The U.S. economy depends heavily on cheap, reliable energy. Unfortunately, our aging electric infrastructure can’t possibly keep up with our ever-increasing demand for power. This poses a serious threat, because a loss of power comes with a huge price tag.
A study conducted by Berkeley Labs estimates that power outages and blackouts cost the U.S. about $80 billion each year. Some research suggests the cost may be even higher, up to $164 billion annually.
Fortunately, the nation’s electric grid is slowly being transformed, changing the way electricity is generated, transmitted, and delivered to consumers. The so-called smart grid will not only provide greater stability and faster response to outages, but also increase efficiency throughout the system and drive drown operating costs within the utility industry.
Many articles have been written about the benefits of these changes, but most of the coverage has focused either on the upside for utilities or lower utility bills for residential customers. Very little has been said about the effects a smarter grid will have on commercial customers.
However, there are hundreds of thousands of commercial buildings in the U.S. that are responsible for almost 20 percent of the nation’s annual energy consumption, according to the Department of Energy. Changes to our electric infrastructure could have a big impact on the cost to operate these facilities.
Lower rates for commercial building owners
Smart grid technologies help reduce energy losses, which allows the power industry to more closely match energy production and demand, and create other efficiencies that drive down operating costs. Those savings are ultimately passed on to customers.
For commercial building operators, who spend a large chunk of their annual budget on energy, lower utility costs mean higher net operating income. Everyone wants that.
The smart grid also enables utilities to develop new rate plans. While electricity rates have traditionally been fixed — meaning they don’t change from one day to the next — this may become a thing of the past. More and more utilities are rolling out dynamic pricing programs in an attempt to align customer rates with actual market prices. With dynamic pricing, electricity rates go up during periods of peak demand and fall when demand is lower.
Organizations that can easily shift a portion of their daily usage to off-peak hours have the potential to achieve huge savings. In most cases, off-peak prices are significantly lower than the standard fixed rate.
But here’s the rub for commercial building customers: They may have a hard time adapting to this type of pricing. Most office buildings, retail stores, and other commercial properties are busiest during peak hours, when energy rates are at their highest. Shutting down major systems to reduce costs sometimes simply isn’t an option.
In order to benefit from variable pricing, building management staff will have to change the way lighting, HVAC, and other energy-intensive equipment operates throughout the day.
Reducing energy consumption
Looking for ways to reduce energy consumption isn’t anything new for facility managers. Energy can eat up 30 to 40 percent of their annual operating budget, so energy efficiency has long been a priority. Organizations of all sizes are now investing in equipment upgrades or replacements as a way to reduce demand and save money.
The next step is figuring out how to run that equipment optimally during the day. This may mean pursuing new control strategies, such as pre-cooling buildings late at night or early in the morning when prices are at their lowest. Or it could mean implementing real-time optimization (ak continual commissioning) solutions to ensure heating and cooling systems operate as efficiently as possible in response to changing weather conditions.
The technology to do this is readily available from a number of vendors. Energy management dashboards can also help reduce costs by providing real-time pricing alerts and triggering alarms if demand rises above established thresholds. This gives engineering staff a heads up, allowing them to temporarily modify equipment settings, reduce demand, and minimize consumption.
Change is good
For the utilities industry, building a smarter grid is a must do, because maintaining the status quo isn’t a viable option. Smart grid technology will definitely bring about changes in the way energy is priced and delivered.
Change isn’t always easy to get used to, but the potential benefits far outweigh any negatives. For commercial customers, some of the changes will go unnoticed. Others, such as dynamic pricing, will force us to think harder about energy efficiency. In the end, however, it’s all good: greater efficiency and greater flexibility will lead to lower energy costs for everyone.
Michael Nark is CEO of Prenova, an Atlanta-based enterprise energy management company that helps large organizations control energy spend by reducing utility costs and improving energy efficiency.