When it comes to purchasing any new equipment or technology, the two questions on the minds of city bureaucrats, facilities managers or engineers are bound to be: who pays and how?
Smart Grid technologies require investments that can seem daunting in hard economic times. But many progressive facilities managers have discovered a financing tool called performance contracting that allows them to complete substantial and sweeping improvements with no up-front investment or any tax increases.
Under a performance contract, an energy service company (ESCO) performs a set of projects that reduce operating and energy costs by a defined amount over a contract term of 10 to 15 years.
The city then pays for the cost of the improvements over a specified period of time from the savings that result. Annual savings are guaranteed by the ESCO itself: If savings in a given year fall short of the contract amount, the ESCO writes the city a check for the difference. Usually, financing is structured so that the monthly savings are greater than the monthly payment on the improvements. At the end of the contract when the improvements are fully paid for, the city reaps the full benefit of the savings on an ongoing basis.
Investments in AMR/AMI and Smart Grid technology typically have attractive payback periods that make them well suited to performance contracting. For even greater benefit, the projects can be bundled with other high-return solutions, such as lighting retrofits, control automation, and upgrades to high-efficiency boilers, motors and drives in water plants and city buildings. Going further, improvement packages can include even long payback projects, like window replacement in buildings, that might not otherwise be financially justified on their own.
Who’s doing it well?
The cities of Cumberland, Maryland, and Cuyahoga Falls, Ohio, provided lessons in the immediate benefits of the Smart Grid concept and its future potential.
Cumberland’s $3.7 million performance contract bundled energy projects (lighting improvements, building lighting retrofits, building weatherization and HVAC system upgrades) with an AMR/AMI program that featured installation of transmitters on nearly 9,000 existing residential water meters.
As part of the project in Cumberland, two tower gateway base stations, a regional network interface, and six repeater stations were installed for the wireless network. In addition, a series of nodes were added for citywide Wi-Fi, available to residents at substantially lower costs than for commercial systems.
City administrator Jeff E. Repp said the Wi-Fi system probably could not have been cost justified if not included in the larger performance contract. Residents can use the system free for limited minutes per day and can also subscribe on daily, weekly, monthly, quarterly, or annual plans.
The Strength of Smart Grid Power
For only a modest investment, that wired, fiber-optic or wireless network can be “oversized” to provide a large array of other capabilities. These may include:
- Providing in-home displays or dashboards that show customer usage in real time. Homeowners can use the display to make wise usage choices or to help teach family members conservation habits. The utility can use it to send information on matters such as water advisories or special usage limits.
- Providing broadband Internet connectivity to homes, schools and businesses.
- Using acoustic devices on customer meters to “listen back” into the distribution system for small leaks, which then can be mapped and assigned priorities for repair.
- Monitoring homes’ power or water usage at intervals as small as 15 minutes to collect near-real-time data on demand patterns as an aid to operations and system planning.
- Enabling remote shutoff of air conditioners for load-control programs, or disconnection of water and electricity for nonpayment (where allowed).
- Managing traffic-related functions from streetlights to parking meters.
- Regulating lawn irrigation and supporting enforcement of special water conservation rules.
Already, without marketing support, the Wi-Fi system has enough users to break even, and the city is gearing up for a spring 2011 marketing push executed by students from nearby Frostburg State University. As the subscriber base grows, profits will be placed in a fund for reinvestment to sustain and improve the system.
“Our aim was to provide low-cost Internet service for our citizens that basically pays for itself,” Repp said. “If it generates enough revenue, we may have some money to transfer to the general fund to be used for other city purposes. We list the Wi-Fi system in our literature as one of our community amenities, and in the future we will market it heavily as one of the major items we can offer to companies that locate in Cumberland.”
The Wi-Fi system also creates a new channel for communicating with residents on city matters from water utility updates to general news. Meanwhile, the energy-efficiency improvements are meeting expectations and show the city’s commitment to being green.
In Cuyahoga Falls, the city replaced a total of 42,000 meters (18,000 water, 24,000 electric) and installed a robust wireless AMR/AMI infrastructure. The immediate benefits include reduction in meter-reading and billing labor, the elimination of unpopular estimated meter readings, increased billing accuracy, and improved cash flow.
Looking ahead, the city hopes to make several uses of the electric meters’ two-way communication capability. “We envision the system helping us work with our commercial and industrial customers on demand management,” said Valerie Wax Carr, director of public service.
“We would be able to chart their demand and consumption data, show them where their peaks are, and help them formulate plans to reduce demand and shift consumption to lower-priced off-peak times,” she said. “That would help the city as well, since by shaving our loads, we can reduce the amount of power we have to buy.”
Going to the next level, the city could create a web-based dashboard where all types of customers could log on with their account number, see their real-time demand and consumption, and use the data as a basis for changing behaviors. In the longer term, the metering technology would enable the city to automate demand response for residents who so desire.
Meanwhile, the metering system also enables the city to pinpoint the extent of power outages and so respond and restore service faster, shut off meters remotely in case of nonpayment, and get instant meter reads (such as for residents who are moving and ending service). On the water side, the system detects anomalies that may indicate leaks, so that staff can better manage the city’s resources and quickly notify residents to investigate whenever necessary.
What’s the next step?
The Smart Grid concept and the technologies that enable it have potential to make municipal utility operations much more efficient, keep costs competitive, improve service to customers, and even help revitalize cities themselves.
“Smart Grid development has a direct relationship with smart growth, fostering the type of initiatives that open doors for model businesses and suburban centers that leave smaller carbon footprints, while cultivating economic hubs for green energy, R&D, manufacturing and engineering,” said Gerry Smallegange, CEO of Burlington Hydro Electric, Inc.
The time is now to explore Smart Grid technologies and to seek help from companies with experience in its successful application.
