Good afternoon everyone, my name is Greg and welcome to this breakout session as part of the Sustainability Summit. For those of you who have never participated in WebEx before, please use the Q&A option to ask your questions. These will be collected and answered periodically during the presentation. Use the navigation bar that pops up at the bottom your screen to access these functions. At the end of the webinar, you'll be asked to fill out the evaluation. Please fill it out when it pops up on your screen. Your feedback will help us to improve future events. This webinar will be recorded and will be available on our website after it has been transcripted and captioned to comply with the ADA Accessibility Guidelines.Our presenter today is Ira Nicodemus, Ira joined the Performance Services team as a Business Development Manager in 2019. For the proceeding eight years, Ira worked in commercial real estate as a Director of Energy and Sustainability, helping customers implement Energy and Sustainability Initiatives. Programs included, LED Retrofits, Demand Response Enablement, Central Plant Optimization, and Solar. He has a passion for solving complex energy problems and finding the best construction and renovation solutions for customers. He and his wife live in Grapevine, Texas. Outside of work they enjoy working on house projects, traveling, fitness, reading, and attending their church. So Ira it's all yours.
Thanks, Greg. I certainly appreciate the introduction and thanks to Dallas College for allowing me this opportunity. I'm really looking forward to the time I have with you all and walking through this presentation on a holistic strategy for managing energy costs, so a lot of good content here today, we'll go ahead and jump into it. As Greg said, if you do have questions as we go, this is kind of broken into four sections, so feel free to put those into the Q&A. and at the end of each section, I'll kind of pause and see if we have anything and then of course we'll have time at the end as well. So you have the video, but here's my smiling face again. As Greg said, I've been in energy and sustainability really my whole career since I finished my undergrad. I also did an MBA at University of North Texas, so I really like to put together the technical piece, undergraduates, more engineering and management as well as kind of finance to put all this together. And so what we're talking about today is a lot of what I had kinda developed in my career in energy and sustainability, and saying, you know, what worked, how do we really put together this overall strategy and make it something that's actually going to work and get some [inaudible] legs and actually have an impact, especially when it comes to facilities. So what we're going to use as we go through is kinda talking in what happens when rates are going up. And the reason why I wanted to put this in here is you know, this is a Sustainability Summit, and I'm all for the kind of a softer side of sustainability, right? Solar and recycling and those type of things. But I also know that when it comes to dealing with the numbers, that it all comes down to the dollars and the cents. And if we can figure out how to put our Sustainability Initiatives into dollars and cents and make it a good business case, we're going be able to get more done and it's really going to have a bigger impact.
So the thing with electric rates or energy in general is that it's always going up. When we look at this chart, this goes back to 1960 and it's the average retail price of electricity. And you can see that in general it's trended up, kinda like inflation. Now there's times where it'll be fairly flat, even go down. Here in Texas right now, we're pretty fortunate that we've had lower electric prices, natural gases down, that's a big part of how we produce power. So it's been fairly cost effective, but that being said, we can pretty much count that just like death and taxes, it's always going to be going up. So, you'll see that some of the things we're talking about, I kinda put the, what happens when rates go up, so we can look at some numbers and see how that impacts the strategies here. Now the other thing we're going to be talking about today is pumpkin pie. And the reason I picked pumpkin pie, I actually developed this presentation awhile ago and delivered it a couple times. But I, I had a story about pumpkin pie, but we're coming into the Thanksgiving season, so maybe this is even more appropriate. So I said, I've been married for a couple of years now and with the first holiday, the first Thanksgiving holiday I had with my wife, see, I grew up in Upstate New York and we always had pumpkin pie during Thanksgiving, so I just assumed maybe that's what everybody did. But we go to the first Thanksgiving with my wife's side of the family, and they've got a pecan pie, and some sort of chocolate pie, and just about every pie except for pumpkin. And I couldn't believe it, I thought that everybody had pumpkin pie at Thanksgiving. So my poor wife, she felt bad, and she promised that next time we have Thanksgiving with her family, there'll be pumpkin pie, but we're gonna be talking about this as kind of a recurring illustration of some of these strategies. So you'll see what I mean here as we get into our first one.
