Taking Control of Energy Costs
By: Michael Nicoloro, PE, senior vice president, and Joan Fontaine, PE, vice president, Sanborn, Head & Associates Inc.
Winter 2015 2016
Independent energy districts can enable building owners to produce their own power and heat.
MANAGING FLUCTUATING energy costs is a fundamental challenge facing commercial real estate developers and owners. Building owners and tenants need reliable access to stable, affordable sources of energy. The unpredictability of long-term availability and prices is a common source of worry for developers and real estate owners alike.
But they don’t have to remain hostage to the energy markets’ fluctuating prices and availability. They can take control of their power needs, producing their own power and meeting their thermal needs with independent energy districts.
Independent energy districts are relatively small (a half-acre or more) power plants that can be developed on a corporate campus or other development project. They are sized to meet the specific energy needs of the development they serve, and can be configured to operate on most fuel sources, including oil, natural gas, propane and biofuels. They also provide a remarkable degree of flexibility, because if one fuel source experiences a spike in price or availability shortages, they can be reconfigured to burn a different fuel. Switching from oil to natural gas or propane, for example, can be staged seamlessly with dual-fuel boilers.
Independent energy districts must conform to National Fire Protection Association (NFPA) codes as well as local, state and, sometimes, federal regulations. They can be built in industrial settings as well as on office campuses. The authority having jurisdiction — typically the local fire department — determines what types of permits are required, but a municipality may also require other approvals. The approval and construction process typically takes 18 months to several years. The districts can generate as much energy as needed, depending on the amount of land and fuel available. They can sell excess electrical capacity to others or back to the grid.
In 2009, natural gas prices plummeted below those of oil. Today, natural gas is the most attractive fuel for most companies because it combines affordability with availability and sustainability. Over the next generation, natural gas will serve as the essential “bridge fuel” that will help America transition from fossil fuels to renewables.
Natural gas offers flexibility because it is available in several forms. The most common, of course, is pipeline gas. For companies with direct access to local gas distribution systems, pipeline natural gas can be the perfect fuel choice for an independent energy district. The gas is drawn directly from pipelines, which are typically provided by local utilities. The primary drawback to relying on pipeline gas is that utility-provided fuel can be subject to all-too-frequent price spikes.
Where pipeline gas is not readily available or costs are not stable, independent energy districts can use other fuels. The two primary alternatives, liquefied natural gas (LNG) and compressed natural gas (CNG), offer effective “portable pipeline” options. In essence, they permit companies and institutions to create their own pipelines.
Utilizing LNG or CNG as a primary fuel source requires specific infrastructure. For instance, LNG requires insulated storage tanks, vaporization systems to convert the LNG back to a gas form so it can be burned, off-load pumps to transfer the LNG transport contents to storage tanks, and service pipes to convey the vaporized LNG from storage to the end-use equipment. CNG, on the other hand, requires a “mother” station where the CNG tube trailers can be loaded, a decompression — or “daughter” — station to warm gas during depressurization to the desired working pressure and a piping system to connect the daughter station to the rest of the apparatus and distribute the natural gas throughout the district.
The CNG Option
Independent energy districts that use CNG rely on “just-in-time delivery,” meaning they require no on-site storage. Tube trailers are delivered as needed. This option is the least capital intensive; the bulk of the cost is built into the cost of the natural gas. The capital investment required may involve converting boiler burners, setting up a tube trailer manifold offload area and other incidentals. The area needed to accommodate this installation will depend on how many tube trailers will be needed to maintain a sustained supply to the end-use equipment. A two-bay trailer offload area would take up less than a half acre; capital costs could be as high as about $150,000. The high-density polyethylene tube trailer can hold a nominal 350,000 cubic feet (350 Mcf) of CNG.
The LNG Option
Independent energy districts using LNG need on-site storage, and thus require a capital investment in storage tanks and associated equipment. Boiler conversions may also be required. LNG-fueled districts are better suited to larger energy consumers that require stored fuel as insurance to maintain continuity of service; they are less likely to suffer a break in service than CNG-fueled districts because of the on-site storage feature. Both CNG and LNG systems should have a secondary energy source as a backup. For example, an LNG facility with two vertical 18,000-gallon storage tanks would be equivalent to about 2,975 Mcf. For perspective, this would equate to about nine CNG tube trailers. A two-tank LNG facility would require about a half-acre site; capital costs could be as high as about $1 million. Larger facilities could require 50 acres or more; capital costs also would be much higher. Land requirements are dependent on storage needs and the facility’s proximity to property lines.
The Bottom Line
Creating an independent energy district obviously requires a significant investment and commitment beyond the turnkey approach to purchasing energy offered by local utilities. However, while the creation of the necessary infrastructure can necessitate a substantial upfront capital expenditure, those costs can be recouped very quickly, in as little as a couple of years. Since independent energy districts are designed to operate for many years, they can deliver significant cost savings for an extended period.
Building owners can’t afford wild fluctuations in the price of the fuel they use to power and heat their facilities. Unexpected interruptions to fuel supplies can also wreak havoc. By taking control of their own power and thermal needs with independent energy districts, developers and facility owners can eliminate energy uncertainty, assuring that they always have reliable and affordable access to the energy they need.