It’s a simple enough formula – reduce energy usage, save money.
Mayor Annise Parker
As Houston leaders push the counter-intuitive notion that the world’s energy capital can go green, and pledge ever-lower emissions goals for municipal operations, installing energy-efficient lighting and low-flow toilets can seem like hopelessly small measures.
City data show a seven-year effort to retrofit municipal facilities with those types of energy-efficient upgrades is working, however. And that matters, since Mayor Annise Parker’s office says energy costs are the city’s third-largest category of spending, after employee salaries and benefits.
The energy and operational savings produced by upgrades to 87 city buildings, completed over the last four years, have averaged $5.2 million a year. That trend is beating officials’ original estimates, and, if it holds, will see the investments pay for themselves in about 10 years, more than two years sooner than projected.
The city will continue to operate the buildings beyond the next decade, added Gilberto Lopez, a senior project manager in the city’s General Services Department, capturing even more savings into the future. Even if the positive trend were to reverse, Lopez said, both contractors handling the upgrades for the city guarantee results from their work, and will cut the city a check if the buildings don’t perform.
“The savings is absolutely a win,” Lopez said. “Is it a windfall, is it taking our breath away? We’re always looking in terms of, ‘Let’s clear the baseline and then we’ll celebrate everything else.’ But we feel very positive about the program.”
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Houston has decreased its greenhouse gas emissions by 32 percent since 2007, and Parker earlier this year committed to cut emissions by another 10 percent by 2016. Parker also this year announced the city would work with CenterPoint Energy to convert 165,000 city streetlights to light-emitting diodes to reduce energy use, electricity costs and emissions. White and Parker also passed new codes for new commercial and residential development requiring greater energy efficiency.
Such efforts are an important component of acting sustainably, said Luke Metzger, director of Environment Texas, because an estimated 40 percent of all the energy used in the United States is consumed by buildings.
“A lot of older buildings are still wasting a lot of energy in terms of leaking insulation or outdated appliances, lighting and heating controls,” he said. “They really are largely an untapped resource in terms of saving energy – and the more energy we save, that means power plants are running less and pumping less pollution out of the smokestack. It definitely has a huge impact in terms of cleaning up the air.”
Putting aside the not-inconsiderable environmental benefits, this is savings without having to cut anything, and it’s ongoing. There’s nothing not to like about it. It’s true that any individual LED light or low-flow toilet doesn’t make much difference, but a couple thousand of them together adds up to quite a bit. Kudos all around.
Before anyone gets all misty eyed over these measures, it seems unreasonable to infinitely scrutinize certain items to the nth degree while automatically assuming everything read on a topic of agreement is beyond reproach. For example, those “low flow” toilets are great for disposing of urine but anyone whose ever eaten local Mexican food or BBQ know how useless they can be for flushing a sizable deposit of processed food so don’t forget the added costs of plumbers and the need for multiple flushes.
And exactly what does it mean that the “city would work with CenterPoint Energy” to install LED bulbs? If it is a sound business decision, Centerpoint would not need to work with anyone to replace said bulbs, I strongly suspect this translates into the city subsidizing the capital investment of bulbs for the private company in a time when energy prices are dropping like stones, a major savings all by itself (though one that makes “upgrades” take far, far longer to pay for themselves if they ever do).
Considering the city’s report came out a month and a half ago, the price of oil has dropped to where seeing a gallon of gas for $1.75 does not seem like such a fantasy compared to the $3.50+ it was for years. Also, suggesting big community savings by the imposition of forced energy efficiency building codes sounds awesome until you compared how much development is LOST to the less restricted county, my travels in both showing a marked difference in which has the vastly higher rate of development (hint: it’s not the city).
I’m supportive of the city requiring it’s managers to turn off every other light (some seem to have two lights out for every one left on) and encourage employees to shut their office lights out when they leave for extended periods of time since it does all add up but the extensive costs of the other measures were greater than the suggested $70 and much of the $5 million a year in savings did not require capital expenditures. The spin on this to make it sound better than it is seems unnecessarily forced, read the data before going all poli-cheer.
Center Point has an agreement to provide street lights in Houston. The City pays a semi flat rate for the lights and CP owns and maintains them. Replacing the lights with LED’s will reduce the cost to the city for the electricity to run the lights and the long term maintenance to replace burned out bulbs.
Ross, the switch in lights was reported last spring (in May I think) after a testing program that started in 2009. Considering the city sued Center Point not too long ago for overcharging on street lighting and the fact that CP cut a check for $1.5 million to help fund some of those bike trails Parker was hawking, I truly wonder if this latest arrangement is as good as the cheerleaders are claiming.
Aside from the fact that the number of street lights has decreased in recent years, it is reasonable to ask if the city’s total costs for the lights was locked in when energy prices were twice as much in May, the 12 year life cycle used in the project, in order to fund the switch in technologies. Given the need for less maintenance and the 50% reduction in electricity needed to run them, CP should have jumped on the project on its own initiative rather than need the city to subsidize the retrofit (if it was such a great deal).