Alright, so the first strategy when we're looking at how do you manage your energy costs, is reducing consumption. And here's our pumpkin pie analogy. So let's say you're going to the in-laws and you gotta bring something, you forgot to make something so you stop by the store and you're going to pick up a pumpkin pie. And you look at one and let's say it's twelve, it's a twelve inch diameter, and they want to charge you twelve dollars for it, well, this is the in-laws and you're not sure you want to spend twelve dollars. So you'll look and there's a smaller one that's maybe a nine inch diameter, and it's only ten dollars. So we can get a reduction in price, but we're getting less for it. It's kinda the same thing with our energy strategies, so if we can just reduce what we're consuming, reduce our kilowatt hours or our BTUs, then there can be a reduction. Now notice here that if you look at this, I said we're going from twelve to nine, but we didn't go from twelve to nine on our price. We actually went from twelve to ten. And the reason is, and we'll get into this a little bit more later. But it isn't going to be just like a linear correlation, when you reduce your consumption there's other things that go into your bill. So just keep that in mind that it's not always going to be one for one. You get a 20% reduction doesn't necessarily mean your price is gonna go right down 20%. You'll, you'll see more of what we mean when we talk about sort of our other strategies. So I am a numbers guy, I saw this on the MBA, they drilled this into me, but I, hopefully you all will track with us as we go through some of these numbers. What I did was I made them hopefully pretty easy. We're using $0.10 a kilowatt hour, that is a little higher than what we normally see here in Texas. But the reason is if we look at this here, our first scenario is before we do anything, so we haven't done any sort of energy conservation.
Let's say you have a building that is using 1 million kilowatt hours a year, you're paying $0.10 a kilowatt hour also we're paying a $100 thousand on our bill, that's easy math. Well, if the rate increase comes along and I'd say it's gonna go up 5%. So we went from $0.10 a kilowatt hour to ¢10.5. Will that if we didn't have anything to reduce, [audio malfunction] are still using the same million kilowatt hours your bill went up to a 105 thousand. But what if, either before this rate increase or even afterwards, we go through and we have a 10% reduction on our consumption, so rather than using a million kilowatt hours, were able to reduce that down to 900 thousand. Well, we're still going to have the rate increase, maybe we couldn't control that, But now ¢10.5 times that 900 thousand might only be 94,500. So we actually [audio malfunction] had a 105. We actually came in less than the original a 100 thousand because that 10% reduction in consumption was greater than the 5% increase in the rate, right? So what this does is, I
kinda look at it, is it's a way to reduce your exposure, your risk to rate increases because when you can pass [inaudible] that down and you don't need to buy as much, you're going to have less susceptibility to those rates increasing.
So how do we go about that? I'm gonna talk about a couple of practical steps and you'll kinda see that sort of the wrap up each of these strategies. But what are some practical steps you can do? [audio malfunction] So implement a program is the first thing that I would do. When I say implement a program, we're talking about things that you can do that will tighten up your operations, engaging building occupants, doing things like that to drive energy conservation. So tightening up your building operations may be as simple as having standardized temperature set points for your heating and cooling system. Put that into a policy, make sure everyone knows what days you have consistently, and that can save you some money. Having schedules in place so things aren't running when they don't need to be.
And then part of that is when you have those standards in place, you also need to make sure that your building occupants are on board and engaged. So whether you're dealing with either a university that has faculty, staff, students, and a commercial building where its employees, K12 where you have younger students, you know, [inaudible] do regardless of who your occupants are, get them involved, make sure they understand why you're doing it. and then they could even help, you know, doing the little things like turning off the lights.
And the good thing about this, and the reason I say it's the first thing you can do is there doesn't need to be a lot of cost to this, this isn't having to go buy a lot of equipment and material, you're really just putting working with what you have, there can be some savings. So do that first before you really start to look at these next ones. Now the next thing that I would do is look at investing in high return investment items. So these are things where you're going to spend the money to invest into these projects, but you're doing it because it's going to save money, that's the primary reason. So things like LED lighting is probably most common. LED lighting has gotten much more cost-effective over the last several years, so even here in Texas where our electric rates are pretty low, it makes sense to invest that money. So if you were to say, you know, if I say I've got a $100, where am I going to put a $100 next?
LED lighting is a really good one because you're getting all of these benefits and it's a quick return on investment of that $500.
The next thing that I would look at is upgrading aging infrastructure. So things like HVAC, building envelope which isn't [inaudible] roofing windows, maybe electrical transformers. So these are things where you're not doing them just because they save energy, but you're doing it because they need to be done. And oh, by the way, it will help you save some energy. So think of [indecipherable] like an HVAC unit. We usually say that those who have a 15 to 20 year life, and we're not going to replace a
10-year-old unit that still has a lot of life left in it just because there's a more efficient one, it just wouldn't make sense. But when you get to that period where you need to replace it anyway, you make that investment. Oh, by the way, there's going to be this good savings that comes as a part of it. So these are longer paybacks. These are things that could be 20, 30, even 50 year paybacks by themselves, but when you're doing them because they need to be done, there's that other benefit.
