Did you budget enough for electricity bills this year? If not, you are not alone. Who could have predicted double-digit increases in fuel costs driving up utility expenses? Unfortunately, crude oil prices continue to trend upward with no apparent end in sight.
The good news is that there is something you can do to control your energy costs. In fact, it might surprise you to know just how valuable energy conservation can be to your company’s bottom line. Throughout the country, millions of dollars are wasted on inefficient building systems –- HVAC, lighting, pumps, and motors -- that use more electricity than needed. By replacing old equipment with high efficiency equipment and adding new energy-saving technologies, businesses can often gain operational and financial benefits beyond expectation. When measured in financial terms, energy-efficiency projects, or energy conservation measures (ECMs), can generate significant returns of 20% to 60% on capital improvement costs. A lighting retrofit project alone might achieve a 50% internal rate of return (IRR). These are numbers that will make any CFO sit up and take notice. Upon implementing an energy-saving measure, the associated reduction in utility bills represent a cash stream of “usable” or “savable” funds that can either offset other operating costs or enhance operating income. Think of the ECMs as “unrealized” cash streams waiting to be tapped. Generally speaking, energy-efficiency projects are different than other capital improvement projects because of their cash stream component, and should be evaluated on both operational and financial merits, apart from typical capital improvements. A good rule is to place energy-efficiency project on a separate list than other capital improvements, and do them first. Despite excellent cost saving opportunities, many energy-efficiency projects are never accomplished because the cost of the ECM is often greater than the company’s capital improvement budget allowance. The conundrum, therefore, is… “How does one benefit from energy saving measures if one cannot afford the measures?” Interestingly, there is an ideal solution for addressing this aspect of energy projects -– equipment leases. While companies frequently use equipment leases in the normal course of their businesses for vehicles, computers and photocopiers, they are often unaware that it is possible to lease almost any fixed asset used in business operations, like HVAC or lighting equipment. Equipment leasing is a form of financial leveraging that eliminates the large front-end payments in favor of smaller monthly payments over a period of time. This allows for the “matching” of cash inflows (monthly utility savings) and cash outflows (monthly lease rents). For energy projects, the desired condition occurs when monthly utility bill savings are greater than monthly lease payments. When projects are properly leveraged using equipment leasing programs, they become “sources of cash” that can be used to fund other expenses. Here is an example:
In addition to positive cash flow, the utility company will often provide a rebate check to encourage energy saving, say $10,000. In total, over a five year period, $50,000 of “usable” or “savable” cash is made available to the customer, not to mention the operational improvement to the property. Through the use of leverage, the project IRR increased from 49% to an number that cannot be calculated because there are no periods of cash outflow. As illustrated, this energy project has become a real “source of cash”, not just a “use of cash” like other capital improvements. To some, this might sound too good to be true, but it is simple math when investment returns are greater than interest rates. It does not take “rocket science” to determine that borrowing at 8% to achieve returns of 49% makes good economic sense. Financial benefits like this are available to all those who choose to take energy conservation seriously. Here are some financial tips for the energy-minded:
In summary, there are two important concepts to understand and remember about energy-conservation measures. The first is simply that the investment value of an ECM can be excellent, often much better than traditional security investments. The second point is that thoughtful use of financial leverage can make an ECM become a source of cash. As fuel costs increase and the demand for power grows, expect your electricity bill to grow as well. To all those who have not included energy conservation in their business plans, this will be a wake-up call –- don’t be caught by surprise! | ||||||||||||||||
Wednesday, April 11, 2007
The Suprising Upside of Energy Efficiency
Kimura appears on the KHON 2 Morning Show
"Brian Kealoha promoted to Senior Vice President"
Story from: The Honolulu Advertiser - Hawaii
*Carrie Castle has been named business manager/market controller for Clear Channel Radio in Hawai'i. She will oversee all financial matters for Hawai'i's seven Clear Channel stations. She most recently served as market controller for Emmis Television Broadcasting.
*Amy Watabayashi has joined Bank of Hawaii Insurance Services as an account executive. Her responsibilities include overseeing the life and benefits department in addition to managing and developing new business opportunities.
*Bruce Shewalter has been promoted to the position of vice president of sales and marketing at Contract Furnishers of Hawaii, Inc. dba Office Pavilion. NorthStar Alliance has promotedAudrey Foster to wholesale account executive.
