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Energy Efficiency: What’s the Best Plan for your Organization?

October 10, 2016

October 2016 Edition: The Department of Energy has established October as National Energy Awareness month. Energy efficiency is an important topic for our nation and within our communities, businesses, and homes. We all desire a sustainable future, and we all want to control energy costs. Thus, conserving energy and finding ways to become more efficient is more important today than ever before. This educational topic will explore energy efficiency measures that can decrease your power supply cost and help preserve the environment.


Market Overview

Jason Jarecki


October 2016 Natural Gas and Power Market Activity

Natural Gas

  • During the month of September 2016, natural gas prices were modestly down.
  • The prompt month (October) Henry Hub natural gas contract was up $0.019/MMBtu to $2.906/MMBtu.
  • Calendar year 2017 declined $0.015/MMBtu to $3.091/MMBtu.
  • Calendar year 2018 was down $0.056/MMBtu to $2.913/MMBtu.

Power: PJM – Ohio

  • Downward pressure on various natural gas basis points in the front years contributed to larger declines in power ahead of generation outage season. October 2016 delivery On-Peak AEP Dayton (AD) Hub rose $1.10/MWh to $31.30/MWh.
  • The remaining balance of winter 2016 delivery was up $1.50/MWh to $44.69/MWh.
  • Further out the price curve, 2017 delivery AD was down slightly by $0.07/MWh to $36.60/MWh.
  • 2018 delivery dropped $0.40/MWh to $34.92/MWh.

Power: Illinois

  • For the Illinois market, many of the same issues are still in play from the September edition, all of which have potential impact to customers.
    1. Liquidity is still very low in the MISO Illinois region.
    2. Discussion over Exelon’s PPA and stakeholders continues behind the scenes.
    3. MISO is still formulating its capacity construct changes (seasonal capacity and three- year auction structure).
  • In terms of future impacts on energy outlook in Illinois, a key trend is developing in the Illinois market that is important to monitor. Traditionally, the Illinois and Ohio markets have tracked closely together over the past two decades given their preponderance of baseload generation (Illinois – Nuclear & Coal) and (Ohio – Coal). As coal retirements have impacted both states significantly resulting in a loss of generation, there is a lack of new build of generation replacing these coal retirements in Illinois. Ohio, in contrast, is currently building six new
    natural gas power plants. With natural gas the only baseload generation that can be built, the new build issues in Illinois are caused by two factors:

    1. Shale production is robust in Ohio allowing natural gas to flow to power plants through a developing network of pipelines. Illinois, in contrast, does not have large natural gas shale deposits and infrastructure is not sufficient yet to bring in new production from nearby shale regions.
    2. Additionally, the capacity market structure in MISO results in extremely volatile results from year to year and a very short term window of certainty (currently still a one-year auction). Usually, a generation developer needs at least three years to build a generator, so having certainty around their capacity payments in the future is very important to successfully obtain their financing on the project. This is one reason why MISO may be looking to change its capacity construct to a longer term construct resembling more of what PJM currently uses.

Please speak with your AEP Energy representative with any questions regarding these issues.


Energy Efficiency: What’s the Best Plan for your Organization?

The Department of Energy has established October as National Energy Awareness month. Energy efficiency is an important topic for our nation and within our communities, businesses, and homes. We all desire a sustainable future, and we all want to control energy costs. Thus, conserving energy and finding ways to become more efficient is more important today than ever before. This educational topic will explore energy efficiency measures that can decrease your power supply cost and help preserve the environment.

To begin with, it is important to understand when and how your organization consumes energy. If you know exactly when, where and how much energy is being used in your facilities, you can identify waste and target reductions. Tracking electricity consumption in real-time provides data that is used to make decisions on procurement, load scheduling and maintenance. This information can result in significant cost savings when used to set performance targets for energy efficiency upgrades.

Most energy reduction efforts begin with benchmarking and energy audits. Benchmarking is an organizational tool that helps you understand how your energy consumption compares to that of your peers, so that you can quickly identify whether you might be operating inefficiently. An energy audit is a detailed review of energy consumption, including building and equipment performance levels, characteristics and efficiency of energy consuming equipment, safety issues, and potential production enhancements.

Benchmarking and energy audits often turn up savings opportunities in two key areas: lighting and HVAC (especially HVAC controls).

Did you know lighting accounts for up to 40 percent of the energy used in older commercial buildings? Electronic ballasts have led the market place with improved standards since the early 21st century, saving consumers nearly 15 billion in energy dollars nationwide. Installing occupancy sensors will insure lights are off when rooms are vacant.

An inefficient HVAC system controls waste up to as much as 30 percent of energy. Installing new controls on existing equipment maximizes efficiency and dramatically reduces energy use. New controls also allow you to manage motor speed. Not only can you save energy, but you can reduce maintenance and repair costs, extending equipment life. Matching HVAC systems to building occupancy schedules is another measure to promote energy efficiency thus reducing cost.

Beyond lighting, HVAC, and controls, an effective audit can help you identify further conservation opportunities. These may include identifying and correcting issues in air (and other fluid) handling systems, installing variable speed drives on your motors, and identifying and correcting other energy ‘leaks’.

Going beyond efficiency measures, solar power installations, which may be beneficially paired with energy storage systems such as advanced batteries, can be provide significant economic benefits, while at the same time improving your sustainability profile.

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