Well, the last thing that I would say is really you can do these sequentially or you can do them all together. And especially if you're looking to do them all together, think about getting a third party that can really help you to evaluate how these things would work together. Look at all of it together, and say here's what the collective cost and benefit would be. It can be a lot to manage, so depending on what level of resources, if you have some good energy managers that are on staff you can probably do a lot of this yourself. But if you're saying that I need some help, engage someone, and they can help work
through this and put together an overall plan. And at the end of the presentation I'll talk about a University that we worked, that did a lot of this and you'll see the impact of these can have. So as we wrap up this first section, Greg, I'll check with you, any questions that we've had from the team? [Greg] No questions so far. If we could give people a moment, if you have any questions, please enter them in the Q&A, and that will address those, [pause] [Ira] Thanks Greg. [silence] no questions so far. Alright, very good.
Well, let's move on to our second strategy, which is managing when you use your power and specifically when you use electricity, is really key. So what does this mean? Well, let's go to our pumpkin pie analogy again, and this is the concept of supply and demand. So, during Thanksgiving, if you go to a bakery and you're buying a slice of pie, it may be that it's $4.50 because everybody is getting it so there's a high demand during this time of the year. Well, if you came back at Christmas, I don't think many people are buying pumpkin pies during Christmas, so maybe that's either discounted, hopefully it's not the same pies from [inaudible] authority and it's getting, but it may be a little bit cheaper because there's not the same demand. And it's the same way with electricity. Electricity does need to be produced here in Texas, we have essentially our own grid, and all that needs to be balanced across the state. So, when you're looking at times of really high demand, where everybody wants the power, there's a price impact to that. So, we can manage when we use electricity, it can save us on our costs. So, here's a little bit about why that is, and what that looks like. This graphic is actually a couple years old, but the reason I kept it in is, I just really like how it laid things out. So this was I think in 2018 or [inaudible] COD Reliability Council at Texas for the power grid, they did this projection of a couple of things, it's gray bar here, is how much capacity was currently installed. This is how much in generation they can have.
This blue on top was what was planned to be built. So these are things that were coming down the pike, [inaudible] you know, maybe it's wind turbines or [inaudible] some sort of a new power plant that was going to be added, so additional generation. And then this kind of orange line that goes through here, this is the forecasted peak load. This means this is how much they were forecasting was going to be needed, a kind of a worst, worst-case scenario, the peak time. Now again, these things shifted a bit, this is a projection from a couple of years ago. But what you can see is that over time, if they didn't add more of this generation of these things in blue weren't added, eventually we're going to run out of power. And we saw some of this where we had some tight summers last year. The summer was some times where you may have heard, Hey, we gotta do things to help manage the grid because it was pretty tight. And that's the impact of this balance of Texas is growing, we're having a lot more demand on the system, but how quickly can we get the generation to add power so the needs can be met?
Well, one of the ways that they tried to manage this is by increasing the amount that can be charged per power during these peak times. So, the beginning of this chart is in January of 2011, and this is the system-wide market cap. This is the maximum amount, that they're allowed to charge in the market for power, this is dollars per megawatt hour. And you can see that in February of 2011, they raised it to $2,250 per megawatt hour. And as things were kind of tight, they said, well maybe we need to raise that so there's more of an incentive for people to build more of this generation capacity, so they raised it to $3,000. They later, August of 2011 was a really tight year, so they said, well let's move it up to $4,500, then 5, 7 and 15. It was all the way up to $9,000. Well, at that point everyone thought we're never gonna hit $9,000, but the market is just not going to go that high, this is way higher, like way more higher than what we need. But sure enough, we've actually hit that a couple times. Last year we had about $9,000 cap. So the point is, that there's times where on the open market, if the power is really tight, it can go all the way up to $9,000 per megawatt hour, which is a lot. So you want to be really careful about that. So what does this mean in practical steps? And I understand that there's a lot of kinda information there, but what does it actually mean for how you operate your facility? So one, if you can reduce your electric load, your consumption, especially before about 3:00 p.m. during the summer, on the weekdays. Those are the times that are tight for Texas, so if you think about June, July, August, September, that's what I'm calling summer. During the afternoon on a weekday, not only do you have all the commercial buildings that are still running and people are still at work at 3, 4, 5 o'clock, but you also have folks who may have, you know, kids are coming home from school, if it's still [inaudible] not going to June, September timeframe, people are coming back from work, the residential air conditioning is kicking on, it's also the hottest time of the day. So all these things kind of compound to where this is normally where we're gonna see that top peak periods.