*Sheryl-Ann Wong, senior vice president of NorthStar, will be in charge of its new real estate sales division.
*Rick Peterson has been promoted to vice president of e-commerce at Hawaiian Airlines. He previously served as senior director of e-business and marketing programs..
*Brian Kealoha has been promoted to senior vice president of Energy Industries, an energy company focusing on efficiency, generation and renewable energy.
*Shannon Ladd is the new director of human resources at Sheraton Kauai Resort. She will direct employment, wage and salary administration, benefits, training, employee/labor relations and organizational development for the Po'ipu Beach resort.
*Maryl Construction has announced its new employees: Doug Costales, superintendent of the Villa Erickson residence at Hualalai Resort on the Big Island; Clyde Wakida, general superintendent of Kapalua Village Phase 1; Chris Spencer, project manager of Wainani at Kiahuna and other Kapalawai projects on Kaua'i; and Eric Wong, project manager of Kapolei Spectrum project.
*The Ritz-Carlton Club announced recently that Jeffrey Berger has been named director of sales and marketing for Kapalua Bay.
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Energy Industries opens Puget Sound office
Story from: nwcurrent.com
Honolulu-based Energy Industries LLC has opened a sales office in Bellevue, Wash., adding to the company’s Northwest presence. Founded in 1994, the energy services company now operates 12 offices throughout the world. The office opening follows the company’s purchase of Quantum Lighting of Spokane in 2005. The purchase allowed the company to broaden its lighting offerings to include scheduled lighting maintenance, including emergency repair services, for commercial and industrial accounts. It also offers data-com maintenance, installation and repair. Energy Industries founder Darren T. Kimura is host of the recently launched Energy Smart News (ESN), a weekly Internet radio program featuring guest speakers and promoting energy-efficiency. As of mid-January, the program had been downloaded more than 3,000 times, according to the company. “We’re trying to get the industry to move forward faster by sharing information and promoting energy-efficiency,” Kimura said of the program. Energy Industries employs 200 people who specialize in designing and delivering energy management and conservation programs for commercial and industrial customers in the United States. The company also operates a 24-hour National Accounts Center.
Energy Industries, LLC Local Company Goes International From Hilo to Honolulu to the World
Story from: Building Management Hawaii
I love it when things just work out. Like they’re meant to be. For instance, Elvis went to Sun Records to make a gift for his mama. Bill Gates got a small contract to make a quickie piece of software for IBM. J.K. Rowling was riding a crowded train home to London when the idea for Harry Potter simply fell into her head.
Darren Kimura is a third generation electrical professional. He learned his business in the cradle of the family business.
From his earliest days, he could see that energy production was not being planned well and that our dependence on oil would lead to problems someday. He asked his dad’s customers if they were interested in energy efficiency.
They said, “You mean like in saving money? Let’s do it.”
His first customer was a small office building in Hilo, where he’s from. It was the kind of dark, dingy type country building with dark wood and incandescent lights. He cut the number of fixtures in half and replaced them with fluorescent lights. Not brain surgery. But it worked. Even you knew that.
A lot of the world’s best ideas are like that… simple.
Today, Kimura has a company with offices in Kahului, Hilo, Seattle, Spokane, Boise, Portland, Guam and New York. Originally founded in Hilo in 1994, Kimura’s company, Energy Industries, LLC, is a national energy efficiency company with headquarters in Honolulu. In total, the company has about 180 employees worldwide.
His next step is Hong Kong.
Then, of course, the world!
It was only two years ago I first talked to him and he sounded like a nice local kid you’d invite to meet for business at Zippy’s. In 2000 Pacific Business News listed him in its inaugural top Forty Under 40. He then went on to win Entrepreneur of the Year for SBA in 2002 (Hawaii, California, Nevada, Arizona and Guam). That same year his company was named service firm of year for SBA.
He started by doing mostly consulting work with the electric company to improve its rebate programs and started moving toward project development type work, where he could go into a customer facility and figure out ways to save energy and bring in the components to make it happen.
When he got big enough to hire contractors or buy things acting as an owner’s representative, he started adding staff and opened his first branch office in Maui.
