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Top 3 Controllable Factors in Energy Cost Management

Sept. 11, 2020

Facility managers can’t change realities like shutdowns, weather, or market conditions, but these elements of energy cost management are within their control.

Photo from Getty Images

Commercial and industrial energy management and cost reduction strategies typically hinge on weather, market conditions, and historical usage. But in the face of looming pandemic-related uncertainty such as re-openings, shutdowns, and travel limitations, other factors can come into play as well.

Despite many unknowns, there are still ways to manage energy costs in colleges, universities, office buildings, hospitals, and other facilities. These energy management strategies can empower facility and supply managers to have greater control over keeping risk and cost at target levels.

1. The Energy Contract

You can’t control the weather, the economy, or the energy market—all factors that directly affect energy expenditure or costs—but it’s possible to facilitate a more agile response to changing conditions by working with an energy supplier with continuous market access, trading expertise, and fundamental intelligence.

Energy Contract—Credit: Cory Morton for Shell Energy

Working with an energy professional grants access to customized structures and procurement options that aren’t available through local utility companies.

For example, many facilities employ contracts with a fixed price based on full requirement deals with swing tolerance provisions. These deals procure power or gas based on best-fit usage, ensuring a reliable supply, while allowing a predetermined amount of over- or under-usage without penalty. There are also index-based contracts, which follow market fluctuations and allow for additional price flexibility.

Market expertise is imperative in optimizing energy cost solutions. However, most facility managers have much more pressing responsibilities than navigating the ever-changing complexities of the energy market. Utilize the trading resources of your energy expert. A knowledgeable representative will be able to perform cost analysis and advise you on a customized solution for your business, including insight into the impacts of abnormal or unexpected changes in usage.

Shell Energy has provided a valuable resource for C&I natural gas customers to navigate various energy risk products and services. View the Natural Gas 101 guide here.

2. Facility Efficiency

Increased efficiency saves on energy costs, supports sustainability goals, and may be incentivized or mandated by cities and states. Lighting represents the largest single use of energy in commercial buildings, according to the Energy Information Administration, closely followed by heating and cooling. It follows that improving HVAC and lighting system infrastructure can translate into significant energy savings.

Efficiency—Getty Images

Energy companies may assist with this effort through Distributed Energy Resource (DER) offerings. DER portfolios vary, but many include smart, high-efficiency lighting, HVAC, or other infrastructure improvements within the scope of larger onsite projects.

For some facilities, infrastructure updates are often deferred based on other business priorities. Shell Energy can assist with creative and appropriate financing mechanisms that allow customers to meet sustainability goals and reduce energy expenses in an economic manner, without an upfront investment.

3. Load Shifting, Resiliency and Storage

Even if you can’t control how much power your business requires overall, you might benefit from changing when you use it. At its core, load shifting (also called peak shaving) is the practice of moving power usage to off-peak times to save on energy costs. For example, manufacturers may choose to run certain industrial operations in the middle of the night instead of during the day, when energy is less in demand and more affordable.

Resiliency—Getty Images

Peak shaving and demand response program participation is made easier through aggregated DERs and energy management systems. Both of these options can provide real-time insights which empower energy use decisions, provide actionable early alerts about over-usage, and allow users to actively manage load imbalances.

They may also include advanced capabilities such as automated infrastructure responses to changes in energy consumption, on-site generation, and behind-the-meter storage. In areas where demand response programs operate, facilities may even be able to create a new revenue stream by selling power generated onsite back to the grid. For natural-gas powered generation, a customized natural gas contract may be layered in to provide additional cost management and optimize returns.

Together, these aggregated solutions can achieve greater cost savings and support ambitious sustainability goals, as seen in the case of the first net-zero elementary school in Texas. Despite the inherent uncertainty of today’s markets, facilities have many options when it comes to reducing energy usage and costs.

If you have questions, experts at Shell Energy are available to assist in exploring options available in your area.

About the Authors:

Priscilla Partida, Manager of U.S. Retail Account Management at Shell Energy North America, is a graduate of Rice University with 15+ years of experience at Shell. Her focus is the delivery of optimal natural gas solutions to C&I facilities across the United States.

Patrick Scott, Sr. Originator, Shell Energy North America, brings 15 years of robust trading experience to the Shell Energy team. He applies his deep background in power generation, operations, transport, Real-Time, and Day-Ahead trading in his customer-facing role.

This article was written and sponsored by Shell Energy North America.

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