Why Hasn’t the Energy Efficiency Profession Updated Its Methods in 40 Years?

 Cost of energy audits

Watson: All of our experience, research and many of our Blogs have provided evidence that the Energy Efficiency Profession is continuing to use antiquated methods that haven’t changed in 40 years. As a recent engineering graduate anxious to embrace all of the latest technology, the biggest question in my mind is Why? Why is this profession still using temporary instrumentation, Energy Audits and Benchmarking to produce mountains of reports to justify Capital Projects? Why hasn’t it updated its methods to take advantage of the latest developments in information technology as all other professions have?

Holmes: We have talked about a number of possible reasons, the most probable being that those methods have resulted in a huge industry including many jobs, government and utility programs, expensive training and certification programs, vendors of lights and other capital equipment and much more. There are a lot of people and companies making a lot of money from perpetuating those antiquated methods.

Credentials

Watson: All we have ever promoted is installing permanent instrumentation and applying basic management and engineering problem-solving techniques to the resulting data; things I learned in my freshman year of Engineering School. By providing the owner with the information, analytics and training they need to operate their existing energy systems more efficiently, they can reduce their energy costs by 10%, 20% and more without the need for audits, benchmarking and capital projects. How could anyone who wants to do what’s best for the owner be opposed to that?

Holmes: There are a lot of people working in all types of facilities who understand and apply these techniques to everything in their facility other than the energy systems. They know a better way to do it but haven’t been able to change this field.

Watson: To try to answer my question Why? I did some research and have uncovered some things that may help explain it.

I found a great paper from Santa Rosa Junior College titled “Impediments to Cogent (convincing) Reasoning; Provincialism, Loyalty, and Herd Instinct” Read the Paper

“Provincialism is the assumption that one’s own group is better or more important than other groups, and the failure to look beyond the group for other points of view.”

Lion-in-mirror

“There is a base need to identify with one’s group and a natural tendency toward group loyalty … If we’re out of step, we’re not likely to succeed.

Holmes: I can certainly relate to that Watson as I have been out-of-step with most of the Energy Profession my entire career. More than once I have been asked why I didn’t do what everyone else was doing. Why didn’t I do energy audits or take incentives from utility or government programs to produce reports? What value was information without new equipment? What was the matter with me?

My answer? One day when I was in Air Force Officer Training School marching in formation, I noticed that everyone was out of step but me. I thought I was right and they were wrong. I felt the same way about my engineering business. I was convinced I was doing what was best for my clients and stubborn enough to continue doing it. The fact that our projects were producing tremendous savings in every type of facility from schools, office buildings and ice arenas to 1,000+ acre, 80 MW industrial plants seemed proof enough.

Wrong-direction-revised

 

Watson: The Santa Rosa paper goes on to say “Loyalty is an outgrowth of Provincialism. The group uses loyalty in deciding the truth and what is right. Critical thinking urges people to think for themselves and not necessarily what the group believes is right.”

“Herd Instinct (follow the crowd) is associated with both provincialism and group loyalty. Pressures to conform are enormous. Be a team player! Don’t rock the boat! Don’t make waves! You’ll be crushed if you dare to buck the system! I’m just a little guy; they have all the clout!

…On the other hand, conformity to group standards may wrongly influence our beliefs. Again, we should strive to think for ourselves.”

Holmes: I think your research has explained quite a bit about human nature, the “Not Invented Here Syndrome”. As a sheepdog you more than any of us should understand the Herd Mentality. But I have done some research of my own and found, thank goodness, there are a lot of people who for whatever reason were unable or unwilling to just follow the flock. Albert Einstein said “It is important to foster individuality, for only the individual can produce the new ideas.

Did you know that Dr. James Lind, a British physician, discovered the cure for scurvy in controlled scientific tests in 1747? Medical professionals were certain that such a terrible disease could not be cured by something as simple as fruit. If he were right it would threaten the establishment and its power and prestige. It took more than 40 years before his work was accepted. During those years tens of thousands of sailors died unnecessarily.

Watson: The world is in the middle of an environmental crisis. Sustainability and Climate Change are on most everyone’s mind. Innovative and creative solutions are needed. It’s past time for the Energy Efficiency Profession to modernize, to stop killing trees to produce tons of Energy Audits and Reports preparing to save energy and focus on actually saving energy; to stop enriching themselves and do what’s best for building owners and the Earth.

