Copyright© 2000 by School Services of California, Inc.
The Grid that Stole Christmas
Holiday Crisis in California
You may have recently heard through the media that energy customers up and down the state are being asked to conserve electricity this holiday season by waiting until 7:00 p.m., after peak usage hours, to turn on their Christmas lights. This reduction in energy use is usually only asked of consumers during hot summer months, but this year a shortage has occurred in December. For the fourth day in a row, as of December 7, 2000, a Stage Two Electrical Emergency was declared indicating that the state's power reserves dipped below five percent, due to the fact that many power plants are temporarily closed for scheduled repairs or expired air-emission credits. On the 7th, the situation worsened and power reserves dropped below one-and-a-half percent. This instigated the declaration of a Stage Three Emergency, and "rotating blackouts" were narrowly averted. A Stage Three Electrical Emergency has never occurred statewide in California.
As you may know, in September of 1996, the California Legislature passed landmark legislation allowing consumers to choose their own electric supplier. This law was created to allow customer choice while ensuring that electricity is available, safe, and reliable for California consumers. As a result of this new law, two independent organizations were formed: (1) the Power Exchange, where electricity is bought and sold at wholesale prices, and (2) the California Independent System Operator (California ISO), to oversee the transmission of energy to 75 percent of the state.
California ISO, a not-for-profit corporation, assumed control of the power grid that delivers electricity throughout California, neighboring states, and Mexico after the electricity market was deregulated. This power grid is a network of long-distance, high-voltage electricity lines and substations that carry electricity to local utilities for distribution to the customers. The main purpose of the California ISO is to ensure that the power grid is safe and reliable and that there is a competitive market for electricity in California.
This year, demand for natural gas has grown as a result of the overall economic growth caused by the strong U.S. economy. Because supply has not yet caught up with demand, the price for natural gas is increasing and is being passed on to the consumer. According to the California ISO, this current energy shortage could lead to even higher energy costs for California consumers. But, by reducing our own demand for energy, we can reduce our overall utility costs.
School Districts Can Benefit from Energy Conservation
Almost every school district could benefit from an audit of energy use and efficiency. Many school districts are already involved in energy management projects. There are a variety of programs offered to districts that wish to pursue energy conservation in their schools. For example, the California Energy Commission, through its "Bright Schools Program," helps school districts identify, design, and implement cost-effective, energy-efficient projects. If the district decides to proceed with an energy improvement project, the district can finance it on its own, or utilize the Energy Commission's financing program. According to Virginia Lew of the Energy Commission, the California Legislature recently passed AB 970, a bill providing $50 million to the Commission for grants to reduce electricity use. This money will be used to, among other things, help schools install new roofs with highly reflective coatings in order to reduce air conditioner usage during the summer, and install demand responsive HVAC and lighting systems which are connected to the California ISO network and react to the overall supply of energy by lowering energy usage in times of shortages.
Financial Implications of Energy Management Programs
Implementing an energy-efficient program should be carefully evaluated and should only be undertaken if is financially advantageous for the district. As Lori Raineri of Government Financial Strategies explained in an August 1994 article for the C.A.S.H. Register, "timing and opportunity costs are crucial elements of this evaluation. For example, if a district were to spend $100,000 to put in an energy-efficient capital improvement and projected a savings in utility cost of $11,000 each year for ten years it would ultimately save $110,000 and have a nominal net gain of $10,000. However, this needs to be compared to the alternative investments for that money." If the district were to invest that $100,000, it is possible that the return on the investment could well exceed the $10,000 saved by the improvement project. On the other hand, if we assume that the district were to save a significant amount of money by conservation, in order to borrow the money to finance the projects, the projected utility cost savings would have to exceed the payments on the borrowed money.
How will implementing an energy-efficient program benefit a school district? An energy-efficient program will reduce the possibility of revolving blackouts in the State because of the reduction in energy use. In addition, energy-efficient products can replace old or worn out products and modernize the classroom. One final benefit is that energy-efficiency will potentially decrease the district's utility bills, and therefore, the excess money can be used to benefit kids. Alternatively, due to possibly skyrocketing energy costs, energy conservation could help the district avoid costs that would be incurred with higher utility costs. Since the deregulation of the industry, there is more uncertainty with regards to the price of utilities. Experts are not able to predict when, or if, supply will catch up to demand and, therefore, the cost of energy is very volatile. For this reason, it is difficult to accurately project the future utility cost/savings.
Getting Started
Both the California Energy Commission and the Energy Assessments branch of the California Department of General Services can help school districts get started on energy-efficient projects. The first step is to conduct an initial energy audit to see if the district's facilities have the potential to save money through energy efficiency. If the audit finds that there are ways for the district to save money, an energy study should be conducted to ensure that the savings in utility costs will pay for the costs of implementing the program. If a district decides to go ahead with the project, it is important to determine the best way to finance the project. An analysis should be done to determine what is best for the individual district, as there are many options (Energy Commission's Energy Efficient Financing Program, Department of General Services' Electric Services Program, modernization funding from the state, the district's internal funding sources, etc.). After these steps are taken, installation and construction can begin. Both the Energy Commission and Department of General Services can assist in bid specifications, selecting contractors, reviewing proposals, and design. These two organizations are also available for consultation during construction.
More Information
For more information on the consequences and solutions to California's energy crisis for schools, C.A.S.H. is holding a conference in January 2001. Some of the topics that will be covered are: practical steps to save energy in a school environment, how to deal with potential rolling blackouts, and energy efficiency and school design. Contact C.A.S.H. for registration information. If you have any questions about implementing an energy conservation program in your district, please contact the California Energy Commission, the Energy Assessments branch of the Department of General Services, or Government Financial Strategies.
--Cathy Dominico
[Editor's Note: The current energy crisis in California may have a silver
lining-highlighting the benefits of a school energy audit and conservation
efforts. SSC is indebted to Cathy Dominico, Financial Analyst, Government
Financial Strategies, for this timely article.]