John Nicol, P.E.Industrial Program Manager
Rayburn House Office Building
Washington, D.C.
September 22, 2010
Successful Engagement of
Manufacturers Through
a State-wide Program
Speaker’s Experience
Managing energy efficiency promotion programs since 1988
At eight different utility-run programs
Started programs for Ameren Illinois Utilities in 2008 and the state of Hawaii in 2009
Managed the Wisconsin State-wide Industrial Sector program since 2001
Wisconsin’s Unique Approach
“Focus on Energy”
Funded by Wisconsin’s electric and gas rate-payers
State-wide program since 2001
Unique targeting of the industrial sector
Wisconsin’s Focus on Energy
Residential program
Business programs
•Schools and government
•Commercial
•Agricultural
• Industrial
Barriers to Industrial Energy Efficiency
1. Project identification ability
2. Ambiguous project information
3. Technical risk
4. Savings risk
5. Low return on investment
6. Limited capital
7. Limited staff resources
8. No upper management commitment
9. Company culture
Industrial Market Challenge
Most efficiency programs do not directly target industrial customers because:– Facilities and process are much more complex
– Need strong expertise for credibility
– Need additional program infrastructure to effectively impact industrial processes
– Still have enough savings potential in other markets sectors
Industrial programs are much more cost-effective than other sectors
Wisconsin Industrial Opportunity
More than 12,500 industrial facilities – 36 percent of energy used in Wisconsin– Similar to percentage of U.S. energy use
Key energy-intensive markets or “clusters”– Pulp and paper– Food processing– Metalcasting– Plastics– Printing
Clusters account for 65 percent of industrial energy use and 23 percent of the state’s total energy use
Over 2,000
industrial facilities
have done projects
with program
support since 2001
Program Tools - Labor
Fact sheets/case studies
Training and education
Cluster best practice guidebooks
Technical assistance/cluster experts
Energy plan training
Energy team assistance
Program Tools – Incentive Money
Feasibility study incentives
Equipment tune-ups
Special emerging technology support
Staffing grants
Project incentives (primary tool)
Project Incentives
To overcome barrier of a too low return on investment
Strive for “tipping point” for project decision Typical incentives at $0.05/kWh + $150/kW,
or $0.50/therm Greater than 1.5-year payback and less than
four-year payback Up to 30 percent of project costs Incentive cap at $250,000 per project Results in about a 0.5- to 1.0-year payback
reduction for the company
/ = per kWh = kilowatt hour kW = kilowatt
Staffing Grants
To overcome “limited staffing” barrier
Demonstrate benefits of additional staff for
energy management
Up to $100,000 to pay for energy manager
Competitive request for proposal
Very significant savings resulted and very
cost-effective
Emerging Technology Support
To overcome perceived higher risk
Vetting of:– Technical claims
– Market potential
– Business health
Investment portfolio ($5 million)
– Equity in company selling technology or
– Project loans or capital lease for customers
Provides strong value to industry
Focus on Energy’s Model for Collaboration
Work with all key stakeholders to
understand their missions relative to
efficiency
Develop program elements to leverage
stakeholder mission and services
Provide leadership for energy efficiency
promotion across all stakeholders
Collaboration With Stakeholders
Industrial companies
– Meet with them to develop the program to meet their needs
Trade allies
– Develop programs to support their sales of energy-efficient equipment and services
Utilities – gas and electric
– Team with utilities to reach out to their customers
Collaboration With Stakeholders
Associations – clusters– Team with trade associations to reach out to their
membership
Wisconsin Manufacturing Extension Partnership (WMEP)– Coordinate with WMEP to add efficiency with lean
manufacturing
Environmental Protection Agency (EPA) and Wisconsin Department of Natural Resources – Use EPA tools
Department of Energy
Collaboration with Stakeholders
Department of Energy (DOE) (MOU 2008)– ARRA funding for large projects ($14 million)
– Technical trainings on DOE tools
– Save Energy Now Assessments• 50 percent cost match
– Save Energy Now Leaders (13)• Cooperative technical support
– Superior Energy Performance – Pilot• Testing new U.S. and Institute of International Organization
for Standardization (ISO) standards
MOU = memorandum of understanding
Wisconsin Industrial Program
Program impact since July 1, 2001
– Electric savings = 484,053 megawatt hours per year
– Electric demand reduction = 75 megawatts
– Gas savings = 37 million therms per year
– $820 million of lifetime energy savings
– $188 million of avoided new power plant ($2,500 per kilowatt)
– $120 million of total program costs
Therefore, very good benefit-to-cost ratio
Program Lessons Learned
Listen to needs of industry sector to build program credibility
Provide solid technical and business support
Use program tools to teach customers to “fish” on their own
There are many projects waiting to happen in industry that just need to be “tipped” with an incentive
Program Lessons Learned
Even most large companies do not have a pro-active energy management plan or energy teams
Advantages of larger state-wide program over utility territory programs include:
– Bigger impact on equipment vendors
– Leverage multiple company facilities
– Work with state-wide associations
Programmatic Gaps
Incentives for project costs more than $2 million– Program project incentive caps at $250,000
Effective loan or leasing program
Combined heat and power support– Large projects
– Unaligned motivation for utilities
Combined Heat and Power (CHP)
Produces both power and usable heat
Typical power generation is 35 percent efficient while CHP is 60 percent to 70 percent
One of the largest industrial efficiency opportunities
Is distributed within the electric grid, so reduces transmission requirements
Regulatory Barriers
Environmental compliance
– Real and perceived
– Reduced emissions from reduced energy not usually counted in environmental impacts
Accounting issues for capital
– Financing ability is big issue
– Capital leases
– Operating leases
Multiple Efficiency Benefits
Business survival– Typical industrial businesses can save more
than 20 percent of energy costs through increased efficiency
Environmental benefits– Increasing efficiency is one of the most cost-
effective solutions
Reducing future utility rate increases – Energy efficiency programs cost less than $500
per kilowatt (kW) while it costs more than $2,500 per kW for new power plants
Conclusions
Potential to reduce industrial energy use by 20 percent to 50 percent with national program
Many in the industrial market could benefit from technical support and incentives
Need to overcome the disconnect between the energy operating budget and the capital budget
Need to develop policy and rates that appropriately support distributed generation and combined heat and power (CHP)
Conclusions
Properly structured industrial programs can be
very cost-effective to reduce energy costs for
industrial companies and utility rate payers
There are many good potential projects in
manufacturing facilities that just need to be
“tipped”
This type of cost-effective program targeted at
industry could be applied nationally and
provide a greater impact on the market
Contact Information
John Nicol, P.E.Industrial Program Director
RW Beck
5609 Medical Circle, #201
Madison, WI 53719
608-277-2941
RW Beck is a Science Applications International Corporation (SAIC) company