Office of Energy Savings

 

Make a difference. Now’s your chance. Abandon the flock. Dare to be different. The World Needs You!

 

How Long Will it Take for Big Data & Analytics to Revolutionize the Energy Efficiency Profession?

 Super-info-sonic-speeds

Even though the Energy Efficiency Profession, Government and Utility programs have refused to embrace sound scientific methods based on permanent instrumentation, outside influences will force them into the Information Age.

Watson: I have frequently criticized your profession Holmes for refusing to keep pace with the times. For continuing to use antiquated methods that haven’t changed in 40 years; methods that benefit the practitioners more than the facility owners.

As a young pup fresh out of engineering school I am continually amazed and disappointed that in 2014, the Information Age, the Energy Efficiency Profession is still mired in the Estimation Age.

Audits-obsolete-farting-dust

But I have been doing some research and it appears to me that things are finally starting to change.

Holmes: I think you’re right Watson; I have been sensing the same thing. Why don’t you share with our readers some of the things you have uncovered?

Read the Blog

 

You Can’t Afford to Use Data Loggers; Permanent Energy Instrumentation is the Only Cost- Effective Solution.

 Data-Loggers-2-AP

Watson: I’ve been thinking about data loggers Holmes and have a couple of questions for you.

Holmes: How can I can help?

Watson: One of our early blogs was titled “Utility Company’s Energy Conservation Program; Good Intentions – Antiquated Methods”. Read the Blog In it we described how the utility was paying engineers up to $50,000 to come up with opportunities to tune-up building energy systems using no-cost, low-cost methods.

Holmes: That’s right. Another example of paying engineers for preparing to save energy rather than paying them for actually saving energy.

Our experience with no-cost, low-cost changes has been that they always pay for themselves within a few weeks or months including any engineering required. There is no need for separate funding.

Watson: I remember the program well. It included the mandatory program requirement to use snapshot data from data loggers along with data gathered on-site to identify opportunities for no-cost, low-cost changes to save energy. I have been thinking about that and realized one reason they were paying so much money to the engineers; the use of Data loggers is too expensive to be practical.

Holmes: Data loggers are the basis of Energy Audits as promoted by DOE, most utility companies and just about every Energy Auditing course offered by the Association of Energy Engineers, Universities and all other training sources. What makes you say they are too expensive to be practical Watson?

Watson: Apparently no one considers the cost of the labor associated with using data loggers. During an energy audit, a data logger might be put on an air compressor for a week, then moved to a chiller for a week, then a lighting panel, etc. In order to analyze the data, each time the data logger is removed from a piece of equipment, it must be connected to a PC, the data downloaded to a spreadsheet and the spreadsheet formatted to present the data in a meaningful way.

Along with moving the data logger, the sensors must be removed and re-installed and that’s what takes most of the time and costs so much.

Holmes: True. Monitoring an electrical motor requires installing 1-3 current transformers – CTs, in some cases, potential (voltage) monitors – PTs. This normally requires an electrician to shut off the power to the circuit, open the high voltage panels and connect the sensors. If the monitored device is related to production, the connections must be made when the equipment can be shut down without disrupting production. That might need to done during the night or weekend. In some instances we have had to wait until the plant was shut down during a Holiday or for summer maintenance to install sensors for our permanent monitoring system.

Watson: Let’s think about starting with an air compressor for a week and then moving the data logger to a chiller for a week. The initial installation will take one to two full days for the engineer including travel to and from the plant for the installation of the CTs, PTs and possibly a portable CFM flowmeter. Most likely the facility or plant engineer and an electrician will be required for at least one day.

At $100 an hour the consultant’s fee for 2 days will be $1,600 plus expenses. The plant engineer and electrician will cost another $1,600 for one day. So the actual cost to install the data logger, not including the cost of the sensors or logger itself could easily be $3,200.

After a week, the man-hours to remove the sensors from the air compressor and install them on the chiller may be one and a half to two times the original installation at a cost of $5,000 – $6,000. If the consultant spends another day downloading, formatting and presenting the data, that is another $800.

Holmes: You’ve made a really good point Watson. It’s easy to see how the cost of using data loggers can mount up rapidly.

Watson: Just think about the whole process of using data loggers. After you spend all of the time installing, removing, downloading and formatting the data for several pieces of equipment, what do you really have?

