”  oil  price  forecasts  

•  Energy  Information  Administration  2012  Annual  Energy  Outlook  

•  Contract  speciUics:  capacity,  energy  charge,  delivery  start  date  and  duration  

•  Actual  HSWAC  contract  terms  

•  Monte  Carlo  Analysis  software   •  Palisade  @Risk  6.0  (Microsoft  Excel  add-­‐in)  

•  Monte  Carlo  analysis  is  a  method  used  to  quantify  risk  by  simulating  thousands  of  future  scenarios  such  as  oil  price  spikes,  recessions,  periods  of  high  inUlation,  etc.  

•  A  Monte  Carlo  analysis  of  Hawai‘i’s  electricity  rates  would  run  simulations  for  multiple  variables  to  produce  hundreds  or  thousands  of  possible  outcomes  in  order  to  obtain  the  probabilities  of  different  outcomes  occurring  

•  It  allows  us  to  estimate  the  probabilities  of  electricity  rates  increasing  5%  or  10%  or  15%  or  etc.,  or  remaining  at  current  levels  

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Monte Carlo Analysis: HVAC Inputs

Model  Input  (Variable)   Source  

•  Electricity  Costs   •  Conventional  or  ultra  efUicient  chiller  plant  annual  efUiciency  in  kW/ton,  multiplied  annual  ton-­‐hours,  and  by  HECO  $/kWh  costs.  

•  Cooling  Tower  Water  Costs   •  Cost  of  water  evaporated  and  discharged  into  the  sewer  from  the  cooling  tower  operation.  Water  rates  taken  from  current  Board  of  Water  Supply  Rates.  

•  Cooling  Tower  Sewer  Costs   •  Department  of  Environmental  Services  charges  for  sewage  discharged  from  the  cooling  tower  operation.  Sewage  rates  taken  from  Department  of  Environmental  Services.  

•  Costs  are  calculated  based  on  an  assumed  peak  operating  cooling  capacity,  installed  capacity  to  provide  back  up  for  primary  equipment,  and  energy  used  for  cooling  measured  in  ton-­‐hours  

•  Other  “Uixed”  costs  to  own  and  operate  a  AC  system  have  been  estimated  based  on  engineering  calculations,  engineering  reports,  and  published  water  and  sewer  rates  for  Honolulu,  Hawai‘i  

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Model  Input  (Variable)   Source  

•  Water  Treatment  Chemicals  and  Refrigerant  Costs  

•  Cost  of  chemicals  used  to  treat  condenser  water  estimated  at  $2.00  per  1,000  gallons  of  water  used  

•  Cost  to  recharge  refrigerant  in  chillers  on  an  annual  basis  due  to  leakage  

•  Maintenance  and  Repair  Costs   •  Annual  and  periodic  scheduled  maintenance  on  chiller  plant  equipment,  including  unscheduled  breakdown  repairs  over  the  life  of  the  equipment.  Estimated  from  Electric  Power  Research  Institute  (EPRI)  Electric  Chiller  Handbook  

•  Labor  and  Administration  Costs   •  Annual  on  site  staff  and  administration  costs  to  operate  equipment  13%  of  one  full-­‐time  employee’s  annual  work  hours  

•  System  Replacement  &  Installation  Costs   •  Cost  of  installation  and  purchasing  replacement  chiller  equipment  at  end  of  life  of  the  existing  equipment  is  estimated  at  $3,000  per  ton  installed.  Actual  costs  per  ton  will  depend  on  speciUic  installation  requirements  

Monte Carlo Analysis: HVAC Inputs (Cont.)

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Typical Chiller Plant Efficiency

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EXCELLENT   GOOD   FAIR   NEEDS  IMPROVEMENT  

New  Technology  All-­‐Variable  Speed  

Chiller  Plants  

High-­‐efficiency  OpCmized  

Chiller  Plants  

ConvenConal  Code-­‐Based  Chiller  Plants  

Older  Chiller  Plants  

Chiller  Plants  with  CorrecCble  Design  or  OperaConal  Problems  

kW/ton  C.O.P  

0.5  (7.0)  

0.6  (5.9)  

0.7  (5.0)  

0.8  (4.4)  

0.9  (3.9)  

1.0  (3.5)  

1.1  (3.2)  

1.2  (2.9)  

AVERAGE  ANNUAL  CHILLER  PLANT  EFFICIENCY  IN  KW/TON  (C.O.P.)  (Input  energy  includes  chillers,  condenser  pumps  and  tower  fans)  

 Based  on  electrically  driven  centrifugal  chiller  plants  in  comfort  condi6oning  

applica6ons  with  42°F  (5.6°C)  maximum  entering  condenser  water  temperature.  Local  climate  adjustment  for  North  American  climates  is  +/-­‐  0.05  kW/ton.  

HSWAC Cuts Cost & Reduces Risk for Customers

•  Forecasting  simulations  (Monte  Carlo)  based  on  oil  price  volatility  from  2000  to  2013  indicate  signiUicant  cost  savings  and  risk  mitigation  provided  by  HSWAC  services  

•  Buildings  operating  5  days  per  week  are  expected  to  save  money  over  on-­‐site  chilling  85%  of  the  time  (85%  of  possible  future  oil  price  scenarios)  

•  Buildings  operating  7  days  a  week  save  money  more  than  95%  of  the  time  

Hawaiian  Electric  Company  

One    Waterfront  Towers  

Finance  Factors  

First  Hawaiian  Center  

Remington  College  Honolulu  

HSWAC  Customers  

Union  Plaza  

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Prince  Kuhio  Federal  Building  

HSWAC Cuts Cost & Reduces Risk for Customers

•  For  5-­‐day  a  week  buildings,  oil  prices  would  have  to:  –  Drop  below  $95  per  barrel  (oil  prices  in  Hawai‘i  are  above  $130;  more  than  35%  higher),  and  

–  Stay  below  $95  for  15  years  for  HSWAC  service  to  be  less  economical  

•  For  7-­‐day  a  week  buildings,  oil  prices  would  have  to:  –  Drop  below  $70  per  barrel  (oil  prices  in  Hawai‘i  are  more  than  85%  higher),  and    

–  Stay  below  $70  for  15  years  for  HSWAC  service  to  be  less  economical  

Hawaiian  Electric  Company  

One    Waterfront  Towers  

Finance  Factors  

First  Hawaiian  Center  

Remington  College  Honolulu  

HSWAC  Customers  

Union  Plaza  

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Prince  Kuhio  Federal  Building