So this is when you have that potential exposure to those high prices. So anything you can do to reduce it, then that's going to work. Now, the reality is you probably don't want to be trying to turn off all your lights all summer long at, you know, 2:30 p.m. So the good news is you can really be targeted in this approach and still get some good savings. And the reason is there's a, there's a thing here in Texas called 4CP or [indecipherable] for Coincident Peak times. And basically what this is, is during those four months, June, July, August, September, each of those months, whenever the grid peaks, when the Texas grid has its biggest peak, they're going to look at how much your building is using at that time, and this is right down to a 15-minute period. They're going to look at that time. And then you say, how much were you using? And the average of those four 15 minute periods in June, July, August, and September, that becomes a big part of your bill for the entire next calendar year. So, if you can just predict and know when those four periods are and reduced during those, now you can get a big savings and it's not nearly as much as trying to do it every single day. Well, the tough part about this is, you know, how do you predict that? And this is where a lot of different third parties can help you with it because they're essentially looking and saying, what is the weather forecast for the next few weeks? How much have we had so far? And they're pretty, pretty accurately able to predict when these coincidence peaks are. You're not just maybe having to do it four times. Maybe you can shed that load eight, ten, twelve times, and even if you don't hit all four, if you hit, you know, two or three, then it's an average, so it can still help you.
So working with someone to help you kinda predict that, have a plan for how you're going to reduce that load, it's a very low cost way, not really saving consumption, it's not really about that, it's about hitting these peak times so you can save the money next year. Now the last one that I'll say is something that can work for a lot of folks in its demand response. You can actually get paid for [inaudible] this fact that the demand, when the demands high, those prices go high. So essentially what happens is if you're in a situation where the grids in a situation where they're potentially going to have rolling brownouts or blackouts and they're so close to running out of generation capacity, then what are they going to do?
Well, there's programs in place with [indecipherable] with Oncor, that will allow you to say, hey, if we get in that situation, I'm going to volunteer to drop my load. It may be that you just have a plan in place for how you're going to do that, if you raise the temperatures in the buildings, you turn off lights or do things like that, or if you have back-up generation, like emergency backup generators, you say, I'm going to actually take my load off of the grid and put it onto that so I'm really able to move it off. Just for saying I'm available to do it and you have to do a test [inaudible] pride during the year to prove that you can, you'll get paid even if they [inaudible] would never call you, and it can be very substantial, so as I [inaudible] said, I used to work in commercial real estate and I had a health care portfolio for awhile, a hospital system, and then I had a big financial portfolio that had a bunch of data centers. While in both of those cases we had back-up generation. To give you an idea of the potential with my datacenter portfolio, the total energy span for that was about, I think we were about $20 million a year? and we had maybe six of the sites and demand response, and we were making almost $2 million a year
back. So close to 10% of our energy budget was coming back. And we hardly ever had to run the generators for the program.
We just had to do the task and be enrolled, so it's a little bit unique. I understand that a lot of you may not have back-up generation. But if you have a substantial load there's a way that you can curtail it.
Look at these demand response programs because you can actually make a lot of money and it's not really a ton of work to do it. So this is the end of the second session and again, Greg, I'll pause real quick. Any questions that have come in and Q&A? [Greg] none yet. [Ira] Alright, well, I must be doing a heck of a job than if we don't have any questions. Alright, so let's look at our third strategy, and it's about managing utility contracts. So this is a procurement side of it. So we've talked about reduce your consumption, manage your demand, and now manage what you're actually going to pay for [inaudible] with the utility contracts. So here's our pumpkin pie, and what we're looking at here is two different strategies, I'll bring in the second here in a second. And if you see down here, I've got five years, 2020 through 2024, and what I'm showing here is that each year as you go out, there may be a difference in the market of how much people are charging for pumpkin pie. Maybe it's $3 a slice this year, it goes up a little bit more next year, maybe some Instagram influencers start posting about pumpkin pie, everybody wants it so demand goes up. And then the next year maybe it's [inaudible] that it falls out of fashion and it becomes way cheaper because nobody wants pumpkin pie anymore. I mean, there's a big crop of pumpkins, whatever it is, we have these different factors that are going to increase and decrease our price over time.
Well, you could just kinda go through and each year you just pay the price of pumpkin pie as it comes along. Or what if you were to say, I just want to know exactly what my pumpkin pies going to be every year for the next five years. You signed a contract with someone that says, I'm going to pay $3.25 a slice, and that's what you have for the next five years, whatever you are buying, [inaudible] very contracted in that amount. Well, that's kinda what happens when we sign a procurement contract in which you'll notice here, I don't expect that you all have done the math real quickly, but if you were to take these five amounts and average them, and then compare them to my $3.25, and you'd see that it's actually a little bit cheaper if you were to just pay each year than to have a set price. And the reason for that is if you think about what's happening here, when you get a set price from someone, they're still having the risk of whatever the market's going to do, so because of that, they have to kinda have a little bit of margin in there for that. So, it may cost you a little bit more each year, but you don't have the risk of it going up and down the volatility.