With a data logger, you’ve only got a snapshot of Historical Data data covering the brief time period when the logger was installed. There is no Real-Time data. The engineer must then try to project how those systems will operate during an entire year, what improvements could be made by spending money on capital projects and estimate the costs and the savings using some type of modeling software.

Holmes: That’s the accepted and widely promoted method. Although the loggers themselves have been improved, the method hasn’t changed since the 1970’s. Instead of installing permanent instrumentation, they use an outdated and cumbersome process to estimate what the real data would be if they actually had some.

Engineers seem to have this talent to come up with the most complicated solutions for simple problems don’t they?

Watson: I am learning that.It reminds me of when my great-great-great-great(32) grandfather was applying for a job with Thomas Edison and he asked him to determine the volume of a light bulb. After spending hours with the calculation, when papaw presented the answer, Edison dipped the bulb in water and poured it into a graduated cylinder. The answer was simple and logical; it didn’t need to be over-engineered.

Edison-vol-of-lt-bulb

Why doesn’t everyone just install permanent instrumentation, an energy monitoring system at the beginning of each project? The cost of the sensors and man-hours required for installation are the same as a data logger. There is no downloading required as the reporting is automated and it is less expensive to install permanent instrumentation and leave it than to install, remove, download and format data from data loggers.

Holmes: And don’t forget that with a Permanent Energy Monitoring System the data is live; we can watch the total facility and every system operate Real Time.We can see where every dollar is going within the facility, not just estimate where it went after the fact.

Our experience has been that the best opportunities with the fastest paybacks always come from no-cost, low-cost changes that match the operation of the energy systems to the energy requirements of the facility.

The accepted method of using temporary data loggers to collect spot data completely misses the #1 opportunity for creating and maintaining no cost, low-cost, immediate savings.

Nerd-audit-inaccurate

Holmes: Installing permanent instrumentation as the first step in a project eliminates the need for Energy Audits, Benchmarking and all of the hours associated with estimating energy use and savings. The data from the Energy Monitoring System can be used to tune-up the existing energy systems and start saving money the first day it is installed.

Watson: You may have answered my question right there Holmes. Sounds like it would also eliminate the way that most energy professionals, DOE and utilities make their money or justify their existence, from gathering data, preparing to save energy and selling a product or service, not from creating, verifying and maintaining energy savings.

Office of Energy Savings

If they were really focused on the needs of the building owners, they would jump at the opportunity to give their clients the information required to allow the clients to operate their facilities as efficiently as possible on an ongoing basis; like airplanes, automobiles, trains, and nearly every other sophisticated device or system, other than buildings, is operated in 2014.

Tell us about your experiences, both good and bad with energy professionals, what has worked and what hasn’t. Send us your comments, thoughts and suggestions on how to improve our profession so we can all continue to learn from each other. Thanks – Holmes & Watson.

 

“Do You Realize What You Have? You Have a Money Machine.”

Money-Machine 

Watson: How did you get the idea to contract with building owners to serve as their energy manager for a percentage of documented savings each month Holmes?

Holmes: After working for an engineering firm for five years where each job was sold for a fixed price or a percent of construction costs, it was obvious to me that was not an appropriate way to structure energy conservation projects. Normally an energy audit was done for a fee to identify opportunities for savings and estimate costs. If an opportunity looked promising, a more detailed study was performed at a higher cost. The objective of the study was to identify capital projects. For instance, a study might determine that an owner could spend $100,000 to replace an old, inefficient boiler with a newer one with a higher efficiency. If the “estimated” savings were $15,000 a year – the simple payback on the investment would be six and two thirds years. There was normally no follow-up to confirm and document the actual savings.

Watson: Why didn’t you think that approach was appropriate for energy projects?

Holmes: After I started my own business, I was approached by a Mental Health Hospital looking for help in reducing their energy costs. They wanted me to give them a “bid” to do an Energy Audit.

The objective of the project was supposed to be to reduce their utility costs. By bidding the process and taking the lowest bidder, they were limiting how much time a competent engineer could spend, which would most probably limit how much could be saved; it was a self-defeating process. Up to a point, the more time a competent engineer can spend in a building and the more they can know about it and its energy systems, the more the owner can save.

