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Get Paid to Go Green

Feb. 1, 2009
An emerging trend in the material handling community adds revenue and saves energy with little or no investment.

Manufacturing facilities and distribution centers are notorious power hogs. Material handling equipment zips from point to point, while climate-control systems toil around the clock. It’s easy to see how powering mission-critical activities, especially these days, can drain profits.

From a green point of view, excess demand on utility suppliers quickly depletes the natural resources used to generate electricity.

So, it’s not a stretch to say that saving energy can both enhance the bottom line and support corporate sustainability initiatives. Installing energy-efficient equipment, lighting and HVAC systems is a proven path to reach those goals.

However, there’s another way to achieve green while making green. And, it requires little or no upfront investment.

It’s called demand response (DR), and it’s a real trend emerging in the material handling community.

DR Defined
DR programs are incentives offered by power providers to end users to curtail power usage during brief, capacity-constrained hours, according to Robert Zak, president of Seattle, Wash.-based Powerit Solutions. “With usually 10-minute, one-hour, or 24-hour notices, the user is asked to reduce its electrical load for a few hours and is paid handsomely for every kilowatt of reduction it delivers,” he says.

It’s a way for utility providers to reduce energy demand during peak times so they can avoid the need to build additional power-generation assets and infrastructures. “It is less expensive for utilities to create incentives for industrial and commercial users to lower their energy demand during peak times than it is for utilities to produce additional electricity and sell it to those who cannot alter their energy consuming behavior,” Zak explains.

Although DR programs have been around for years, they are becoming more popular as utilities feel increased pressure on their power supply. “When utilities reach maximum capacity, things start to fail, resulting in blackouts and other system failures,” says Eddie Hickerson, staff marketing specialist at Palatine, Ill.-based Schneider Electric. “DR is a way for utilities to manage the demand side of the equation so it doesn’t reach more than 95% of capacity.”

There are many different variations of DR programs in North America. Ross D. Malme, president, chief executive officer and founder of RETX, a subsidiary of Schneider Electric in Norcross, Ga., says there are three main types— reliability/emergency, in which someone has a “call option” on a resource; economic/demand bidding, in which a consumer or agent bids in at a price at which they are willing to see a reduction; and pricing based, in which commodity pricing creates incentives for consumers to use power based on market conditions.

“For many utilities, a third-party provider sells kilowatts back to the grid at predetermined prices,” adds Neal Verfuerth, president and chief executive officer of Orion Energy Systems based in Manitowoc, Wis. During peak periods, in which demand is high, these third parties reduce energy consumption through a command sent to a computer on a facility’s power meter that reduces power to select systems. “The third party installs Web-based equipment that sends a signal to the facility to turn off loads and/or turn on a generator,” explains Verfuerth. Two examples of such companies include Hanover, N.J.-based Comverge and Boston’s EnerNoc.

Mitigating Risk
Hickerson says there are two main ways to reduce energy demand in facilities: load shifting and load shedding. Load shifting is transferring power from one system to another, while load shedding is the deliberate shutdown of power to specific equipment. For example, says Hickerson, facilities operating electric lift trucks can shut off power to batterycharging equipment. Other facilities can create setbacks on HVAC systems or reduce lighting levels during periods of peak demand.

Obviously, cutting power to material handling equipment, lighting and HVAC systems without controls in place is a dangerous endeavor that can result in devastating downtime and cost. According to Zak, many industrial facilities—even those with highly automated processes—still use manual procedures to control how power is used.

“Less than 1% of all commercial and industrial companies use automated technology to measure and manage their use of power,” says Zak. “The reason companies do not currently participate in energy management to reduce peak demand most often is risk,” he explains. “Many site managers are not confident the actions taken will produce benefit that will outweigh the risk.

“In the past, DR was prone to error, as it was handled by manual operators turning loads on and off,” Zak continues. “With intelligent DR technology, the user can accurately dial in how much DR participation they realistically desire, knowing exactly the action the system will take and, as a result, the impact those curtailments will have. What before was a risky and difficult prospect can now be a true operating advantage.”

Zak adds that many utilities offer innovative financing and grant programs that pay for some or all of the investments needed to automate energy use in facilities. “With new control technology solutions available today and good strategies for implementation, it is now possible for facilities to take advantage of these opportunities to improve their bottom line,” says Zak.

Orion offers a control system that enables DR for lights and other devices. The system, called InteLite, ties a facility’s lighting system to a wireless device that controls lighting based on time-of-day scheduling and specific user inputs. “In large distribution centers, much of the power loads can be attributed to lighting,” says Verfuerth.

Getting Started
So, where can material handling professionals find DR programs? “Most activity is in the mid-Atlantic and New England regions and southern California,” says Verfuerth, “as these are areas with significant population and capacity constraints.”

Nevertheless, Malme says DR programs can work anywhere in North America. In fact, many large utility companies have recently launched DR incentive programs. For example, last year, New York-based Hess Corp., one of the largest electricity suppliers in the U.S., introduced its own DR program, which includes energy audits, installation of metering equipment and access to an online energy monitoring system. Hess’ energy marketing division pays customers monthly to commit to reducing electricity usage during times of peak demand when power grids are under stress. The company initially rolled out the service to its eastern markets.

An intelligent lighting control panel board, such as this one from Schneider Electric, can be configured to receive a signal from a utility to turn off preselected loads.

“We’re launching Hess Demand Response as a value-added service for a growing number of customers looking for new ways to save money and manage their energy usage more effectively,” said Gene Kutcher, Hess energy marketing vice president of sales and marketing, when the company announced the service. “DR is a way businesses can generate recurring revenue, and at the same time, help improve the reliability of the power grid.”

As DR becomes more popular and its benefits more clear, additional regions will likely gain access to the revenue-generating strategy. Some believe it may soon be driven by the federal government. A new report from the U.S. Electricity Advisory

Committee for the U.S. Department of Energy stated that current savings from DR programs represent a small fraction of potential savings in the future. According to the report, national policy outlining sustainable strategies, such as DR programs, is needed to achieve maximum possible energy savings.

“Upgrading the nation’s electric transmission grid is critical to ensure a reliable electricity supply, provide greater access to economically priced power and support the growth of renewable energy generation,” states the report.

Clearly, DR programs are worth investigating, but experts suggest some preparation first. “Before considering DR, make investments in reducing base loads,” Verfuerth advises. “Take out legacy highintensity discharge products and put in fluorescents. Better manage air-conditioning systems, and rethink when you allow battery chargers to operate.” Once a facility achieves overall reductions, the time is right to contact the local utility and find out what programs are available, says Verfuerth.

Hickerson agrees with this two-pronged approach. “Controls, energy-efficient equipment and energy management systems, when combined with a DR program, can help pay for the equipment and result in quick payback,” he says.

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