Month: September 2021

In February 2021, Texas suffered a major power crisis. Severe winter storms brought some of the coldest weather the state had experienced since 1989. Consumers turned up their heating systems, increasing energy demand. Meanwhile, the cold weather froze natural gas wells and pipes. Freezing rain followed by extreme cold froze the mechanics of wind turbines and snowfall covered solar farm panels. The loss of generation plants, wind generation and solar energy, in addition to frozen gas pipes, nearly led to a total shutdown of the Electric Reliability Council of Texas (ERCOT) grid. More than 4.5 million homes and businesses were left without power. The market price for energy spiked from the typical $50/MWh up to $9,000/MWh during the storm.[1]

Extreme weather is increasingly affecting energy pricing

The 2021 Texas power crisis is just one example of how U.S. energy pricing is becoming increasingly sensitive to weather events and climate change. Changes in temperature, precipitation, and the frequency and severity of extreme weather events can affect energy supply and demand.

A warmer climate corresponds with rising air and water temperatures. These changes may reduce the efficiency of power production for fossil fuel and nuclear power plants, which use water for cooling.² If the average climate warms by an average of 1.8°F, U.S. energy demand for heating is expected to trend downward, but energy demand for cooling could increase by about 5-20%, and warming will increase summer peak energy demand in most regions.

Meanwhile, extreme weather events also impact supply and demand, leading to fluctuations in energy prices, as seen with the winter storms of 2021. The frequency of extreme weather events has risen over the past 20 years, driven by rising global temperatures and other climatic changes. Heat waves and large storms are expected to become more frequent and more intense. In 2021, there were 22 separate billion-dollar weather and climate disasters across the U.S.; the previous annual record was 16 events, in 2017 and 2011.[2]

“Summers are becoming hotter and hotter, and now we’re naming hurricanes after letters and numbers,” said Dave Ryan, Constellation’s Chief Meteorologist. “They are getting more and more extreme, and consequently, organizations need the ability to be nimble in times of crisis.”

Limiting fiscal exposure by managing weather risks

Energy prices don’t have to be at the mercy of extreme weather events. There are opportunities for energy managers to be better informed and take action to reduce risks in their energy purchasing.

While Constellation actively communicated with customers when the winter storms struck this year, the sales team is also equally proactive in regularly discussing energy strategy with customers. In addition, staff meteorologists and market analysts regularly share insights during the monthly Energy Market Intel Webinars so customers can better understand the dynamics in the market and plan their energy purchasing.

Beyond information sharing, Constellation has developed an ecosystem of tools and plans to help organizations manage their power purchasing strategy. One of the no-cost resources is the MarketWatch® service, which allows customers to proactively monitor energy prices and make informed purchase decisions when their “strike” prices are close. This service can either send an email notification or purchase on our customers’ behalf when market prices reach the strike price. Another resource available to Constellation’s customers is the Information-to-implementation (i2i) reporting service, which helps customers plan their budget and make informed power-purchasing decisions.

Meanwhile, customers who want to reduce exposure to electricity price volatility may consider Constellation’s structured, systemic Minimize Volatile Pricing (MVPe) plan. With this plan, organizations can lock in higher percentages of load when prices are lower in comparison to historical prices as opposed to basic dollar-cost averaging approaches. Active participation may result in a reduced peak load contribution (PLC) and a lower monthly capacity charge the following year.

“The risk of market volatility is always there, especially during extreme weather events,” says Dave Pfeifer, Vice President and General Manager of the West. “But you can plan your purchases so that you are not buying energy in the eye of the storm when energy demand and prices are highest. There are opportunities to balance the peaks and manage your risk due to climate and weather.”

To stay informed on the latest energy purchasing trends, subscribe monthly Energy Market Intel Webinar now!

 

To learn more about specialized energy for your business, visit your association’s site.

 

[1] Guardian News and Media. (2021, February 20). Why the cold weather caused huge Texas blackouts – a visual explainer. The Guardian. https://www.theguardian.com/us-news/2021/feb/20/texas-power-grid-explainer-winter-weather.

[2] 2020 U.S. billion-dollar weather and climate disasters in historical context: NOAA Climate.gov. 2020 U.S. billion-dollar weather and climate disasters in historical context | NOAA Climate.gov. (2021, January 8). https://www.climate.gov/news-features/blogs/beyond-data/2020-us-billion-dollar-weather-and-climate-disasters-historical.

As businesses emerge from the COVID-19 pandemic, they are proactively re-evaluating their energy strategies for two reasons:

• Curtailed commercial and industrial demand for energy during the pandemic, creating new volatility in fossil fuel markets. In 2020, demand for energy delivered to the four U.S. end-use sectors (residential, commercial, transportation, and industrial) was down 90% compared to 2019 levels.[1]
• A stronger focus on environmental, social, and corporate governance (ESG), along with increased government scrutiny and regulation for carbon emissions is driving the demand for renewables. According to the U.S. Energy Information Administration, the renewables share of U.S. generation will rise from 20% in 2020 to 21% in 2021 and 23% in 2022.[2]

Energy managers are recognizing that they need more than energy. They need a plan—a strategy that balances the pursuit of a sustainable future with the reality of attaining a strong bottom line.