So let's talk about that here in our actual electric contracts. So, this is a study that I really like, it was done by Constellation. And what they did was, this was done back in about 2013, and they looked back at ten years of actual market data, so they we're going backwards and say, okay, we know what happened over the last ten years on these electric markets, now what we wanna do is, let's look at six different strategies of how you can procure that power. And what you'll see is that they were going from a 100% fixed to 0% fixed. So I won't go through all of these in detail, but what you could do is, you can just say I want everything to be basically that same idea as the pumpkin pie. [indecipherable] I'm going to be [inaudible] just a locked in 100% of it all the time. And then as we move to the right, what we're doing is we're kinda going to where maybe I've got a percentage that's locked in, but the other part I'm going to go based on what the market is. And you can go all the way to this 100% index, which is basically that pumpkin pie analogy, just paying whatever it is. And you could do this down to, really down to the day, [indecipherable] murders, whatever powers trading. Now, the problem with this is when you look at it, there's differences in volatility and risk. And here's what Constellation found for this real dataset over ten years.
When we look at the six different strategies on this side, we're looking at our price, now do keep in mind that this scale goes from 65 to 61, so it looks like a big difference, but, but keep in mind that the scale they're using, it's not 0 to 60. So what we're seeing here is that our prices here, and then the volatility is this red line. So when we're a 100% fixed price, we have some high price [indecipherable] in high volatility. Now when we get into the middle here, these kind of combinations where we're either fixing our peak price or we're layering [inaudible] incent strategies we're kind of in a sweet spot to where it's not the lowest cost, but we have more reasonable volatility. If we go all the way over here, buying it on the open market, that index pricing, it's actually pretty much your lowest strategy over time. It was on this 10-year period, but it's also very volatile. So depending on what your appetite is or are you just looking for the lowest cost even if it's going to bounce around a lot? or do you want some bits really stable or somewhere in between? That's what kinda starts to dictate what type of strategy you're going to use. Now, of course, keep in mind that this study was looking back on ten years of data. When you're making these decisions, it's kinda like you're looking at the stock market, we don't know exactly what's going to happen over the next ten years. So you gotta kinda, you know, it's always easier to look in hindsight, right? But we also want to say, how are you going to feel and we're looking forward. So what are our practical steps here?
Well, first of all, understand what you and your organizations appetite is for volatility versus cost. [audio malfunction] Some folks may say, well, you know, we're talking about this session is about managing energy costs, why wouldn't I just go with the lowest cost option? Well, that's all well and good until your CFO calls and says, how come my energy budget went up 20% year-to-year and it's because of the volatility in the market, right? So you really want to understand like how much is it that I want to have that steady predictable rate versus the lowest cost and kinda find that happy medium. Once you have that, create a written procurement plan. This is really, really key is to have a plan so you know, this is what we're gonna do, this is how we're gonna do it, [inaudible] there's no longer contracts [inaudible] we want to be, or even if it's just the criteria that we're going to evaluate [inaudible] any work that plan. So a little bit of a story on this one is, one of the portfolios I worked with, they had a situation, I think this was back in 2017. And you all may have heard of this or some of you may have seen it that Texas, kind of at the last minute, decommissioned too big [inaudible] coal plants. And going back, remember that chart that we showed about the amount of generation capacity versus the demand? Well, this happened, I think in the fall and maybe 2016 if I remember, and all of a sudden 4 thousand megawatts wasn't going to be available the next summer. So the market looked at that, 4 thousands a lot in our peaks are up around 78 thousand. Those are big drop and everybody kind of started to freak out and prices started to go up. So in October 16, we started to see them go up a little bit, and as we got into the spring, they went up some more.
Well, this organization I was working with, he had a coupled these Data Centers that was here in Texas. Their procurement plan was really focused on short-term, so they didn't have a long term contract that was going to go out, pass this. Well, the prices started to go up. [inaudible] Hermes, Hello, should we, should we except, should we sign a contract with you or not? And they kept going up and then people like, well, maybe they're gonna go down because there wasn't really a process in place, and now the contract they have is about to expire, they ended up signing their contract, really just prior to when the price is peaked. And the price went up for this small part of the portfolio, about 50% between the two contracts. And how could they have avoided that? If there had been a contract in place that said, or a plan in place that said, we never want to have more than, let's say, 50% exposure over a twelve month or a 24-month period, right? We always want to be locked in and hedge this percentage for this period.
