Learning to Look Critically at Your Vendor Energy Savings

Whenever I talk to a vendor, I always learn something new because they truly are experts in their field.  With that being said, even though these guys are really good, you have to keep in mind that they don’t work for you, they aren’t your energy managers, and they aren’t the ones who answer to upper level management as to why a project isn’t performing adequately.  At the end of the day, only you can make the final call if a project is a good investment or not.

As part of their sales pitch, many vendors present a high-level energy savings estimate showing you just how much energy or money you could be saving by implementing their equipment.  It is important to keep in mind that these energy savings estimates are based on a series of assumptions that may or may not be totally inaccurate for your facility.  You’ll need to do a “sanity check” and then make the decision as to whether or not you can reasonably believe the provided estimates.

Things to Look For

The vendor analysis will usually outline a series of assumptions that were used to complete the calculations (and if they don’t outline their assumptions, you need to be extra careful!).  Check the following metrics to make sure that they line up with what you would expect for your facility:

  • Annual hours of operation – how long is your equipment really on?  How much product are you really using?  Check the assumptions against your historical data.
  • Equipment efficiencies – Check boiler efficiency (%) and cooling equipment efficiencies (kW/ton).  These can really vary depending on the age, type of equipment (ex: steam boiler vs. hot water boiler), and how often the equipment cycles on and off (more cycling = less energy efficient).  When in doubt, check out the ASHRAE rated efficiencies for your type of equipment and rated capacity for a good starting point, and then make adjustments as needed depending on your situation.  Want some more reading material?  I really like this write-up, which was done by a PE engineer out in California and talks about looking critically at boiler efficiency claims.
  • Utility rates – Your natural gas rates in $/therm and electricity rates in $/kWh.  Make sure you take into account your supply rates too, if you go through a third party provider.  And check out this article that Clair wrote on utility rates that may be just a little too optimistic for their own good.
  • Historical utility consumption – We frequently look at historical utility bills to make sure that the level of savings proposed makes sense.  Total up your annual consumption and compare it to the vendor energy savings.  Anything that’s really high is probably too good to be true.
  • Peak Loads – You may have three 100 ton chillers, but maybe only two of them operate at peak load.  The vendor won’t know this until you tell them.  Conversely, maybe you have separate winter and summer boilers.  When does each one operate throughout the year?

Real Life Examples

Facility #1 – This facility was installing a new tank-less hot water heater.  The vendor estimated that the facility was consuming 6,000,000 gallons of water each year, when in reality they were only consuming about 2,000,000 gallons (per their historical water bills).  This one assumption alone cut their energy cost savings down to 1/3 of the vendor’s initial estimate.  The vendor also estimated that the site was paying $1.00/therm of natural gas, when in reality the facility was paying close to $0.60/therm.  This cut their energy cost savings down even further.  The vendor estimated $30,000 in annual energy cost savings.  In reality, the energy cost savings were closer to $2,000.  Ouch…

Facility #2 – This manufacturing facility was upgrading their Building Automation System (BAS) that would automatically control their heating and ventilation units.  Initial vendor estimates projected that the facility would save a total of 80% of their existing natural gas consumption.  This magnitude of energy savings doesn’t seem realistic because the facility still needs to heat its large manufacturing area.  In reality, the projected energy savings are closer to 26% of the facility’s existing natural gas consumption.  Contributing factors to the over-estimation of the energy savings included over-estimating the facility’s annual run hours and under-estimating the new amount of outside air needed to keep the building pressurized.

However, not all of the projects that we evaluate are this far off.  Below is a bar chart summary of ten different vendor cost savings estimates versus the savings that were compiled by ANTARES for a random selection of past projects.  As you can see, some of the vendor estimates are close to, or even less than the energy cost savings that we evaluated for the project.  However, 2 of these 10 projects were disastrously different. It would be counterproductive to generalize from this sample, but in our experience, these are not isolated examples.

Vendor Savings Chart

What You Can Do

Make sure that your vendor has as much information as possible—utility rates, efficiencies, annual hours of operation etc.  The more information that you give them, the more accurate their calculations will be.  If you are spending lots of money on a new project – it may be a good idea to get a second opinion upfront, rather than pay for the forensic opinion after management asks you, “What went wrong?!”

About Sara Aaserud


Sara works as a Renewable Energy Engineer in ANTARES’ Fayetteville, NY office. Her favorite types of projects are solar PV feasibility studies and electricity rate tariff analyses. She can be reached at saaserud@antaresgroupinc.com.

Speak Your Mind

*