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The pulling power of utility rebates

How compelling money-saving incentives can accelerate energy conservation measures

| | Jan 26, 2021 | 5:00 am
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Dan Mizeko

The truth is, everyone wants to do good, go green and save the planet. However, in my experience, unless there is a compelling money saving incentive, organisations will not move forward with the majority of such projects.

We at US Chiller Services NY were working on an energy-saving proposal for a fairly large chilled water plant in the New York Tri State area. The savings were compelling at over 1,300,000 Kwh per year and a payback of 2.6 years for a project investment of USD 515,000. Just when we were putting everything together, engineering the project and finalising our proposal, one of our energy engineers pointed out that we had not included the Con Ed (utility provider) rebate incentive. When I asked him what the rebate amount was, I was amazed.

The rebate was as follows: For every Kwh saved with a project, the utility company would rebate 0.45 cents per Kwh and pay this up to 75% of the entire project cost. In other words, the utility company would give USD 386,250 as rebate, with the customer having to pay only USD 128,750 and still receiving the full benefit and savings of a USD 515,000 project. I was wonderstruck. Such an arrangement provides companies with a huge incentive to move forward with Energy Conservation Measures (ECMs).

The New York Tri State area project, with the rebate factored in suddenly had an ROI of 149% and a payback of just over eight months. Sheer music to the ears. With such incentives, it’s impossible to not implement the technology and take advantage of the savings. The customer eliminates 1,300,000 Kwh cost per year, and the utility saves the generation of 1,300,000 Kwh per year on its power plants and infrastructure.

This begs the question, why would a utility offer such attractive rebates?

1) To keep existing customers and incentivise customers currently with another utility provider to switch utility companies. This would not be a factor in the GCC region, as utility providers are not in competition with each other. With the tremendous growth in the GCC region and the clear desire to be as energy efficient as possible, implementing utility ECM rebates would surely exponentially speed up the approval process of many, many energy-saving solutions being proposed in buildings and chilled water plants throughout the region.

2) Energy efficiency is much cheaper than building new power plants. This is the main reason, in my opinion, why utility companies provide rebates. Studies have shown that for every USD 1 spent on energy conservation, the utility company saves USD 9 compared to the cost of building a new power plant to generate the amount of energy that the energy efficiency conservation measure offsets. In other words, it’s cheaper to provide rebates for ECMs than to build new power plants.

Of course, measurement and verification (M&V) proof of savings would be required for the utility company to release the rebate money. With that taken care of, we are staring at a win-win for everyone, as it would accelerate the implementation of more ECMs in the region, keep utility companies from having to build new power plants, provide savings for the end-user facilities and provide jobs for the energy specialist companies that are engineering and installing the saving related solutions.


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