Watson: Plus the traditional approach was based on the assumption that the only way to save energy was to buy something; spend money on capital projects. You have said many times Holmes that even though spending money on audits, studies and capital projects is how Energy Professionals make their money, it is often not what is best for the owner.

Holmes: It is a definite conflict. I wanted an approach where I would be free to spend as much time as it took to produce results. I didn’t want to be constrained by time. So I came up with the idea of working for a percentage of results, actual documented savings. That way I would be free to spend as much time as it took to understand the energy systems and figure out how to create the maximum savings.

Watson: These days the term “Shared Savings” raises a red flag in may people’s mind as it is often just a guise to sell expensive equipment that the owner may not really need. But you weren’t selling anything except results. If you didn’t reduce their utility bills and document the savings, you wouldn’t be paid a cent, right?

Holmes: Correct. But luckily as it turned out, this approach not only worked much better than the traditional approach, it worked much better than I ever envisioned. I had no idea there was so much energy wasted in buildings.  By installing a permanent energy monitoring system at our expense as the first step in every project and then spending the time required to completely understand the energy systems, we reduced the annual energy costs of the Mental Health Hospital by 59% with no capital projects.

 We went on to routinely create savings of 20%, 30% and more and in several projects the savings exceeded 50%. All we have ever done is minimize the energy that is wasted in the facility; energy that the owner didn’t need but was paying for each month. As we eventually discovered, the Mental Health Hospital was not unique; we have found this same opportunity in every project for more than 35 years!

The owner has no up-front costs and starts putting money in his pocket within the first few months. We focus all of our time and energy on creating actual savings, not on audits, studies or designing capital projects.

Watson: The question to an owner is not do you want to the spend money or not? You are already spending it. It is being paid to the utility companies every month. The utility companies always get their money first or you are out of business, closed, kaput.

Holmes: Right. If we could reduce the amount of money the owner was sending to the utility companies, they could pay us for creating and maintaining the savings with part of the dollars saved and put the rest of the savings in their pocket every month.

A key point here that is still unique in this Profession is that we made our money from producing results. Most in our profession make their money from selling a product or service, not from creating and maintaining energy savings.

Watson: I see the conflict. Because the first goal of anyone in this business has to be to stay in business, the products and services they recommend may be what’s best for the provider, but not what’s best for the owner.

How did you come up with a contract that would define the relationship?

Holmes: I lived in a small town so I asked some friends to recommend an attorney and I remember one saying “I would look for a good attorney who has also been successful in business and that man is John Rumple.” I called John and set up a meeting.

John grew up on a farm in Northern Indiana and graduated from Indiana University. He served a year in the Army in Vietnam and then worked his way through Harvard Law School. John had returned to Indiana and joined a law practice in Columbus. When we met, he was just finishing his MBA from the Indiana University Business School with an emphasis on Entrepreneurship.

Watson: What did John think of your idea?

Holmes: He read my proposed agreement and asked “Do you realize what you have? You have a money machine. You are paying people to allow you to work in their building. You are installing the instrumentation required to produce the savings at your cost and taking 100% of the risk. They have everything to gain and nothing to lose. I don’t know how any building owner or manager could say no to this.

John went on to say that engineers often don’t think in business terms. He said I needed to be fairly compensated for the value of my services and the shared-savings concept was a beautiful way to do it. If I could spend a day in a facility and save them $100,000, my fee should take into consideration the resulting savings. Most engineers would say that was eight hours at $100 an hour so you owe me $800. The remaining $99,200 is yours even though you wouldn’t have a dollar of it without me. I think I started to sweat a little at this point. He was describing me.

John said that attorneys, many of whom only think about money, have devised a system of working by the hour so that the less competent they are, the more hours they require and the more money they make.

Watson: Your “Shared Savings” approach aligned your interests, objectives and incentive with those of the owner; it was a partnership. You had to produce actual savings to be paid. When you saved money, the owner saved money. When you worked together successfully, you both benefited.

Holmes: You’re right Watson. It was a great arrangement for everyone involved. John was so enthused about what we were doing that he eventually bought a part of the company. With his legal and financial background and my engineering skills, we were a great team.

Tell us about your experiences, both good and bad with energy professionals, what has worked and what hasn’t. Send us your comments, thoughts and suggestions on how to improve our profession so we can all continue to learn from each other. Thanks – Holmes & Watson.