He went to Honolulu in late 1996, early 1997, and started Pacific Energy Services in 1998.
It did engineering work, meaning more mechanical work with chillers, heat pumps, the kind of components that made him a player in the biggest buildings in Hawaii.
In 2000, he opened eControls for building automation systems, which means wiring up a building to a computer, from lights to A/C, anything that uses energy, thermostat, timers, the works. Then in 2002, he began Energy Smarts, which was designed to market all these different services and include rebates from manufacturers and utilities in a complete package.
“I realized most electrical contractors or mechanical contractors had the technical expertise but not the sales engineers able to communicate these great ideas with the customers effectively. With Energy$mart, we now had a really comprehensive approach to energy,” Kimura says in his youthful voice.
“Ninety people is not a large company when you look at the national level,” Kimura says.
In 2004, he opened in Seattle and January 2005 bought a company in Spokane, Wash., which gave him a presence in Canada, Idaho and Alaska. In 2005, he opened a training center for customers and employees in Seattle. “The training center was designed for continuing staff education which leads to a better, more professional business,” says Kimura.
In mid-2005 came Guam. Kimura plans to go international next. The reason is simple.
“People need our services and there are no other firms like us in the U.S. Some firms do a portion of what we offer, but no one provides it in a one stop shop. The complete package allows for our customers to not only identify their savings but achieve it. Without a full line of services, our customers wouldn’t achieve their ROIs! ”
And why not the world? Energy is everywhere we look and our lives are becoming more dependant on electricity now more than ever.
“Today, our firm’s Honolulu staff exceeds 50 professionals experienced in a wide range of disciplines all focused on the goal of helping our customers save money by saving energy.
“Our strength lies in our ability to provide high-quality products with:
1) proper energy efficient design,
2) proper installation, and
3) proper long term maintenance.
“We specialize in finding solutions to the problems that commercial and industrial customers face.”
Kimura’s motives are not like Donald Trump’s.
“My goal always was to help people. This has been instilled in me from my parents and promoted though out my career as a scout, ultimately helping me achieve Eagle Scout. I had a vision that as long as I can help others, the rest will be taken care of.
“By helping businesses save energy, we help the environment in reducing atmospheric pollution, we help the electrical utilities by reducing rolling blackouts, ensuring our energy security and deferring future generation and we help the customer by saving money… of course we also help the government by paying taxes.
“Additionally, we help reduce dependence on imported oil, help integrate renewable technologies into today’s facilities and help provide efficient solutions without the sacrifices of traditional conservation.
“Through our concepts of energy economics, our goal is to save our customers so much energy that from the first day we install their measure, they’re at a positive cash flow.
“This is a unique win-win-win industry.”
Alvin Koo has been a writer and public relations practitioner in Hawaii for 30 years. His book “Stuff Nobody Told Me” can be found at Amazon.com.
More is Less With Variable Frequency Drives
Story from: Building Management Hawaii
February - March 2006 Edition
“Run your equipment less to save energy.” Seems simple, right? But, did you know that there are instances when running more equipment will actually save energy? As counterintuitive as it may initially seem, it is possible by using Variable Frequency Drives (VFDs). A VFD is a equipment controller that can vary motor speeds based on system load requirements. The VFDs of today actually make running multiple pieces of equipment in parallel more efficient than using a single one. This has not always been the case. Just over a decade ago VFD may as well have stood for Very Foolish Decision. Their high cost and low dependability made it difficult to justify their installation and were often viewed as an afterthought to fix oversized equipment. The 21st century welcomed vast improvements in the reliability, pricing and understanding of the technology, turning VFDs into a leading weapon in the arsenal of energy cost reduction. Many of the first and second generation VFDs still lurk in your mechanical rooms taking up wall space. Our experience has been that most are either disconnected or in permanent bypass mode. This is not a surprise considering the early versions had no standard protection against power strikes or brown outs which caused routine failures. Failures cost money and embarrassment and so goes the equipment back into full power mode never to be returned to automatic VFD control. The next generation of VFDs is here. They cost half of what they did a decade ago and are produced by more than 15 major manufacturers. However, price is irrelevant if we’re buying the same unreliable product. Fortunately, the increased competition has created demand for built-in features such as power transient protection, harmonic reduction and built-in control sequences. VFDs have become one of the standard features in our design and implementation of HVAC systems today. Old school ideas commonly called for dedicated back up or redundant equipment to ensure continuous operation. We have seen that it is frequently more economical to operate both pumps at half the flow. This can reduce the required pumping power by as much as 70 percent. Why limit VFDs to pumps? They are also big savers on cooling towers, chillers, air handling units, all types of centrifugal pumping, refrigerant compressors and exhaust fans. If the energy savings isn’t enough incentive to add VFDs to your facility, consider the reduction in wear on the motors, gears and belts due to reduced speeds and start up torque. If you’re still not convinced, Hawaiian Electric Company supports the technology on HVAC pumps and fans by providing a rebate to help encourage those who may not be entirely sold on the idea. With reduced costs, utility rebates and significant energy savings, VFDs offer a quick payback on your investment. So stop believing “less is better,” with the proper design, installation, control and commissioning of a Variable Frequency Drive systems running more equipment can save you money.