Now that energy prices are 50% lower, it’s tough to cheer too loudly for a deal that locks the city into paying more while CP reaps the benefits of lower electricity costs AND having the city pay for the upgrades. So the estimated $2.5 million/year “savings” would have been achieved without any added costs as energy prices dropped. The Rice U. professor hawking the switch over recent years (Dillinger or something like that) acknowledged even small rate decreases would quickly reduce the rate of true savings, I doubt he envisioned oil prices dropping nearly as much as they have.
Sometimes Steven you are way to knowledgeable.
I would dispute that “energy” prices are lower. The price of oil, and thus gasoline, is down, but that doesn’t mean electricity costs less. We are at the end of a three-year deal with Gexa, and I can tell you that all of the available household plans now are 10-20% more expensive, in terms of kw/H cost, than what we are paying. But even if electricity costs were down, using less of it would still mean lower costs, in absolute terms and relative to what you would have paid otherwise. Set your thermostat at home this summer for 65 degrees and tell me what the effect is on your electric bill.
The price of oil has almost zero impact on electricity costs, since the number of oil burning power plants in Texas is minimal (I can’t find any evidence of any at all). Natural gas prices have been relatively steady, especially when compared to oil, and natural gas, coal, and nuclear make up the bulk of Texas electricity generation.
The rates charged Houston appear to be governed by a publicly filed tariff. The tariff did not address LED lighting, and presumably had to be amended to cover them. Centerpoint can’t just unilaterally decide to make changes to service offerings covered by tariffs. Changes require approval by the affected parties and/or the PUC
Was there any announcement of upfront funding by the City? I didn’t see any.
Thanks PK. It’s just that the continued claims of “savings” seem to fall far short of mayoral press releases and the slush funds/”contributions” seem to grow to pet projects by those receiving the bulk of the largess.
Guys, energy is energy and with the abundance of natural gas courtesy of all these new drilling techniques some of you hate (many pioneered by those with ties to Houston), it helps lower the cost of other forms when demand changes. Natural gas is a major component of electricity generation in the area, prices shown dropping all year here: http://futures.tradingcharts.com/chart/NG/W just as coal prices, the other major component of generating electricity is shown dropping here: http://www.infomine.com/investment/metal-prices/coal/6-month/ .
Mayor Parker made a huge deal about locking the city into a three year contract with Reliant back last spring, the “$500 million” contract discussed here: http://www.houstontx.gov/mayor/press/20120404.html though mentioning the city’s cost for electricity showing a: “decrease in annual expenditures by the City on electricity, from about $130 million per year to about $100 million”, generously requiring quota hiring and renewable energy components but one would think spending $100 million/year for three years would make it a $300 million contract, yes?
But just so we’re clear here, oil is only the latest energy source to drop in price, helping drive the trend for the others but they were on the move downward for the last 5 years. Wholesale electric rates have been dropping even if the providers Kuff has access to did not see fit to share those drops with him. And while I like your analogy, most city facilities seem to set the temperature on 65 in the winter, then closer to 78 in the summer; I’ve been in over a dozen such facilities to see employees wrapped in sweaters in the winter while running personal heaters under their desks yet sweating like crazy during the summer.
So I ask all three of you,
1) do you think it is wise to lock in prices for extended periods of time in a climate where prices have steadily declined and show even more downward pressure?
2) do you think paying for energy credits (rather than the actual power itself generated by such renewable sources) makes sense just to make claims of sustainability, in spending taxpayer money?
3) don’t the continued press releases showing false savings (often using apples to oranges comparisons) ever make you wonder at all?
4) don’t any of you believe that Reliant/NRG, a huge corporation with extensive capital investment far more valuable than Houston city government, is in a better position to make long term capital expenditures than the city is, especially when the primary beneficent of the investment is the company (and yes, they are regulated but nothing prevents them from investing in LED bulbs to lower operating and investment costs)?
Electricity pricing is complicated, and is typically related to the marginal cost of the highest priced component. This is why Energy Futures had to file bankruptcy, they bet that natural gas prices would go up even more. making their coal fired plants very profitable. instead, gas prices went down, making coal the driver of prices, and they lost their backsides. The power mix for Houston is nuclear, gas, and coal, so a drop in gas prices may or may not result in lower electricity prices.
CenterPoint is providing the lights, not NRG. The provision of lights is tariffed. They cannot just start installing LED bulbs (and it’s not quite that simple, the fixtures have to be changed as well), as the tariff specifies rates for each type of light source. A new service offering requires that the tariff be amended via a rate case proceeding. That takes time, and agreement from the affected parties.
As for long term lockins on rates, and that’s a separate issue from lights, sometimes you make a choice to risk missing out on savings in the near term in order to have predictable costs for a period of time. If the market starts to change, there are hedging activities you can do that offset the changes. However, I don’t think the City has enough people smart enough to do hedging, and would prefer they stay away from it.