“Sustainability doesn’t mean sacrificing profits or putting success on the back burner,” explains Natalie Chladek, Associate Product Manager at the Harvard Business School. “Instead, it has become a crucial element to any organization’s successful strategy. A business that doesn’t factor in sustainability risks is less successful in several measures, including profitability, growth, and employee retention.”[3]

But what goes into a sustainability plan? According to Raj Bazaj, Executive Director for Solution Sales at Constellation, it’s different for every organization. “Energy sustainability means being able to meet corporate efficiency goals through strategic solutions, including renewable energy options and energy efficiency initiatives. These reduce energy consumption—and thereby a company’s overall carbon footprint.”

The first step in creating a sustainability plan is to review and analyze energy use data. Energy analytics allow businesses to generate insights and inform strategies that can lead to both cost savings and sustainability. For many organizations, a sustainable energy strategy contains two key components:

• Energy Efficiency:using a lower quantity of energy to do the same amount of work can help reduce greenhouse gas emissions and therefore safeguard the environment. Energy efficiency is considered the first step when putting together a sustainability plan.
• Renewable Energy: energy produced from sources that do not deplete or can be replenished within a human’s lifetime (compared with non-renewable sources like fossil fuels).

The best plans consider both renewable energy sources and efficiency options in coordination with usage habits and budget considerations. Constellation has the expertise, products, and technologies to help energy managers every step of the way. Here are just a few ways Constellation can help:

 

Understanding usage

Knowledge is power. The more energy managers know about their energy usage data and trends, the better they’re equipped to meet savings, risk management, and strategic goals. Through Constellation’s Pear.ai platform one can easily understand the usage trends and see abnormalities when they occur. The continuous monitoring of data and analysis help identify the best areas for implementing energy optimization projects within a facility or between different facilities. This proactive approach helps drive an efficiency strategy that not only lowers carbon usage but also reduce one’s energy bill.

“Increasingly, with a focus on sustainability, our customers want to better understand and control their energy portfolio,” said Bazaj. “The Pear.ai platform effectively and efficiently meets that demand.”

In Middletown, CT, Wesleyan University is already experiencing the benefits of the Pear.ai platform’s functionality. The university operates a multi-faceted utility footprint that includes power, gas, heating oil, propane, solar, and cogeneration powering academic buildings as well as student and faculty housing.

“I went from literally mountains of paper and a grueling 20 hours per month of data entry and accounts payable processing to having the university’s entire energy footprint essentially at my fingertips,” said Jeff Murphy, facilities business manager at Wesleyan.

Efficiency Made Easy

Using less energy can help businesses work toward their sustainability goals. The best news is that efficiency upgrades don’t require prohibitive upfront costs. In fact, Constellation offers efficiency solutions that don’t require upfront costs at all.

Constellation’s Efficiency Made Easy program enables customers to pay for energy conservation measures through monthly charges that appear on their business’ power or natural gas supply bill. Meanwhile, energy managers will realize cost savings by reducing consumption and an improved load profile, which will positively impact future energy costs and environmental goals.

Many companies find on-bill funding as a means to achieve corporate compliance with regulatory requirements, meet established sustainability goals, improve electricity load profile, realize energy cost savings, increase asset valuation, and reduce operation and maintenance (O&M) costs.

In addition to on-bill funding, Constellation can also work with organizations to create customized design/build upgrade solutions if that arrangement is a better fit.

Renewable energy options

Constellation provides renewable energy options for both short- and long-term sustainability goals. These options can be accessed independently or built into an overall sustainability plan leveraging the full range of Constellation expertise and resources.

• Solar: Solar energy options are available through Constellation’s Efficiency Made Easy program. The cost of photovotaic (P/V) systems can be included in the regular Constellation power bill.
• Constellation Offsite Renewables (CORe): CORe is designed to provide businesses access to offsite renewable energy projects through the simplicity of a retail power contract. Location-specific renewable energy purchases can be combined with renewable energy certificates (RECs) to make a strong sustainability statement. For an even more impactful renewable option, CORe+ supports the development of new build renewable assets through the same retail contract.
• Renewable Energy Certificates (RECs): Through the purchase of RECs, businesses can support their sustainability goals by matching their energy usage with renewable energy delivered to the grid. Each REC represents the environmental attributes associated with one megawatt-hour of renewable generation.
• Emission-Free Energy Certificates (EFECs): Carbon-Free Electricity Plans from Constellation will be fulfilled through EFECs that are created to represent generating sources that do not directly emit greenhouse gases from combustion.

Sustainability: It starts with a plan

Renewable energy products, customized analytics, and creative cost solutions are all in place. But the first thing every organization needs is a comprehensive plan that will helps them set achievable sustainability goals, maximize resources, and reach those objectives. Constellation can break it all down and provide the turnkey service that makes it easy. To learn more, check out the Supplier to Strategist blog series and subscribe to Constellation’s array of resources here.

To learn more about specialized energy for your business, visit your association’s site.

 

[1] U.S. Energy Information Administration (EIA). – Consumption – Energy consumption fell faster than gross domestic product in 2020, and the pace at which both will return to 2019 levels remains uncertain – U.S. Energy Information Administration (EIA). (n.d.). https://www.eia.gov/outlooks/aeo/consumption/sub-topic-01.php.

[2] U.S. Energy Information Administration – EIA – Independent Statistics and Analysis. Short-Term Energy Outlook – U.S. Energy Information Administration (EIA). (n.d.). https://www.eia.gov/outlooks/steo/report/electricity.php.

[3] The Importance of Sustainability in Business: HBS Online. Business Insights – Blog. (2019, November 6). https://online.hbs.edu/blog/post/business-sustainability-strategies.