Then even when the prices started to go up, not all of that would have been subject to it. So
unfortunately, that's what they had to do. They sign the contract, the bill went up quite a bit [inaudible] that your Data Centers, we're talking about a $1 million increase just because 50% on the consumption side. [audio malfunction] And then sure enough, of course after that, things were kind of okay and the sky didn't fall that summer, prices started to go back down. So make sure you've got a plan, no what it is, and then work that plan so you don't get one of those situations that can really leave you kinda more open.
Now once you do that to help with this process, I get that these are kind of tough things, I don't expect you to kinda take what we talked about today and go do all this yourself. So look at using a commodity broker, you know, this isn't something that I do and I'm not trying to pitch my own services or anything, but find a good independent company that can help you with all these steps. Have these conversations and develop your plan, look at how you use power, and then go out to the market and procure that. So, if you're interested in going more into this, I'd encourage you to look at that and if you have questions about some options feel free to reach out to me, [inaudible] always some good companies around here that can help you with that. All right, that was the third one. And again, Greg, Any questions? [Greg] Yes, we have two questions. The first question. Can you comment on the potential for utilizing for CP prediction is distributed generation and bind with energy storage and electric vehicles, smart charging, and aggregating smaller systems? [Ira] Yeah, that's a really good question. So, if I understand what we're talking about here with an electric vehicle charging distributed generation, those type of things, we're basically saying ways that we can have these smaller systems that can either generate on their own or put power back in. So talking about with electric vehicles [inaudible] or spend some discussion about, you know, these are driving around with all this power in their battery packs. what if during these times, they could go in and basically feed back into the grid, right? So 4CP, you can definitely do it. Now, some of the trick that comes into this is that depending on the type of generation, if we're using things that are like diesel where they have emissions, there's regulations around when you can use those.
And 4CP, these aren't emergencies, so sometimes you gotta look at the regulation and talk to the [inaudible] TC2, the environmental folks here in Texas and make sure that if you're using something that's going to be combustion, that is permitted to run for something that's economic. It's not an emergency for [inaudible] CPS and economically.[inaudible] But when we're talking about things that are more like or solar or battery or those type of things, there won't be those same issues and it can be really good to do it. So you got to kinda do the math so you know how much is it costing you to do all that versus the potential? But I think it's a great idea, and if you can aggregate those resources that can have a lot of benefit on 4CP. [Greg] Okay, one more question. The individual RUPs differ in the way they pass or CP charges onto their customers? [Ira] It's a good question, so I don't want to say [inaudible] adopt next. I don't know about every RUP, RUP [inaudible] is retail electric provider. And the reason I think this question is coming, is there, when we talked, remember about when you use power and command charges, those are coming kind of pass-throughs from the grid. Typically for here in North Texas, I imagine a lot of you are here in North Texas like me. Most of them are Oncor right? so you'll see these T and D transmission and distribution charges that come from Oncor. Texas is a deregulated state. That means that we can go and get our commodity portion, the dollars per kilowatt hour, and we can go in most areas and bid that out.
That's where the RUP comes in. What I normally see is that 4CP is on the demand side, so that's coming through and it's not really having anything to do with your retail electric provider price. Now, having said that, there's a lot of creative contracts out there or, you know, that are structured and of course legal and that. So there may be ways that our [inaudible] data is done. And especially if you're more of a kind of residential or you're not paying a separate demand charge thru Oncor transmission and distribution
versus your retail rate. Those are gonna be blended and he may have some ways to do that. So I don't want to give a definite answer that you're never going to see an RUP, kind of pass through those charges some way. But normally, if you look at your bill, you'll have all these different line items. Some of them will be based off of Oncor and the demand. [inaudible] The bill [inaudible] lots are including of course [inaudible] epi, and then you have your actual rate from your RUP and those would be separate. Good questions. Greg, anything else or any follow-ups came through on those? [Greg] no more questions. [Ira] All right Very good. And again, I want to cover this last one, one more time here. [inaudible] So let's talk about strategy number four. It's our final one and that's going solar. The question I get a lot is, you know, it doesn't make sense to go solar, why would we do it? And let's dig into that a little bit. So going solar is our last pumpkin pie analogy, and it's two ways to look at it. So one, remember we said we can go to the bakery and we can buy a slice of pie for $3.25. The bakery did all the work, they made it, we just got to walk in, get it, get some coffee and enjoy that. Or, maybe we can make our own. Now it may be cheaper because let's say this $1.25, this is really just the cost of the ingredients. But remember that you're going to have to have a kitchen, then begin to take some cooking classes, get the equipment, and get all the, everything you need to put this together to make it so it's kinda like you can get it cheaper down the road, but there's gonna be some investment up front and it's the same way with solar.