Duane Ashimini, CEM, is executive vice president/chief technology officer of Energy Industries LLC, a Hawaii-based energy services company that specializes in energy conservation for commercial customers. He is a pioneer of energy-efficient mechanical system design in Hawaii.
"Fuel Cells The next generation"
March 1, 2005
Story from: Building Management Hawaii
Imagine a technology that allows you to produce electricity from water. Imagine creating electricity on-site at your facility as easily as producing hot water for your showers. Imagine doing all of this with a technology that has no moving parts and no combustion. As futuristic as this technology sounds, it is a reality today in a product simply know as a Fuel Cell
What is a Fuel Cell?
A fuel cell is a device that uses an electro-chemical process to produce electricity. In this sense, a fuel cell is similar to your standard car battery but the chemical components are constantly fed to the fuel cell which translates to constant electrical output. Typically chemical fuel choices include water and a gas such as hydrogen/propane or even methane. Current Fuel Cell Uses
Fuel cell technology is currently used in a wide range of industries. Fuel cell systems can currently be found on board NASA’s Space Shuttle flights producing electricity and water for astronauts. The automotive industry has embraced fuel cells and virtually every major manufacturer is offering a product on the market powered by fuel cells. GM recently introduced its Sequel, a SUV powered by a hydrogen fuel cell. It is available today. In the commercial sector, companies such as UPS have partnered with the U.S. Environmental Protection Agency to test the use and economics of converting to an all fuel cell fleet. Fuel cells are also commonly found today aboard mass transit vehicles, at universities and federal facilities, in the military and even at residential homes or providing reliable standby power.
Advantages
There are many advantages to using a fuel cell. From a facility operation stand point, the fuel cell has no moving parts, thus it requires low maintenance and emits virtually no audible noise or emissions. Fuel cell systems create water, electricity and heat allowing for a highly efficient use of its chemical inputs. Finally tax credits may be available on the federal and state levels which help to offset the high costs of system installations.
Disadvantages
The major limiting factor behind the technology is that systems today are extremely costly. comparison, purchasing electrical power from your local utility will run you an estimated kilowatt hour charge of $0.11. Over a 5 year period photovoltaic power may run you about $0.27 cents per kilowatt hour. Fuel cells will presently cost an estimated $0.42 per kilowatt hour. While the concept itself is not new, the application is evolving thus and there is little understanding of fuel cell system use over time. In fact, it has been speculated that fuel cells may lose significant efficiencies as time goes on. These situations are being tested today by Hawaiian Electric and the military to quantify the trueeffect of fuel cell system use The Future of Fuel Cells As the market continues to evolve and systems become more economically viable, the near future will see vehicles powered completely by fuel cell and more on-site generation systems installed. On the consumer level, in the not too distant future we may see fuel cells included cell phones, wrist watches, laptop computers. One day you may find that a fuel cell is producing the electricity for your facility from the waste methane of your trash and sewage systems and is producing water for your landscape, as well as heat for your hot water. Darren T. Kimura is the President and CEO of Energy Industries, an energy services company focusing on the installation and implementation of energy systems in Hawaii, Washington, Oregon, Idaho and California. Darren is an Electrical Engineer and Certified Energy Manager (CEM) and has over 14 years of experience in the energy industry.
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