Ross, I get all that and mentioned how the two largest components of electricity generation (natural gas and coal) for the area have been falling for quite some time (admittedly not as fast as oil has of late but that factors in given the long term decline of the other major fuel sources (as the price of oil declines, it will be used elsewhere in the country and offset the other two sources more, further lowering their costs).
Regarding the bulbs and other costs of retrofitting to accommodate LED; remember that the city had to join in with NRG’s wholly owned subsidiary, Centerpoint to work out the agreement. Wholesale rates for power have gone down and have been declining for several years, in part due to the factors mentioned above. If the city is going to work out a deal with the company, why not work one out that makes sense in absolute terms instead of focusing on carbon displacement and such? Because it sure looks like someone at the city made a sweetheart deal for Centerpoint in order to get that fat check to subsidize a slush fund dedicated to bike trails. Companies rarely “donate” $1.5 million at a whack just for goodwill alone. It just doesn’t pass the smell test.
In terms of the electricity alone, the trends were there to make a rational decision. The “savings” suggested by the contract imply someone made a particularly good deal, the city then using some of the “savings” to bolster unrelated programs. The thing is, the “savings” would have been realized without any green components and spending them on such programs amounts to an unseen cost of substantial funds better used elsewhere. I admit this takes budget analysis a step beyond Kuff’s previous requests to name specific cuts but I was pointing out that the tremendous amount of spin used to “sell” LED street lights was only needed because the company wanted a subsidy and the mayor apparently wanted a big private sector check to help fund another of her pet projects.
Don’t get me wrong, I like LED lighting. As a homeowner, my CFL bulbs bought 10+ years ago are only now starting to fail so I waited for sales and bought a few dozen LED bulbs for under $5/each. I used due diligence to time the purchase and did my homework so I expect nothing less from the city. Do you really think the state cares on the specifics of whatever the city and a company agree to on such matters? In my experience, the state will let the parties go right ahead and rubber stamp any deals, though yes it takes some time. The closer one looks at most of the city’s green projects, the worse the deals look to the average bean counter, hence my comments.
Wonder how Austin is doing with their method of control? Enron and others did a number on us and we are paying the price.
http://www.statesman.com/news/news/opinion/austin-energy-bills-are-lower-than-deregulated-com/nchcR/
While you argue about savings, if I invest 1 million on upgrading and get to save 100,000 per year when will I start realizing a net savings? If we are doing it to help the environment then let us be frank about it and not obfuscate the reasons.
LED lights are suppose to last hundred of years, how many building do you think will still be around? In Houston where an old building is 50 years old, not many if any.
@Steven, Centerpoint is not a subsidiary of NRG. It’s a separate entity with its own stock ticker (CNP) and everything. Centerpoint (as far as I can tell) doesn’t sell power except as part of a service like providing street lights. I haven’t taken the time to find out where they buy the power used for street lights. Any deal for retail power would be with NRG or one of the other retail electric providers, with Centerpoint merely providing transmission services.
@Manuel, LED lights for outdoor use like street lights have a life of 50,000 hours, according to some data I’ve seen. That’s not long enough to make LED’s economic winners based strictly on life alone. However, since LED’s use 60% less power, there is a payout. For commercial lighting, I’ve seen payouts of under 5 years. For street lights, it may be different.
My bad, for some reason I was tying Reliant to Centerpoint, the convoluted deal some years back where NRG picked up a bunch of HL & P assets sticking in my mind. That said: “CenterPoint Energy, Inc., headquartered in Houston, Texas, is a domestic energy delivery company that includes electric transmission & distribution, natural gas distribution and energy services operations. The company serves more than five million metered customers primarily in Arkansas, Louisiana, Minnesota, Mississippi, Oklahoma, and Texas.” (from their website). It is a minor point as Centerpoint still has billions in capital assets and it better able to capitalize them than the city but I acknowledge the error.
As far as LED street lights longevity, the devil is in the details as all studies, even the multi-year study in Houston’s downtown area, require simulation projections. The city agreed to a 12 year life cycle under local conditions and frankly, if you think the city lacks people qualified to hedge, you certainly shouldn’t now be suggesting it employs people qualified to make mechanical projections for the fairly new devices. Even so, touting that “going green” pays off for the city has yet to be proven in any major contract when all factors are calculated. It is especially false if you take any projected savings and then spend them on energy credits not otherwise required.
Manuel, given the much higher expense of the bulbs and need to retrofit existing equipment, I believe the “savings” are largely figments of the imagination given falling energy prices or not. If people like Ross or Kuff believe these projections, they probably believe the estimates given on gas mileage at a used car dealership, believe the packages on any energy savings device at face value, and also believe in Santa Claus & the Easter Bunny. It is new technology and more delicate under ideal circumstances, few suggesting the extremes of heat and humidity in this area constitute such. My own testing of the more established home versions that require no retrofits show the advertised 8.2 watts are closer to 10 watts and longevity is likely to be less given the amount of brownouts suffered on a regular basis (weather, power lines not kept cleared, etc.). If the brand used lasts the 12 years, has the amount of savings announced, and results in TRUE savings when all costs are factored in, I’ll go Vegan for a week each year.