So let's look at our numbers, and I'm going to use the same type of numbers that we had before. So these first couple are going to look similar. Remember we said a million kilowatt hours, $0.10, it's a 100 thousand. Let's say the rate goes up, well, here's the interesting thing about solar, solar kind of impacts you in a couple of different ways and some good ways. Everything we were talking about with managing your electric contracts with [inaudible] determined. There is an element of that, that happens normally with solar, because what you're really doing is you're saying I'm taking and generating some of it in house, so I don't need to buy that from the gray, right? So whether you actually purchase your solar panels outright, and then from then on, the power is essentially free. Or if you structure it as which is probably more command as a power purchase agreement where you're, you have a rate for your solar because you're kinda leasing them, but either way you do it, it's kinda like you have a long-term plan for some of your power. So if we look at this, let's say that we are producing some of this power. What's here in orange from our, from our panels, and we're only paying a power purchase agreement price if EPA rate of 8 cents for what those are generating. So that's how we're paying for the panels is via this predetermined rate [inaudible], everything they produce. Well, we're gonna save some money there, but then we're also going to have savings from the power that's being produced because we don't have that exposure to the market. I know that I was trying to figure out how to describe this, and I know it's kinda dealing with some different things we get to solar, so hopefully this analogy isn't too confusing. And here, if you go into the next one, I think these will make a little bit more sense as we talk about our practical sense. So when you're looking at solar, really you want to evaluate the different types of systems. You want to do a ground mount system, you want to go with a roof mount system. There are some pros and cons to both of them. Going back to when I had the datacenters [inaudible] meeting and we had beautiful open roofs, but because those are critical infrastructures, we don't want to run the risk of putting any sort of roof penetrations [inaudible] the mountain, and there was even some concern about having non penetration with [inaudible] balanced system. So they didn't really want anything on roofs. So we were limited to ground mounts.
If you have the land, ground mount can be a really good way to go. It's easy to access, it's visible, but land is expensive, especially here in Texas. So look at what you have available, I'd also say be careful before you put a solar system that's going to last 20, 25, 30 years on top of a roof. If that roof is maybe reaching the end of its life. Because if you need to replace that that roof, you'd have to take all those panels off, do your roof replacement, put them all back on and that can be pretty costly. So if you have a
new roof and good condition, there's not a lot of equipment on it, It's kinda free space, it's a great way to do that. So evaluate the different types of systems and mounting that you want to look at on solar. The next thing I would say is make sure you coordinate with your utility provider, so as we were saying about when you lock in these contracts with your retail electric provider there's typically often a component of your kind of contracting and saying I'm gonna use this much power. When you put solar on, all of a sudden you're shifting that away.
So where, let's say you put roof mounted solar panels and you're going to produce 20% of your consumption from those panels now. Well, that's going to impact because you're not buying that 20 percent so make sure that your utility provider, your RUP, knows which you're looking at and it may be that you need to adjust that contract. You definitely make sure there's no penalties because now maybe you dropped down below a certain level and you have minimums or something in there. So a lot of people forget about this part of coordinating utility provider to make sure it aligns. The other piece I would say in this, is to coordinate to see if there's any incentives. [inaudible] Unfortunately, I'd say that Texas probably isn't one of the better states for incentives for solar. And it's one of the reasons I think it's been a little slower to adopt here then some other states that we work in, and I've seen, but definitely worth tracking. There are some from Oncor, especially for smaller systems you cannot do in a real big, large-scale system. Or maybe you have something through your RUP that you can work out. So look for incentives as well. And then there's some good tax incentives that are federal, that if [inaudible] your taxable you can do.
The last piece to look at is that point of how are you going to purchase this? You want to do an own system? Where essentially this is in its simplest form, would just be that you buy them, you own them, you probably have to maintain them now yourself, or pay someone to do that. But once you have that upfront costs, whether you pay cash or finance or whatever, you own it, and all the power that you get is doesn't really have that ongoing costs to it. The other way is to lease them and the most common one here would be that EPA, the Power Purchase Agreement. The thing that the Power Purchase Agreement is technically someone else normally owns the panels and your leasing that back into paying for it, so it doesn't cost you much of anything or maybe nothing up front, and then down the road you're paying some rate to recoup that cost. There's different reasons that these can be better, especially if you are within your school or some sort of non-taxable [inaudible] in order to get the tax credits that are still available, investment tax credit, you need to have someone that's part of this, EPA may be the better route.
