As the costs associated with the purchase, production and distribution of energy continued to rise, The University of Alabama realized that it needed to search for new opportunities to control these costs. The University requested that Draper & Associates provide a proposal to address energy cost control strategies that may effect cost reductions and allow University administrators to better control utility-related costs.
The Draper Approach
In order to ensure the requisite level of expertise was applied to this engagement, Draper & Associates included the services of Energy Services Group, LLC (ESG). ESG is a strategic alliance partner of Draper & Associates with a proven track record of implementing supply-side strategies to reduce energy costs for large energy users similar to The University of Alabama. Draper & Associates and Energy Services Group, LLC (Draper/ESG) were engaged to identify, quantify and prioritize supply-side energy cost control measures for natural gas and electric power service to campus operations.
Supply-side energy cost management methods are part of any sophisticated energy cost management program. Supply-side actions generally:
- Deliver recurring savings in future years,
- Are transparent to existing operations,
- Avoid unnecessary capital investment, and
- Often do not require capital investment
Draper & Associates performed a review, evaluated, and made recommendations to assist the University by:
- conducting a preliminary supply-side assessment of energy costs (natural gas and electric power),
- evaluating the price paid by the University for natural gas and electric power service in light of the suppliers' costs to serve University loads and load patterns,
- identifying and quantifying potential supply-side energy cost reduction measures, and
- providing prioritized recommendations for the University to capture these cost-reduction opportunities
In order to quantify potential supply-side energy cost reduction opportunities, Draper/ESG reviewed 24 months of historical billing for University natural gas and electric power accounts. As part of this cost control evaluation, Draper/ESG:
- characterized the energy requirements and consumption patterns at the University
- identified and quantified supply-side energy cost savings opportunities (such as alternative supplier strategies, fuel switching or substitution, and special rate considerations)
- explored natural gas purchasing methods to reduce price volatility
- identified strategic issues which may reduce energy costs over the long term
- prioritized and recommended energy cost control strategies that will provide significant economic benefits
- identified other strategies (e.g., regulatory or legislative actions) which may potentially impact The University of Alabama's ability to manage energy costs as the utility industry attempts to address concerns with respect to rising energy commodity costs
- provided actions items to (1) capture near-term cost reduction opportunities identified in the evaluation, and (2) manage longer term issues that may impact The University of Alabama's energy costs over time
The work performed during this Diagnostic Review and Evaluation focused on current practices, identified alternatives, and provided options and recommendations to potentially realize greater economies and allow University administrators to better control utility-related costs.
The recommendations emerging from this energy supply-side cost control evaluation included both strategic (long-range) and tactical (near-term) recommendations. This analytical work resulted in five specific recommendations that were pragmatic and actionable.
The potential benefits to The University are significant. By performing a preliminary supply-side review, The University of Alabama will be able to subsequently capture immediate and near-term cost reductions, identify other significant cost control opportunities that were either unavailable at the time of the evaluation or attainable through long-term efforts, and will be able to more effectively implement follow-on demand-side programs such as conservation or efficiency planning.