So just look at the different options again in a couple of minutes that we have here. Solar is complex, I will say that I think we're gonna see more solar in Texas as the prices come down and some of these gradient constraints that continue to be an issue. I'd like to see some more incentives, so I think it would really push it over the edge, but we're at a point where I'm seeing it makes sense in a lot of situations, so definitely research it, if this is an area that you're interested in learning more, I can definitely help you on it. So putting it all together and there's [inaudible] a couple of wrap up slides here, and we talked about these four strategies and how they work together, reducing our consumption, managing our demand when we use power, having all that tied into getting the right contract or procurement, and then maybe looking at doing some solar. So what is the potential if you do it all? And remember that we're talking about costs, so you're gonna see some differences here on energy reduction vs cost because some of these things will help in one area, but maybe not the other.
So what I've seen is it's not uncommon to see a 10-30 percent reduction, and this is kind of a building or a group of facilities isn't doing a lot of this already, right? But it's pretty common that we see 10-15-20
percent, or even 30 percent by combining these strategies. That's an energy reduction, those are, that's when you can get through conservation. Your cost reduction could be even more, because if you do all these right things on consumption reduction, it's helping you on-demand. But then you [inaudible] start to do demand, your 4CP and demand response. And that's putting in money, even though it might not be saving you on your consumption, so we can see even more when we look at our cost reduction, renewable production. If you focus on saying I want to have on-site renewables to reduce carbon footprint 10-100 percent, now, the reason I say 10-100 is what I'm seeing, and think about it like it's a difference if you have a 40 story skyscraper, you're trying to put a roof mounting system, well that's clearly going to make a dent at all in the power that that building uses is very tall. If you have a one story warehouse that doesn't use a lot of power and you cover the whole thing with solar panels, well maybe it can offset over half of the power. So what I have normally see is that 15-20-30 percent and was pretty attainable when you get to closer to try and do a full 100 percent offset on renewables. That's where if you're trying to do an onsite, you're gonna have to have some land so you can do some ground mount systems to offset beyond what the building could have on the roof.
And then the other benefit here is a long-term risk reduction. And when I talk about risky, I'm seeing price risk, exposure to the market. And I think that It's important that we balance this in, because there is a value to this. When we look at these strategies overall, it's not always about just getting the lowest price. If we can combine these things together, not only can we hopefully have a lower price, but we can also have a very predictable long-term price. We'd reduced that exposure by the use of consumption. We brought some of our generation in house because we have solar. We have a plan through our microgrids our backup generation, whatever to take advantage of the bare spots. And we put all these things together so we reduce our costs, but we also have a really good plan to protect us if rates go up if there's issues with the power grid or whatever's going to happen in the future. So this is an important aspect.
Before I close, I wanted to show a case study. This is a university, I imagine a lot of you all are in the university market in some way. This is University of Arkansas at Pine Bluff. It's a project that we did ourselves a couple of years ago. You can see it's a pretty big project, it's about $19 million in work and we had about 700 thousand in savings as a 32 percent. And so what did we do? We did LED lighting upgrades pretty much throughout. We have a lot of HVAC works, you'll see a few of these pictures on here are the HVAC system, so they had a lot of needs, that's why this project was a little bit more expensive, at close to 20 million. We did a lot of tracking, so we didn't talk about that here, but the installation of sub meters to be able to track all this and know where the power's going, and that was a big part of this one as well. The solar, this wasn't a really big system, 320 kilowatts. It's not really that large frequency as a ground mount and that's kind of a space they had available. So at least we got some part of it. And then our program, we call Energy Leadership is like our operations program. That's what we're talking about with low cost, no cost, engaging occupants to students at points, et cetera. So we did that, and then the last piece, because we've got some money back from utilities, about 1.4 million. So that's basically I visit [inaudible] D Docker so that project costs. So this was a really good example, the reason I picked this one is it kinda has all these elements in it. Maybe not in demand response directly, but it's got just about everything in here that we were able to do and give them a really good project and this has been performing well for them.
All right, last thing I'll leave as a shameless plug for us as a company. It's my last slide and I'll open up the questions again. Performance services, I said I'm here based in Grapevine. We had been in business over 20 years, got about 200 employees, done over 1.7 billion in projects, a lot of savings, lot of binding capacity. So if you are with a public entity and are interested in this, even if you're not, feel to talk and I'm happy to answer questions or talk more. But we do focus primarily on public sector, and we love an
opportunity to work with you guys and help you. So, with that, Greg, I'll open it up again for any questions you had or they want to come in.
[Greg] We do not have any other questions at this point.
[Ira] Alright, well we had some good ones earlier, so I definitely appreciate that, and again, thanks to the folks here at Dallas College, and hopefully you all enjoyed it. You do have anything [inaudible] further to reach out to me and I hope to hear from you all soon. [silence]
And this is Greg, thank you for attending. And please remember to fill out the evaluation at the end and give us your feedback, and have a good friday.